How to Compete for Investment Properties Against Realtors (and Win)

How to Compete for Investment Properties Against Realtors (and Win)

5 min read
Chris Feltus Read More

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If you do as much direct mail marketing as I do, you will inevitably run into a situation where you are not only competing against other investors for the deal, but realtors as well.

I have nothing against realtors — in fact, I am one myself — but I always try to operate within the client’s best interest. But let’s face it, sometimes as an investor, realtors will be your competition.

Now, I don’t go around blindly making a ton of low ball offers to see what sticks. I evaluate every potential deal based on the needs of the client. This particular home had been left vacant for some time. The homeowners had put off a bunch of repairs — and eventually months turned into years. This was because in their elder years of retirement, both parents suffered from severe forms of dementia and were now living in an assisted living facility. The siblings both had power of attorney over their mother who was still alive, but the father had passed away a few years ago.

Competing Against Realtors

While I was on the way back home from another appointment, I received a call from my lead generation website. I had a casual conversation with the brother who was out of state and lived in North Carolina, and to be honest he didn’t sound very motivated. He notified me that a family friend would be at the property that day interviewing real estate agents and investors alike to help make an informed decision on what to do with their parent’s property.

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I told him we could pay that, take care of the closings costs and be ready to go in two weeks or less. This would be a great alternative to listing the property on the MLS – crossing your fingers and hoping that it sells. Competition is very stiff here amongst realtors, especially in the Dallas-Fort Worth Market. I figured I might see a few real estate agents and maybe one or two investors; this was more like an amusement park attraction. When I pulled up to the house, there were cars lining the sidewalk and driveway, people were walking in and out of the house, surveying the front yard, walking on the roof. It was a madhouse.

The Neighborhood

Before I tell you the rest of the story, let me give you a little more back story on why this area is so desirable. This is a house in what once was a luxury neighborhood, with 1960’s to 1970’s construction, most on acre lots. Certain phases of the subdivision have started to go downhill as the neighborhood has aged, but now this area has become a hotbed for investors flipping houses, and the neighborhood has slowly but surely begun to transform back to its former glory.

Unfortunately, this neighborhood is notoriously known in our market for the soil type it’s built upon. Because of the soil the houses were built on, foundation issues have been very common, especially if there was deferred maintenance (as was the case with this house). And this house was no exception. There was probably a 2.5-3 inch drop and incline on the East side of the house. The scary part was, this dip in the foundation was right over the kitchen area, and utilities had been off for quite some time — and who knows if the pipes would burst after the house had been lifted.

The house itself, besides the foundation issue, mostly just needed a little care. There was an add-on to the house in the back that I frankly wasn’t sure was worth repairing, and I considered tallying up for a tear down. In fact, some of the other investors at the appointment began to back out right away; maybe they were not experienced enough and were having trouble imagining what the house would look like when it was all fixed up, much like buyers.

Landing the Deal

Now let’s rewind back to the appointment. Like I said, this place was a madhouse — I think I counted over a dozen individuals there. Some were agents, others were investors, but I’m not sure what exactly the split was. Despite what everyone else was doing, I focused my time on building a relationship with the family friend who was at the house on behalf of the brother. I got her to start talking about the parents that used to live there and how the father used to be a well-respected electrical engineer who worked for Bell Helicopter before he retired. And how the mother was an artist of sorts who spent a lot of time working with charity and opening art galleries across North Texas.

We started to connect, and really, we ended up talking about all sorts of things that had nothing to do with the house. In the meantime, while we were walking around the house sharing these personal stories, the occasional realtor or two would come in and try to intervene with a hard pitch: “We can get your house top dollar,” etc. You know how that it is, especially after you hear it over and over — you just start to tune it out.

The family friend just politely nodded to the competition as we continued our conversation. At this point, I still wasn’t sure where I needed to be at, numbers-wise or if this property would even be mutually beneficial given the sellers’ situation. Even worse, some of the realtors, based on what I overheard, were doing the typical “tell the seller what they want to hear” (instead of what they NEED to hear) in order to secure the listing. It’s a pretty sneaky tactic that I absolutely despise. The sellers’ situation was sensitive; the last thing they needed was for the house to sit on the market for another 30-60 or 90 days before the agent inevitably came crawling back to ask for a reduction.

The secret sauce to beating everyone else always seems to be just forming a relationship with the client and genuinely caring about them.

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Making the Offer

After enough time at the property and tallying up repairs mentally as I walked the house, I figured out where I needed to be. Because she was swamped by others, I decided I would call the brother later and make my offer “in person” over the phone. So I did just that — on the way back home, I called him up and told him I had a rough idea of where I needed to be at, but let him know I would send him an email with a more “official” letter of intent. Along with the letter of intent, I emailed him a copy of a few video testimonials. I think there is something very powerful about video; it helps people get to know you, even when they are located in another state and unable to meet you in person (as was the case with this seller).

Turned out the family friend who had been the caretaker of the parents for many years before they were transferred to the nursing home also happened to be the brother’s best friend (unbeknownst to me at the time). She had put in such a good word for me that the brother didn’t want to bother with anyone else; she said she felt “confident” that I was who I said I was and could do what I said I would do. It was a very vulnerable time for them, and they were getting sick of being hassled by salespeople. And even though my offer would probably be a little bit less than what they would net if they listed the property “as is” on the MLS, I still gave them a fair offer and could close quickly.

Luckily for me, I have never considered myself a “salesperson.” I always get a mental picture of a some slimy grease ball on a used car lot. Instead, I always focus on working in the client’s best interest, even if that means them not working with me. I use my time to connect with them, and I genuinely care about their situation and seeing if I can help them – and the rest seems to take care of itself.

What’s your philosophy when it comes to beating out the competition for a good deal? Do you make a sales pitch or do you focus on building relationships instead?

Leave a comment below, and let’s discuss!