Why You Shouldn't Hire Friends & Family in Real Estate

Posted by Debbie Drummond on Saturday, December 19th, 2015 at 9:47am.

Getting a Real Estate License is easy.  The rules vary from one State to the next.  Nevada licensing requirements start with a 90 hour class.  The hours are split between Real Estate Principles and Real Estate Law.  After completing the course, the next step is to pass both the State and Federal exams.  Some States require more coursework and some less.

Since it isn't hard to get a Real Estate license, chances are you have friends and relatives who have one.  Is it a good idea to hire your friend or relative?  Odds are that you shouldn't.  Before you do, consider the following questions.  Your home is one of your most important investments.  Would you hire a relative or friend to handle your 401K?  You shouldn't feel obligated to hire them as your Realtor either.

How Much Experience Do They Have in Real Estate?

Hire a Top Notch RealtorAunt Sue has had her license for 25 years but has she sold anything lately?  It isn't unusual for people who got their license and didn't succeed as a Realtor to hold on to the license.  Successful agents may keep their license for years after they've retired.  They maintain their license just in case someone they know decides to buy or sell.  

The other agent you have to beware of is the newbie.  Maybe your Nephew Joey just got his license.  If he's working with an experienced Broker or Mentor, it might be worth taking a chance with them.  In that case, interview the Mentor/Broker who is advising him.  Sometimes a newbie is smart and may work harder to prove themselves.  It's still a good idea for them to have a Mentor who can review their contracts to check for mistakes.

Choosing your Realtor can be one of the most important decisions when buying or selling a home.  An agent who hasn't been working in the current market can be an expensive mistake.  An in-experienced agent may suggest you offer more than someone who knows the market.  They may agree when you want to list your price higher than anything has sold for in your neighborhood.  In both cases, their in-experience will cost you money.  Hiring a knowledgeable Realtor is one of the best ways to avoid getting sued.

Or worse, they could cost you your dream home.  We received a lowball offer from an agent who admitted they only do a deal a year.  They showed our listing to friends who fell in love with it.  When the agent's friends offered 12% less than the list price, our sellers rejected it.  

While the folks who made the low ball offer were "thinking it over", we received a cash offer.  It was 3% below list price with no contingencies and a quick close.  The sellers took the better offer without giving the first buyers a chance to make another one.  An experienced agent would have encouraged them to make a stronger offer.

Having a license doesn't mean you're an expert.  Experience and closed deals with satisfied clients prove you're an expert.  There's much to consider when buying a home.  Find an expert who will guide you through all the steps.

How Much Do You Want Friends & Family To Know About You?

Hiring a relative or friend sounds great in theory.  After all, who will work harder to protect your interests than someone who knows and cares about you?  It doesn't always go that way.  Even if Aunt Sue is one of the top Realtors in town, will she listen to what you want or to what she thinks you should want?  She keeps sending you homes in gated communities near her house.  You keep telling her you want a loft in the warehouse district near the art galleries.  

Selling your home with Aunt Sue can be just as risky.  Do you want her to know that you took out a second mortgage to finance the new business?  Or worse, that you're under water on your home?  It might be a real challenge for her not to let that slip out to your parents.

Buying and selling a home can be stressful.  Sometimes it's easier to do it with an objective professional that you haven't known all your life.  Before you hire a relative or friend, give some thought to how you will feel if things don't work out.  Will you blame Aunt Sue or Nephew Joey?  How will you feel the next time you see them at family gatherings?  

How Do You Hire a Top Notch Realtor?

You'd love to support Nephew Joey who's trying to get started.  And we know Aunt Sue is having to make sacrifices to stretch her retirement income.  They could use the commission from helping with your deal.  Before you commit to working with them, interview at least two other agents.  

Look for a Realtor with a strong online presence who is familiar with your neighborhood.  There are excellent articles to help you know how to interview a Realtor.  Top Real Estate Agents have written stacks of articles with tips for finding one.  One of our favorites is Jeff Knox' "Finding the Best Realtor".  "Picking the Right Realtor" by Bill Gassett is another useful article with lots of great info.

How To Hire a Great RealtorHiring the right Realtor is an important step to accomplishing your goal.  If you're selling, confirm that the agent will provide high quality photos and video as part of their marketing plan.  Check the agent's listings.  Do they have a history of pricing homes to sell?  Or do they have a lot of over-priced listings?  Once you've hired someone, make sure you have a clear understanding of what you expect from them.  Determine how and at what times your home will be shown.  Ask for a detailed marketing plan that's specific for your home.

If you're buying a home, hiring a buyer's agent is a smart move even if you plan to buy new construction.  The first thing your buyer's agent is likely to do is refer you to a lender for a Mortgage Pre-Approval.  Once you have the Pre-Approval, you and your agent will know how much home you can afford.  This is another area where working with family can be a problem.  Who wants Aunt Sue knowing how good or bad your credit is?  If Nephew Joey finds out how much you earn will he hit you up for a loan?  

