I constantly get Students asking me about the newest Bright Shinny Object ("BSO") that is being offered by gurus on webinars or national speakers at local REIAs. I hate to say "No" because these programs just might work and then I would feel terrible for trashing it even though I know that many these programs seldom work.
One such example was when a Student came into the office and told me he had made 85 offers and had no deals yet. Simply making offers that you expect to be accepted is not an investing strategy; it is a surefire way to over pay for your deals. In what we do to get deals, we make a lot of offers and expect not to get anything but a rejection. We make the real money in following up and getting deals when other investors have quit trying.
The Student's BSO in this case was an automated MLSÂ® contract offer maker. The program would somehow integrate with current listings on the MLSÂ® and at the user's command, send the listing agent a completed contract. Obviously using the listing price is unacceptable because the property hasn't sold at that price so why should it trade higher after you buy it?
To make the program more effective, the user would next pick a percentage of the list price and the program would send that offer to the listing agent. Sounds simple enough doesn't it? I can see all kinds of problems with the premise but because the Student was so adamant about getting it, I said, "Try it out." The program wasn't cheap to start with and required a monthly fee to maintain its operation.
I didn't hear from the student for what seemed like months and I should have if he was getting deals as I like to look over Students' shoulders to see if their properties are deals or not. Out of the blue he showed up at my office and said he wanted to chat. So we got right to it and I asked, "What happened?"
Actually it had been six months since I last saw him and he said he had been using the automated program daily. He had put in over 22,000 written contracts and he had no deals. I asked him why he thought it didn't work and he said there was a technical issue with the actual contract going out that took some time to cure but still wasn't working correctly. He had decided to stop paying the monthly fee and quit using it.
Actually there are a couple of other reasons his BSO may not have worked:
1. Many listing agents have changed firms or email contact information so the emails listed in the MLSÂ®, IDXÂ® or Realtor.comÂ® can be wrong.
2. His percentage of the listing price could have been too low to make sense and the agents who did see the contracts didn't even show them to their sellers.
3. Generally agents want to see a complete contract package which usually includes a Proof of Funds ("POF"), Escrow Deposit or Earnest Money Deposit ("EMD") and the correct Purchase and Sale Agreement. If he did not include any of these three items or other seller related requirements, his contract likely would have been rejected.
4. Some listing agents do not open emails when they see a RelatorÂ® approved contract attached. Their thought process is they don't want to split the commission on the deal so not opening the email insures not having to get another agent involved.
5. He did not get any counter offers and this indicates something was very wrong with his contract delivery system.
6. The money in making multiple offers is not in just submitting mass offers and hoping for the best. The vast majority of the time when you get a deal on the first offer, you paid too much. Following up and getting deals that can't be readily sold by the agents or ones that fail to close is where the huge spreads are in wholesaling.
We actually use an automated contract writer that fills in the contract, signs and initials it, adds all the necessary addendums, emails the completed package to the listing agent and puts the property in an automated follow-up system. As I stated above, we make our money by following up until someone else pays too much and closes or we are the "last" investor standing and the listing agent actually needs us!
In summary, I should have said "no" but what if it had worked for him and the thousands of other investors using the same system? It would come down to whoever made the highest percentage offer who would always be the winner and soon the offers would be over 100% of the listing price and on and on...
We focus on making money and as much as is possible on every deal. We can't pay list price unless we are going to rehab the property or hold it long enough to relist it and sell it to crazed buyers who will live in the property.
To your limitless success!
About the Author:
Dave Dinkel has over 40 years experience in Real Estate Investing which has given him a unique perspective into the Market. Learn the proven methods of today's successful Real Estate Investors. Visit Dave Dinkel's site to get you started as a Real Estate Investor today! Click the link Now http://www.davedinkel.com