by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
How often had you heard real estate agents complain about “the inventory problem” this past year? I used to think their complaints were farcical until these past 3-4 months. I have about a dozen pre-approved buyers out looking for homes. Interest rates are low and the foreclosures are getting snapped up as soon as they hit the market. Not one of those dozen has been able to get an accepted offer since Labor Day, 2012.
Clearly, there must be an inventory problem.
It’s time to change gears real estate agents. A few years back, I suggested that buyers would be controlling the market and the listings side of the business should be de-emphasized. All the properties being offered were short sales or foreclosures. Paperwork-intensive transactions didn’t sound so appealing to me and I recommended that agents focus all their efforts on finding buyers and getting them into contracts. Those who followed such advice didn’t get rich but earned a darned good living these past few years.
I had breakfast this morning with Mr. Oceanside, Don Reedy. We discussed the local market and “the inventory problem” when it hit me; there is no shortage of homes. In Oceanside alone, there are thousands of home owners, with equity, who can sell their properties to ready and willing home buyers. This offers the ambitious real estate agent a great opportunity. Too often, real estate agents (and loan originators) forget that we are paid to add value to transactions. If we’re simply acting as gatekeepers, we are no different from everyone else. We need to “create personal inventory”–find sellers for the buyers who want their homes.
Here is my ten- step plan for real estate agents, for a great 2013…with PLENTY of “personal” inventory:
- Attend your local caravan meeting each week. Pay close attention to the agents who speak during the “buyers’ needs” segment.
Call a dozen local agents weekly who work with buyers. Find out where the inventory problem is. At this point, you will see a glaring opportunity in your town/market area. If you know that those agents have 2-3 buyers, for a certain price range, in a certain area, you have identified “half” a market. - Look at the property tax records in the “problem” subdivision. Choose only properties with owner’s equity. Generally speaking, you’ll look for homes bought prior to 2006 or in 2010. If you’re doing a search with the local title company, and you know the homes are worth $350,000-$400,000, you could also search for sales which had recorded mortgages under $250,000 (that can eliminate a lot of problems). Compile a lit of potential “equity sellers”.
- Visit those equity sellers on a Saturday morning or Sunday afternoon. Don’t mail them. Don’t call them. Don’t email them. Bang on their door and tell them that you KNOW where 2-3 willing buyers of their property are. Ask to meet with them to discuss the idea of “equity transfer” to different property.
- Meet the now interested seller and explain that, when they look at their original mortgage payment (before they refinanced), and add the expected equity from the sale of their home, they might be able to buy a “better” (bigger, nicer, closer to work) home. It might be useful to have some listings printed out, in the “better” homes’ price range, to whet their appetite. Recommend that they speak with America’s #1 mortgage broker, to get pre-qualified for the “equity transfer” program, with mortgage payments which were equal to their original (before they refinanced) payment. Schedule a follow-up visit and tell them you’ll have the mortgage broker call them in the morning.
- Speak with the agents who have willing buyers for the home. Verify that they are still in the market and that you might have a property about to hit the MLS. Explain that you’ll give them a “heads up”, right after the listing agreement is signed, and tell them that you’ll let their buyers “preview” the property the day the listing is entered into the MLS. Estimate when you think that will be.
- At the follow up visit to the interested seller, start the meeting off by showing them the available inventory for the pre-approved amount (you’ll have a pre-approval letter from the mortgage broker). Sell the fact that you are transferring the equity from the existing property. If they seem excited, offer to list thee property for 30 days only. Explain that this market is a bit of an anomaly and, if you can’t get them the price they need, to affect the “equity transfer” in 30 days, it may not make sense to sell at that time. Have the seller sign a 30-day listing agreement along with a 60-day buyer’s brokerage agreement.
- Instruct them to be out of the property from 2PM-7PM on the next Friday and out of the property from 1PM-4PM on the next Saturday. Schedule time to review offers, at 6PM on that Sunday evening.
- Plan to enter the listing into the MLS on Friday morning (or late Thursday night). Schedule an open house for that Saturday. Call the agents with buyers, and instruct them to schedule a showing on that Friday (from 2:30PM until 6PM). Tell those agents you plan to hold it open that Saturday and that quick offers are the wisest policy. Explain that you expect to be presenting offers all day Sunday.
- Find your seller a new home. Collect commission checks for adding real value to a lopsided market. Celebrate.
- Repeat.
It really is that simple. If there are more buyers than sellers in a market, find more sellers.
Don Reedy says:
This morning’s talk with Brian Brady was another eye opener, thought I hardly needed anything to open my eyes beyond the wonderfully chilly, sunny and awesome beach area of Oceanside where we met.
There’s a Jimmy Buffet song, “God’s Own Drunk”, in which he says that this big ol bear begins to do the “bear dance.”
“I gave him one of them jugs of honeydew vine water, he downed it upright, (looked like one of them damn bears in the circus sippin’ sasparilly in the moonlight.) I gave him another and another and another ‘fore I knew it, he’d downed eight of ’em and commenced to do the “bear dance.” Two sniffs, a snort, a fly, a turn and a grunt; and it was so simple like the jitterbug it plumb evaded me.”
Well, of course this idea of Brian’s will work. Every week all of us meet dozens or more of our fellow real estate agents complaining about lack of inventory. Each of them has a buyer, or multiple buyers, ready, approved, chomping at the bit to buy their little slice of the American dream.
