Staying committed and checking in with a client can pay off more than a year later. This is why it’s worthwhile to be in it for the long haul.
Getting to know property owners and learning about their experience with the real estate market is a crucial aspect of understanding their motivation to sell without a real estate agent. In fact, one of our successful associates learned early on that listening to and following up with a potential client can have a high return on investment.
This is especially true when considering the three paydays my company creates on most deals. Keeping that in mind, you’ll start to realize the enormous profits left on the table if no follow-up is done.
How to Establish a Relationship With Prospective Sellers
Here’s a story about an associate of mine, who started laying the groundwork for a deal with one of his first phone leads. Every 90 days he would check in and see how the owner was feeling about the market and his property.
After a few phone conversations, he and the seller started establishing an ongoing relationship. By doing so, he got a better feel for why the seller was or was not selling—simply by listening.
After about six months, the seller confided that, while he wasn’t ready to sell just yet, he had decided he would be in touch with us when he was ready. He went on to explain that circumstances (like one of his children returning home to live with him) had delayed the sale.
Unfortunately, that was not something we could help with. But he also revealed that his past experience with the house on the market was also the reason for his hesitation.
He had spent a year with his property on the market. And after dealing with Realtors in that process, it all just felt like a waste of time and money.
We simply explained that we had different methods of buying property. We also discussed why we’re able to then sell it on our end, given the expanded pool of buyers when one considers those who are rent-to-own as opposed to conventional.
How to Undo Past Selling Mistakes
We admitted that one of our biggest challenges when selling a property was that the Realtor’s last listed sale price is often still somewhere on the internet.
As such, we told the owner to list a dream price on Zillow, which would ultimately accomplish two things:
- The more recent value of the house would be easily visible online and influence potential buyers’ perceptions.
- It would give the owner a taste of the current market. It would be unlikely to sell at the dream price. But on the off chance that the seller ended up getting that amount, we would be happy for them and move on.
The deal hung around for 18 or 19 months with the house listed online for $689K, which generated some calls but no offers. That price wasn’t unfair; it’s just that the specific area was crowded with a few other listings.
How Patience Pays Off
When the owner was finally ready to sell, we got the house for $580,000. We listed it for sale for $679,00, which would be recognized as a discount to the pool of interested parties.
It also showed the seller that the market didn’t jump at that higher price and gave him more confidence working with us.
Nurturing that relationship and reassuring one another we were headed toward a deal paved the way for a great experience with the seller. We negotiated his terms for a monthly payment that was contingent upon finding a tenant-buyer. It would begin 30 days after securing their placement.
Structuring the Deal
Most of our deals are contingent upon a buyer, unless we’re picking up some serious additional free equity. As a new investor, you’ll want all yours contingent upon a buyer.
Once you have three or more deals cash flowing, however, you’ll have the option of buying more aggressively and picking up free equity while doing it.
Our associates negotiate a 30-day delay to give themselves a cushion. So in essence, they are using their continuous stream of income from the tenant by capturing the first month’s payment and starting to pay the seller’s mortgage month No. 2.
As we started this article, the lesson from this situation is that deals take time. You have to commit—not necessarily full time, but wholeheartedly—to this business. And if you do, you’ll love the rewards.
The Deal Summary
Source: Expired Listing
Payday #1: $70,000
Payday #2: $26,778
Payday #3: $27,288 ($508 principal paydown x 36 = $18,288. The markup, minus the $70K up front = $9,000.)
If you’ve followed past articles, you know that our paydays across the country, on average, range from a low of $45,000 to a high of $120,000. We’ve seen exceptions of $30,000 and even $300,000—and this one came in slightly higher than the high average.
What’s your best advice on establishing relationships with would-be buyers or sellers?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.