Converting a Failed Lead into a Client to List their House?

Question

Hi Everyone,

I just started my first direct mail marketing campaign, and obviously, a lot of these calls lead me to owners looking to get more for their house than I can pay. However, many of these owners aren't working with a real estate agent. I'm currently in the process of getting my license, and I was wondering if it's ethical to turn these leads into clients I could represent as a real estate agent (after I successfully become licensed).

Is this an acceptable tactic, or is there an ethical issue here somewhere? If it is ethical, please still let me know if there are any gray areas, or things I need to be careful not to do. Lastly, how do you make that transition after saying, I want buy your house, but I can't give you anywhere near what your asking... but I could list it for you on the market for significantly more than I would pay?

I'd love to hear your thoughts. Thanks in advance.

Penny I. · Answer

Hi @Derek L.

I agree with @William Robison and my personal policy is always....disclose, disclose, disclose ; )

Good luck! Penny

Shaun Reilly · Answer

@William Robison

I don't think that there is a legal issue and if your intention is to do your best marketing the property as an agent I don't think that their is an ethical issue either.

That doesn't mean other people won't get all in a huff over it.

Realty boards and licensing commissions would hate that kid of stuff.  If you are sending out marketing for your house buying business and you then take listings form it they will be all up your butt on that.

Also what happens if you list it and it hangs out a long time and they decide to take the offer you made before listing it.  I would not touch that since as soon as they see you sold it for a profit (I am assuming a wholesale business in this not a buy and hold where the "profit" is less in your face) I'd expect to get sued (if there is a legit basis or not).

I have heard of the if we don't sell your house by x days we'll buy it stuff.

I have also talked to many brokers that all say they would drop any of their agents in a minute if they were using that strategy.

My concern is for perception much more than the reality of there being something wrong with it.

Also I am an agent but hate dealing with the BS involved with listing a place so I'd just rather get a referral fee anyway.  So I am admittedly baised.

Wayne Brooks · Answer

I tend to agree with William.  There IS a problem if the initial contact with a home owner is as a realtor, discussing the realtors services, and then converting  that over to a "buy at a discount as an investor" conversation.  The approach as an agent creates a fiduciary responsibility that would not be served by buying at a discount.  But, I see no issue with the conversation going in the opposite direction, unless it could be demonstrated this was a constant "bait and switch" tactic used by the agent purely looking for listings.

There will be a lot of opinions on this one going both ways.

William Robison · Answer

@Shaun Reilly

Where do you see the ethical risk with RE commissions?  If you offer a service to buy a property via marketing and you cannot fulfill that service, wouldnt you be doing the customer a favor by offering more solutions.  I understand it if they have already talked to agents or have an agreement, but other than that, I dont see the risk.

There is that one marketing guru that talks about guaranteed sale of your home is 30/60/90 days, or I will buy it.  Of course, this is at a discounted price.  Which appears to be a very similar plan, just in reverse.

William Robison · Answer

I certainly have made this approach numerous times.  Conversation ends up something like this:

"I certainly understand that you are interested in top dollar for your property.  My business is about helping people who are in distressed situations to get a solution that is viable for everyone.  Since you are needing to get more for the house, maybe we should consider putting the property onto the open market on MLS.  Typically, houses in this market area go under contract within ____ days on the market.  Then depending upon financing, typically take about 30 days to close to allow time for inspections, etc.  Would that be a solution that may better fit your needs?"

This leaves both options open.  By telling them the average days on market, you are telling them that they will need to wait for a contract, then wait to close.  All the while they have to worry about inspections.  If they cannot manage this time or risk, then maybe they will reconsider your offer.  Otherwise, you have a solid lead for a fair market listing.

Shaun Reilly · Answer

I personally would not list a place if I found them via my house buying marketing, especially if I offered on the house.

I don't think that there is a LEGAL reason to not do it, but I could see various real estate commissions probably would.

If it were me I would offer to help them find an agent and refer them to some people in your future office that you have vetted out.  Then you don't do anything and get a cut of the commission if they eventually sell the place.