Real estate agents are perceived to be professionals in the market who assist users in the acquisition, disposal and letting of properties. This is rather curious, because despite the profound knowledge of the industry most of the estate agents do not allocate large amounts of funds on the real estate. The following article takes at look some of the causes of this development.
1. Focus on Client Service
Estate agent’s key strategic customers are mainly their clients. Their time and shale are generally spent on transactional duties, client relations, and selling. Real estate investment therefore calls for different skills and a lot of time, time which the directors may not have due to their main responsibilities.
2. Risk Management
Investing in real estate is considered to be high-risk capital ventures. Sometimes there are fluctuations in the market as well as certain problems related to management of the property, and one can also encounter unexpected expenses that all can have a negative effect on profitability. Instead of taking on more financial risk, estate agents can simply steer clear of these dangers and concentrate on their steady commission income.
3. Capital Constraints
Real estate investment involves a lot of money, so that is why it is referred to as a big business. Of course, estate agents can earn good amounts of money from commissions but they will certainly have other financial needs or obligations which restrict their capability to invest in property. One challenge is to build up enough capital to investors or to finance the generation of investment funds.
4. Market Knowledge vs. Investment Strategy
While it is a fact that estate agents are well aware of various market trends with the subject matters, they do not always make good investors. Real estate transactions are different from other forms of investments since they entail the knowledge of factors such as trends, analysis and modeling among others. It is possible that estate agents would rather use their knowledge as an integral sector of their profession rather than using it directly as property investors.
5. Diversification of Income
There are numerous employees within the estate agents firms who are paid commissions and fees in addition to or instead of salary. This income model might put organizations in a fix when it comes to planning and setting a budget for real estate investment. Other kinds of saving or investment may be more desirable or suitable for the agent depending on their financial requirement as well as their capacity to take risks.
6. Regulatory and Compliance Issues
This paper seeks to discuss the following regulatory and compliance principles affecting investing in real estate; Zoning Laws, Property Regulation, and Tax Laws. Some estate agents might not wish to get involved in these matters and its relationship with these matters may be limited to basic operational matters.
7. Personal Preferences and Goals
Like any other people, Sunderland estate agents also have their choices and needs or wants they have to fulfill. Some may choose to go for other form of investment like share, fixed deposit, or retirement investment instead of investing in real estate. Thereby, self-interests in individual investment preferences and objectives might determine their decision not to invest in real estates.
8. Conflict of Interest
From the case analysis, there are several implications that could arise from this observation; Some estate agents stand to gain from investing in the real estate thus developing some form of a conflict of interest. Depending on their capacity, they may be expose to some ethical issues if they have some investments which are within the area of their specialization.
Several factors have been identified to be the main reasons why estate agents cannot afford to invest in the property despite having vital information concerning the property market. This is mainly because several other factors determine their choices of investments, including the emphasis they place on client service and risk management, regulation and capital available among others and personal preferences. Knowledge of these factors offers some idea why a majority of the estate agents continue to operate mostly as business professionals leaving little room for them to be actual real estate investors.
