Your Real Estate agent is not a Real Estate Investment advisor

Your Real Estate agent is not a Real Estate Investment advisor

Sure it seems to you like everyone is a real estate expert these days. Talk to any real estate investor, and they’ll tell you about how much their real estate investment have gone up in value while real estate agents are more than happy to talk about how real estate is a can’t miss investment.

Wait a minute, are real estate agents all of a sudden financial advisors? How can they possibly say real estate is a can’t miss investment? Well, there are no laws saying they can’t make such statements, so they’re not doing anything illegal. But that doesn’t mean you should think they can accurately predict the future or treat them like a certified financial advisor.

You can use a real estate agent to buy property and like him/her a lot. Even trust them with all of your real estate needs, but never turn to them (or any real estate agent) if you need advice about investments,here’s why.

Real estate agents are paid to sell or buy

In most cases, when a home sells, a percentage of the sale price is paid out to the real estate agents. seller’s agent, and the buyer’s agent. The higher the selling price, the higher the commision that is paid to the real estate agent on either side. If the real estate agent represents both the buyer and seller, then they get the full percentage. You can see how this is a conflict of interest.

Now if you’re the buyer, it obviously benefits the agent if you spend more when buying a home. That's not suggesting that real estate agent purposely encourage you to spend more, but they do have a natural incentive. Some real estate agents will tell you that spending more is just a few extra. The first question they ask is “how much can you afford?” and almost always, they still go over budget. Yes, it’s just a few more but you’ll end up paying more when you factor in the few extra.

They can’t predict the future

Some real estate agents look at how the markets have been doing over the years and make suggestions or say this and that about the investment in the future. This may or may not be true, but it’s impossible to make that guarantee. Certified financial advisers aren’t allowed to make such claims because they’re regulated, but real estate agents can. That doesn’t make any sense, does it?

Real estate agents can accurately (usually) assess the current market conditions and give you their recommendations on what specific homes are worth and what they may sell for, but they can’t predict the future. No one can. Unless you’re buying an investment property, you should think of your home as a place to live. Don’t focus on future value, think about what you can afford now.

They don’t know your financial situation

Generally speaking, there are only two things your real estate agent will know about your financial situation: How much you is your budget and how much you can “afford”. A good real estate agent will, of course, tell you to set aside some money for closing costs, but they likely won’t know what your overall financial situation is.

Real estate agents aren’t thinking about your other commitments, the cost of raising kids, how you’ll pay for your this or that, or if you’ll have enough saved for other things or rainy days and retirement. They’re focused on helping you buy or sell your home (which is their job). When working with a real estate agent, you need to know what you can realistically afford and to stick to your budget. It’s not fair to expect your real estate agent to know how your home purchasing decision will affect your overall financial situation. That’s the job of a financial advisor that has experience in real estate.

Final word.

This is not down playing what a real estate agent does,because they can provide excellent insights in their field which is real estate. You can trust your real estate agent when you’re buying and selling a home, but don’t go to them if you’re planning your financial future in concern with real estate investment.