Calls Coming In But No Deals. What's Wrong?

Question

I've sent out 2 months of direct mail to absentee owners with parameters such as >50% equity >2bdrms, etc.   I've sent out 2250 letters and post cards and gotten 57 responses.  That's a 2.5% response rate.

I have patlive screening my calls, and every caller that didn't just tell me to go F myself, I called back and made a verbal offer to based on the numbers I was told to use here at BP in addition to some of my own assumptions.

I make cash offers by a CMA to get ARV.  I multiply that value by 0.7.  I then subtract an assumed $20K for repairs (paint, carpet, seller's lies about repair costs, landscaping, etc.).  Then, I subtract my fee, which has been $5K every time, because anything more, in most cases, would be completely ridiculous from the seller's perspective (as if a 50% of market value offer wasn't ridiculous enough to them already), and anything less would make it hard to recoup my marketing dollars spent.  For those that are calling me that have 100% equity, I'm offering a seller financing deal for them, which is usually 80% of market value minus a few thousand at 6% interest secured by a mortgage with a balloon at a minimum of 7 years.  A good bit of the calls have had 100% equity.

I've made roughly 45 offers to absentee owners and haven't gotten one yes.

What am I doing wrong?  What could I be doing wrong?  I plan on sticking with this thing and spending the marketing dollars for at least 6 months, but I'd at least like to make at least one deal.  2 months in, and not one.  And I was hoping to get at least 2 a month on this budget.  What's going on?

Andrew Newlon · Answer

@Justin Smith I would highly recommend visiting the property before making an offer. We tried sending out a large amount of low offers and received the same results. Sellers aren't as motivated on the phone, it's easier for them to say no and hang up, and they don't feel as confident in you as buying their house/fixing their problem. When you visit their home, you can begin to connect with them emotionally and find the main reason they are trying to sell and offer a solution to that. Don't focus simply on the price. It also gives you a chance to validate what needs to be repaired and give the homeowner the chance to realize it as well. I always ask what their asking price is on the phone. Then I follow up with asking if that price is flexible. Based on their responses, I can gauge how close they are to my MAO (maximum allowable offer) and how motivated they are. This helps me narrow down to those that I can work best with. Hope this helps!

Ryan Dossey · Answer

@Justin Smith What mix of your marketing has been "letters" vs postcards?

What kind of data do you have Patlive collecting?

If I understand correctly you're starting with 70% of ARV Subtracting 25k and that's your offer price?

One of the issues you're going to run into is that SC as a whole is a pretty hot market. So typically you're going to spend more money to get a deal. What sort of ARV are you targeting? It could be that you're in a tricky price range.

Are you actually going and meeting with these sellers? Judging from your post I'm going to assume that you're not. The Golden Rule in sales is that people buy from who they like. If they haven't met you a 10 minute long phone call typically isn't going to get it done. UNLESS they're desperate. I make my living on working with more affluent individuals who want to trade equity for ease of transaction. You need to build rapport over a common interest, get them comfortable, and logically explain your offer.

45 offers is awesome. But you should have several deals from that sort of volume of offers.

I wouldn't expect a deal off of 1k pieces of mail in a warmer market.

Jay Hinrichs · Answer

I have a couple of thoughts.

1.  Real estate as it was taught to me 40 plus years ago is a belly to belly business.. you cannot have consistent success trying to close folks on the phone unless they do not live in the market.. its too easy for them to simply blow you off.  the lead that comes in should be used simply to set an appointment to view the property nothing more.. its the death nell to qualify on the phone.

2. As Ryan Dossey mentioned if you get belly to belly with them I bet you would have ended up with a few rentals if you want in the landlord game.... I call it porch time.. you MUST do it if your going to close.. especially if your working with a little older demographic.. they want to know and like the person they do business with .. not just some voice on the phone..

If you don't have the time to go visit then you may want to rethink this whole idea of wholesaling

Steve Vaughan · Answer

Conversion rates and income streams will increase dramatically when we teach our pony new tricks. Only knowing the 70% minus this and minus that insult offers is extremely limiting. Probably could have had a couple creative rentals by now.  Solve seller problems. Engineer transactions. Congrats on your responses so far. Cheers!

Westley Bachmeyer · Answer

I have a piece of advice for you.  The people that call you back, schedule a follow up and increase your amount offer.  Also, negotiate, but know what your max is.  If you offered me half for my house, I would laugh too, but if you said "ok, what are you willing to do?"  get their feedback and tell them you will follow up.  Work their numbers and see what makes sense.  You may not always get YOUR deal, but you will still get a GOOD deal.  In fact, their situation may not be money at all.  Suggest other things they may need.  A moving expense.  Get to know who you are talking to, not just the numbers.  Don't mistake this for loosing sight of the number, just don't make it all about numbers.  These are people.  If you can handle the "people" aspect by reading them, listening to them, I believe you will have better success.  This is especially true in a HOT market because they probably get a million offers and they are all undervalued, but if you build a relationship, they will be more inclined to take a smaller offer.  Just my advice.

Todd Plambeck · Answer

Are you going to the properties or just throwing out a number on the phone without ever seeing the properties?

Ryan Dossey · Answer

@Jay Hinrichs Thanks! He's right that it gives me added flexibility. At the minimum I can legally collect a finder's fee if I don't want the listing.

@Justin Smith What does your follow up game on those 45 offers look like? How many times have you called each of them back? How many times did you actually get them on the phone after your offer? That could be a huge part of the problem as well. (Especially if you've never met with the sellers)

Matthew Paul · Answer

You are making an offer , over the phone ,sight unseen , for roughly 1/2 of the value of the house based on assumptions .  And you expect someone to say sure I will do that .

I have 6 properties , I get 2 or 3 of the letters a month , on occasion I will respond to see what they will offer .  Its rather funny , the offers that is . And they love to say " all cash deal " . They do stutter a bit when I tell them I want it in $ 50 dollar bills , cash only .

Justin Smith · Answer

I always try to build rapport.  A few of these people have told me their life story.  But, what I'm getting from you all seems to be that my mistake is not actually going to see the property.

Going to see each property that I've made an offer to would be impossible in my situation.  So, maybe I'll go see the ones that seem the most motivated.  Thank you

Calls Coming In But No Deals. What's Wrong?

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