A Top Buyer's Agent will have their own website for you to search listings.  The best Real Estate websites update the listings several times a day.  They add new listings as they come on the market.  They remove listings that have gone into contract.  Some of the well known national websites no longer have access to all the listings.  If you're using Zillow for your search, you're likely to miss as much as 20% of the homes listed.  You'll also drive your Realtor crazy by asking to see homes that have gone into contract.  They're not available but still show up on Zillow.  

The Real Estate Market is constantly changing.  The Open Houses of yesteryear have been replaced with virtual tours and videos.  Aunt Sue or Nephew Joey may not be as up to date with the latest lending and real estate trends.  After interviewing at least two other agents, ask yourself how your relative compares to the other agents.  You should only hire your relative if they are equally competent.  

How do you let your relative or friend know you hired a Top Producing Realtor?

This is a tricky question to answer.  Honesty is usually the best policy.  If Aunt Sue was a successful Realtor, she'll understand that she hasn't kept up with the market or the latest technology.  While she may have her license, she doesn't have a top notch website.  She no longer has a list of professional photographers and videographers in her cellphone.

Nephew Joey hasn't had time to accumulate a contact list of inspectors, photographers, etc.  He will be asking his Broker or other agents for suggestions.  If Nephew Joey is just getting started he may still working a full time job.  Will he have the time to work with you?  

These are valid reasons for not hiring your relatives and you shouldn't be afraid to let them know.  As a last resort, a little white lie may be the only way to spare their feelings.  If you can't face telling them the truth, blame it on the in-laws.  Surely the Realtor you hired is a distant relative of the spouse's parents.  Or maybe your boss wanted you to hire them.  That's kind of a cowardly way out but sometimes it's the easiest way to handle them.

Debbie Drummond  is a Full Time Realtor with over ten years experience in the Las Vegas Real Estate Market. She and her team of Real Estate Pros offer the highest level of service.  If you’re buying or selling a Las Vegas home, call (702)354-6900 or email Debbie@LVHomePro.com. They’ll be happy to assist you in your move.

5 Responses to "Why You Shouldn't Hire Friends & Family in Real Estate"

Kathleen wrote: When I was a newbie, I decided to make customer service the focus of my career. As expected, my broker was always pushing me to get my very large family to work with me as a buyer's or seller's agent. I wasn't comfortable using my family as "guinea pigs" my first year as I knew I would have to answer to my parents as well as my family when I saw them on holidays and family gatherings. So I devised a solution and got my Broker's approval for the plan: Let me find the best agent(s) for my family to use and make a deal with them for a referral fee if that agent is not in house. That way the agent is beholden to me, as I will tell the agent they are family and that I personally chose them as the best professional to help my family. The agents were of course glad for the business as well as honored and flattered that I chose them! I promised the agent NOT to be a back seat driver and to stay out of the transaction once I made the initial introductions and everyone agreed to work together, though I did ask if I could get the Broker's feedback on the deal and how they went about it. During my first 18 months, I referred 5 family members of which 3 of them closed deals. Not only did I make some money but more importantly, I gained my family's trust because I was honest and upfront about my experience and skill level and proved that I had their best interest at heart. I also spent serious time finding them excellent agents whom I trusted, but most of all, I made valuable friends and contacts within the industry. During my 3rd year, two of the family members referred their engaged children to me and all of them eventually used me to sell their homes and buy new ones. Even after I moved out of state due to my husband's job transfer, they still called me to help them find local realtors, for which I of course received a referral fee and several thank you gifts. If your honest from the get go, you can still serve your family without working with them directly and gain valuable knowledge, trust and insight to use throughout your career.

Posted on Tuesday, December 22nd, 2015 at 9:59am.

SVinson wrote: This article bothers me. This only offers a few examples as to why you might not want to hire your friend or relative. But what about the friend or relative that is very good. Your example is that you might not want to hire them so they don't know your business. You can see their purchase price and mortgage information on public records in a lot of cases. You can find out what they bought and sold their house. But most of all, you will look out for them much more than someone who doesn't know them. You have a vested interest in them. So the article should say considerations of not hiring a friend or relative. Not that you should never do so.

Posted on Monday, December 28th, 2015 at 2:26pm.

Tony wrote: If the real estate agent is there for the clients needs and not their own then who cares if they are a relative. You can see right through their motivations. The devil you know is better than the devil you don't. Stay in your comfort zone. Been there, done it, saw the movie....I always tell people to work with like individuals. A great white cannot hide in the skin of a dolphin.

Posted on Friday, January 1st, 2016 at 10:17am.

Debbie Drummond wrote: Kathleen, sounds like you found a great way to take care of your family and learn from some experts at the same time.

Posted on Sunday, January 3rd, 2016 at 5:13pm.

Debbie Drummond wrote: SVinson, I'm sorry this article bothers you. I didn't say you should "never" hire friends and family. I advised using great caution if you go that route. Yes, your friend may be loyal and want what's best for you, but if they lack the knowledge of your real estate market, you're no better having them sell your home than you would be having them pull your tooth.

Posted on Sunday, January 3rd, 2016 at 5:22pm.

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