What to do when sellers respond back to direct mailer

21 Replies

Hello everyone, I recently sent out a few direct mail letters to a specific neighborhood I would like to invest in. I’m searching for my first BRRRR home in Portland, Oregon area. I have received 2 very pleasant home owners telling me they are interested in selling possibly. I’m not sure the best way to approach the topic of wanting to buy there home for investment purposes and under market value. Some questions I have. 1. What point do I get a realtor involved to handle the process? 2. Is it really possible to purchase a home lower than market value? 3. Tips on what to say or do next after some one calls you back from your letter? 4. If the numbers don’t work for cash flow, can I wholesale it since I have found an off market seller? 5. I’m currently preaproved for $150k conventional loan, but the homes are in $200-$250k range. Any tips to not let an opportunity pass by and negotiate closer to $150k or am I dreaming? I am surprised that only 11 letters sent out resulted in 2 call backs of interested sellers in the 1st day. I feel like I may be close to something but don’t want to waist it. I’ve been studying up the last 9 months and glued to the BiggerPockets podcast. First time posting hear, thanks for any support or tips. Steve
When I get a call from a letter, I tell the caller I'm an investor. I say, "Oh, you got one of our hand written letters, we do it that way so people will accually call. We are investors and we love your neighborhood. So what your favorite thing about your house?......"

1. You don't get realtors involved, that will just eat into your spread.

2. Yes.

3. Ask them how much they want for the house.

4. No, if the numbers don't work why would someone else buy it? 

5. If you can only afford 150k, you should probably look in neighborhoods where the purchase price would be 150k.

Have you listened to the podcast with Chris Voss? I haven't done any wholesaling, but I would think once they contact you, throwing them a lowball offer is just something you have to get used to. Make sure they are the first one to name a price. The podcast with Chris Voss, as well as his book, Never Split The Difference offer excellent negotiating tactics. I would also so you can absolutely get houses for under market value, you can get anything under market value. I don't think it will be easy though.

What to do when a seller calls from your marketing:

Talk to them!

It’s unbelievable how many people send out direct mail only to have the call go to voicemail and then never follow up. It’s a complete waste a time, money, and energy if you don’t talk with them.

Don’t over think this. Your job isn’t to negotiate price over the phone, especially when you are working with a very limited amount of leads. Build rapport, ask questions, and then setup a time to go talk with them in person if it looks like the property is what you are looking for.

Meet in person. Ask questions. Understand where they are coming from, why they are looking to sell, and what their situation is. See the property to get an idea of value if possible. Don’t be afraid to talk matter of fact about what price they see the place is worth to gauge their temperature.

After that research property values, run your numbers, put together an offer or two, and then go meet them again to talk about the offers.

When an offer is accepted take the paperwork to a title company to open escrow, put down earnest money, inspect the trio and title reports, get the professional inspections you’d like to have done, negotiate the deal if necessary from your due diligence, make sure your financing is in place, and then close on the deal at the scheduled closing time.

Take the keys and then get to work.

It feels like a gargantuan feat when you haven’t done it before but it does get easier when you know values and how to structure a deal that you can then shepherd through escrow. You may want to rope in someone more experienced or dare I say an agent to help walk you through this process on the first couple deals.

having spent a decade in the timber business in Oregon I call it Oregon porch time.. these are not inner city dwellers these are folks that you need to sit with and talk  have coffee and build reporte'

if the homes are nice and clean and saleable probably tough to buy under market unless your good at looking someone straight in the face and telling them their 300k home is only worth 200k.. that is a moral issue.

Also be aware that you CANNOT legally sell a home you are not in title to in Oregon.. its selling real estate with out license and don't listen to all the people from all over the country that wholesale.. many states its an accepted practice in Oregon it is not.

Also if your flipping homes IE coming into title you also need a developers license in Oregon  talk to @Karen Margrave she just got an education on this.. the state is cracking down on flippers.. its a 5k fine.. usually 1k first time. 

But the law in this state is even flip one home the license  is required. And to bring two parties together for compensation a real estate license is required. 

