BiggerPockets

Fight To The Finish: Friend Vs Foe

Tuesday, August 11

In my previous post, I highlighted the two stark choices that face every short sale investor each time they do business with a distressed homeowner.  The choices I presented might be obvious to many investors, but I am sure that there are many more investors who have not considered things from the perspective I am presenting.

So, how do I position myself as a friend… or a foe, for that matter?

I thought you’d never ask.  That is a most important question, but before I answer it let me detour a little bit, and discuss the implication of both positions.

Implications of being a ‘Friend’

Pros
You will be presenting a win-win deal to homeowners.
You will develop a reputation as a good guy or gal very quickly.
You will not have to do as much marketing as a foe would.
You will sleep easily at night.
You will have guaranteed long term success.

Cons
You will not make as much profit from each transaction.
You might be taken advantage of by unscrupulous homeowners.
You might experience more than your fair share of deals falling through.
Success in the short term might not be easy to come by.


Implications of being a ‘Foe’

Pros
You will have the opportunity to maximize your profit on every transaction.
You will rarely be taken advantage of by homeowners.
You will be able to take measures to safeguard deals from falling through.
You might have more success in the short term.

Cons
Homeowners will be highly distrustful of you.
Your reputation will not be a very good one.
You will have to market like crazy and spread your tentacles much wider.
You will have your conscience to contend with.
Long term success will be a real battle for you.

As you can see, there is a sharp contrast between the implications of being a friend or a foe.  It looks like the position that an investor decides to take will be informed by whether they are in it for the long haul or not.  

Hmm… That’s a very perceptive bit of analysis, but it’s not quite as simple as that.

Are You A Friend Or A Foe?

Monday, August 10

As a short sale investor, your primary motivation in doing business with a distressed homeowner is to make a profit.  Nobody is debating that.  The question, a very important question at that, is how do you go about doing business with the homeowner?  I want to tell you that there is a good way and there is a bad way.

Inevitably, there will be many investors who will disagree with what I have to say.  But hey… that’s what life is all about.  We are all entitled to our own opinions, and the world would be a very boring place if we all agreed with each other.  So you are very welcome to disagree with me, however, I would urge you to consider the following.

Put yourself in the distressed homeowner’s shoes for one minute…

Many of the homeowners you will be doing business with are on the verge of losing their property.  The fact that they are ‘underwater’ means that when they sell their home, they will be doing so at a loss.  Emotionally, this is a very difficult position to be in.

The last thing that they need is to be taken advantage of.  They are going to lose their home, they are going to lose a lot of money, but the last thing they need is to lose the little dignity they have left.

As the investor who will be on the other side of the transaction, you have two choices.  You can either help them restore their dignity and self-esteem, or you can take away the last vestige of self-respect they’ve got.  Which would you choose?

Choose carefully, because this will determine whether you are seen as friend or foe.

Interestingly enough, positioning yourself as a friend or foe has both short-term and long-term implications for your success as a short sale investor.  You might be surprised to find out what the implications of your choice are.