But we missed it….most of us. There’s never been a better time to switch from being a buyer’s agent with no inventory, to a money making machine listing agent who understands that every home, on every block, in every subdivisioin, in every city is inert inventory. Bodies at rest will stay at rest until acted upon by another force…..(that would be me and you, any of us who call ourselves sales people).
Check back with me in a couple of weeks. I’m going to use Brian’s approach to throw some homes into the particle accelerator, turn the current inert Oceanside community inventory into kinetic “exchangers of equity”, and be back here with homes your clients can purchase.
Disclaimer: Offer good anywhere in America where great agents use good ideas to create jaw-dropping results.
January 11, 2013 — 4:09 pm
Al Lorenz says:
Nice! I like it. It would work anywhere.
January 11, 2013 — 5:18 pm
Daniel Moskowitz says:
Brian,
Great plan and great points. The difference between waiting for the nuts to drop and shaking the tree.
January 12, 2013 — 11:48 am
Cheryl Johnson says:
“Choose only properties with owner’s equity.” I see that as the key concept…. Folks with equity still do exist, it will just take a little more effort to search them out…
January 13, 2013 — 6:20 am
Ashlee says:
I like a lot of ideas and your right it seems like there really isn’t a problem with the amount of inventory on the market, it is more to do with the inventory of realistically priced homes. I believe we as agents should be focusing our attention on sellers that are motivated to sell and educating them on why their homes aren’t selling. Those with equity lost may still be in a better position in selling for a lower to take advantage of a likewise lower priced home and record low interest rates.
January 13, 2013 — 12:14 pm
William Miller says:
I’m not a real estate agent with great experience. Just an average one, with my own highs and lows during my career. These ideas are good, valuable. But let’s admit, everyone of us has it’s own ideas and thoughts. Some are the same, some are a bit different. The point is, that every theory is being changed month after month. And maybe in 3 months you will say that most of those ideas were not really applicable.
January 16, 2013 — 5:58 am
Ray Smiley says:
These are great tips. I have been hearing a lot of inventory shortage talk and I don’t believe it for the most part. Like you said if there are more buyers than sellers on the market, then find more sellers!
January 17, 2013 — 12:43 pm
Gabe Sanders says:
Interesting ideas. On this side of the country, we still have plenty of inventory.
January 20, 2013 — 8:02 am
Colleen G. says:
Such great information on how to successfully tap into the inventory market. Thanks!
January 23, 2013 — 9:18 am
Susan Zanzonico says:
Yes, great ideas. Continual implementation of these ideas is key.
January 31, 2013 — 8:31 am
Trela says:
Some great points in this article. We are starting to see more Realtors going door to door trying to find properties for their buyers. A big problem is education. Sellers don’t know its a hot market and a good time to sell and buyers still think its a buyers market (at least until they have lost out a few times).
March 14, 2013 — 10:04 am
Ryan says:
With almost everyone saying there is low inventory, it was refreshing to read this.The trick seems to be knowing where to look.
March 15, 2013 — 6:30 am
Jackson says:
That bang on equity sellers’ doors on a Saturday or Sunday afternoon) after church and brunch sounds a bit iffy. It could go either way. Sounds heroic and zealous in print, but the idea of actually walking up to someone’s door on such an inopportune day and unannounced. Surely you were being facetious. There has to be a more effective way to connect with people without stepping onto their personal space. Just a thought. And alternative ideas?
March 31, 2013 — 6:32 am
Brian Brady says:
“Surely you were being facetious.”
Absolutely not. Real estate is a contact sport.
“There has to be a more effective way to connect with people without stepping onto their personal space.”
There is but it costs a lot of money. A direct mail campaign, with 7 pieces dripped onto 1000 homes, over a 6-week period, might yield you as many as 10 listing appointments and will costs $5K-10K. I’m suggesting that you will be more effective doing it door-to-door because nobody is doing it.
“Just a thought. And alternative ideas?”
Disprove this theory first by banging on a few hundred doors. Stop after you speak to 100 homeowners. Even if the homeowners does say “not right now” ask them who “might” want to sell in the neighborhood.
April 3, 2013 — 12:20 pm
Jeff Brown says:
How many will ‘bang on doors’ consistently — wait for it — for six figures yearly?
Oh, and I’m not being facetious. 🙂
April 3, 2013 — 12:36 pm
Brian Brady says:
“How many will ‘bang on doors’ consistently — wait for it — for six figures yearly?”
Very few but I’m not aiming for consensus; I’m striving for excellence. This point makes all the difference. My advice is not theory but from observing high-producing agents, over 17 years.
There is marketing and there is prospecting–both work. 6-7 years ago, marketing was key but today, circumstances have forced top-producing agents to out-think and out-hustle the rest of the pack.
Two agents I tagged on Facebook, Johnny Perez and Carlos Gutierrez are doing this and getting remarkable results. Connect with them and watch all the pictures of new listings on their wall. As the market has shifted, so have they. While the crowd is pontificating about how to be “more efficient”, these two are calling expireds at 7AM and banging on doors with willing buyers. They aren’t “following the market”, they are creating (and dominating) one.
The aforementioned agents made mid-six figures last year and willingly told me what works for them.
What’s the most efficient thing to do to make money in real estate? Get belly-to-belly with would-be home sellers. The easiest way to do that is to bang on their doors
April 3, 2013 — 1:55 pm
Jeff Brown says:
Very few indeed, Brian. That was accurate in the 1970s, and today. I’m now mentoring a San Diego agent who has bought into our take on this.
There are those who talk about what works, and those who do what works. 🙂
April 3, 2013 — 2:25 pm