@Neal Collins   are you seeing any of this.. I have been hounded on these issues the last year.. turned in  once and we have the developers license by a neighbor and we were doing a flip in Salem and inspector drove by.. LOL.. 

So get this even though my personal LLC is a licensed Developer with insurance and bond.. the home I bought and was working on in Salem in another of my 14 LLC's did not have the specific license even though I am the owner of that LLC and managing member that is licensed.. the actual LLC needs the license / or you can skip that and be a GC. One way or the other if your going to sell a home in Oregon to the public you need one or the other. This is predicated on working on it at all.. still grey area of buying and never touching the home.. but not many flippers do that.

And if your going to flip contracts or wholesale you need a RE license..  

If your going to buy and hold no license s of any kind.. 

I think Rarebird would be doing their members a big service to invite one of the Department of Real Estate enforcement officers to a meeting and explain what is legal and what is not.. and same with someone from the CCB...

Having gone toe to toe with those folks and losing  .. and the division of corporate securities and paying fine.

Oregon is  tough place to do this the way all the rest of the wholesalers work through out the country.. 

@Jay Hinrichs my son Michael is now a licensed GC, and we are finishing up the developers license for the LLC. The hardest part is getting a straight answer from the CCB because each of them have a different understanding of the law since Michael is on the LLC is it necessary to have a GC license (in his name) and a Developer license for the LLC, or would the GC license suffice. We went with both licenses to be safe. I have talked to other local developers and brokers that insist they KNOW more than I, and they have no clue as to the licensing requirement for Developers if they're buying/rehabbing/selling, and say they do it all the time without a license or some without a GC on the job.

Anyway, lesson learned. What a boon for insurance and bonding companies, maybe we should be in that business.

@Steve Dunford just because you "can" do something, doesn't mean you should. Anyone that you'd get a buy like that from obviously is someone you'd be taking advantage of because they have no knowledge of the market. Also, Jay is correct, what you're doing is in the realm of what you have to be licensed for in Oregon, and believe me, they take licensing serious. Even I, that has been a licensed agent in CA for 30+ years, here in Oregon rather than selling as an owner list my properties with a broker until I get licensed. Portland has a strong market, and finding deals to wholesale in such markets is tough.

Listen to Jay & Karen- they both are successful!

What I would do? Besides lick my lips- I would owner finance and pitch a partnership with the seller!

If you want a spin off- buy, lie, and die! If you want to build a business and develop a reputation as a “problem solver,” partner up with your seller... and if course save on fee’s and all the other jazz. Going thru a bank/hard money lender to buy a dog to fix up imo is TOO EASY to do, Challenge yourself! Partner with the seller and sell yourself!

I would read the book - never split the difference . This is absolutely geaered  toward what you are trying to accomplish . Chris voss has mastered the art of negotiations and you can learn a great deal by studying his techniques 

Originally posted by @Mike Nuss :

@Jay Hinrichs that's a great idea. Do you have a contact you could recommend for me to contact about speaking?

I can make a referral  just e mail me directly Mike.  

At a previous REI seminar I was told that a flipper could do four houses a year without getting a license in Oregon. We always use a RE broker to sell but have bought once in a negotiated private deal. I am very interested in what @Jay Hinricks and @karen Margrave have said. And I look forward to @Mike Nuss providing a presentation on this subject for Oregon.

Regarding the original question by @Steve Dunford, I've sent many mailers and consistently get a 1-2% response.  However, the local market is tough and most people really are just wanting to know what their property is worth.  So nowadays I start on the telephone by telling them I am an investor and advise them regarding the economics of wholesaling their house.  Occasionally you will find someone who: 1) can't afford their property anymore and is tired of the struggle, and 2) have enough equity in the property that you can make them happy while still buying at a discount.  But these deals are few and far between.   Good luck Steve.

Thank you for all the advice. For a first time post, I really have received a lot of info to crunch and process. I think wholesaling is not going to be my direction. I am how ever going to try and set up “porch time” with off market sellers and be honest with them about my intentions and see where it gets me. I will probably rely on a good realtor to help with first deal as well.
I am also wondering if anyone has a good set of questions that they have set aside when some calls back from direct mail letters. I was a little nervous talking with my last responder about there house and wished I had asked more strategic questions.

Steve

@Jay Hinrichs We don’t do very much wholesaling because we will either close or represent a client to close. RE license has been a huge asset to us. The bar to get a contractor’s license is also quite low with an open book test and 15 hours or so of education. Getting bonded is dirt cheap, and if it weren’t for insurance costs I’d bet there’d be more contractors out there.

Originally posted by @Neal Collins :

@Jay Hinrichs We don’t do very much wholesaling because we will either close or represent a client to close. RE license has been a huge asset to us. The bar to get a contractor’s license is also quite low with an open book test and 15 hours or so of education. Getting bonded is dirt cheap, and if it weren’t for insurance costs I’d bet there’d be more contractors out there.

you need good credit to get a bond that I think is a stumbling block to some in that industry. 

After driving for dollars I have recently sent out a few pieces of mail and plan on to continue mailing these people.  I was originally hoping to wholesale (on my own) or flip (with a partner) a property here in Portland until I read this post.  I do not have my RE license.  

@Jay Hinrichs regarding: "But the law in this state is even flip one home the license is required. And to bring two parties together for compensation a real estate license is required."

If I find a seller could I partner with someone who has a RE license to complete the wholesale or flip?

Originally posted by @Dan Albrecht :

After driving for dollars I have recently sent out a few pieces of mail and plan on to continue mailing these people.  I was originally hoping to wholesale (on my own) or flip (with a partner) a property here in Portland until I read this post.  I do not have my RE license.  

@Jay Hinrichs regarding: "But the law in this state is even flip one home the license is required. And to bring two parties together for compensation a real estate license is required."

If I find a seller could I partner with someone who has a RE license to complete the wholesale or flip?

I suggest you call the CCB  and tell them what you want to do .. pretty sure they will say you need a developers license like I have .. or actually I have 3 of them for 3 different LLCs its a pain but after being fined twice you learn.

then I would call the department of real estate and ask to speak to an enforcement or investigator and run your model by them.. Pretty sure they will tell you that you have to CLOSE on the property first before you market it .. just like I have done for 40 years.. 

I had lunch yesterday with a regulator and one of the targets she told me is brokers allowing wholesalers that don't own the property to list and market them prior to them closing.. again what she told me that is a  violation for that broker..  but really don't take our advice from a cereal box  or me or BP  just call the state and talk to the people who regulate us and if we do it wrong who sue and fine us.. 

Thank you, @Jay Hinrichs , for your thoughts. I called the CCB today and found out that I do not need a Residential General contracting license to flip 3 or fewer homes in a year. If I do more than that then I need a contracting license. I would also need a license if I were to do any amount of work on the property myself such as picking up a hammer or paint brush.

As far as needing a real estate license for wholesaling, they directed me to their website and referred me to the laws and rules section (https://www.oregonlegislature.gov/bills_laws/ors/ors696.html). For those wanting more info please see 696.020 that states a real estate license is required for professional real estate activity which they define under 696.010, #17.

They ultimately said I should email them my specific question/scenario to get a better idea of what is legally required.

Originally posted by @Dan Albrecht :

Thank you, @Jay Hinrichs, for your thoughts. I called the CCB today and found out that I do not need a Residential General contracting license to flip 3 or fewer homes in a year. If I do more than that then I need a contracting license. I would also need a license if I were to do any amount of work on the property myself such as picking up a hammer or paint brush.

As far as needing a real estate license for wholesaling, they directed me to their website and referred me to the laws and rules section (https://www.oregonlegislature.gov/bills_laws/ors/ors696.html). For those wanting more info please see 696.020 that states a real estate license is required for professional real estate activity which they define under 696.010, #17.

They ultimately said I should email them my specific question/scenario to get a better idea of what is legally required.

 get the 3 in a year in writing I got a fine for doing one in one company..  it was not worth fighting the 1k fine.. though :)  

@Steve Dunford I'll try to address your Question #3: What to say to seller's when they call you off your mailer.  I created a list of essential questions a while ago that I think might be helpful.  Don't try to ask all of these in one call, but weave them into your initial discussions as you try to build rapport. Here's the link to the pdf: List of Essential Questions