Today I want to talk about why you need to create a customer plan for your real estate investing business (in addition to a marketing plan) and exactly what a customer plan is. This is a new concept for real estate investors, but it’s something savvy businesses have been doing for a while.
What’s the Difference Between a Marketing Plan and a Customer Plan?
Simply put, a marketing plan is used to get leads. It’s used to attract motivated sellers.
Your customer plan details your process or what you do to keep those leads. The goal should be to have a repeatable process for nurturing the people that come into your business as leads.
Let’s Look At Your Marketing Plan
One of the first things you probably learned when you started your investing business was that your #1 job is marketing. You won’t be in business very long if you don’t have a steady stream of leads coming in the door. There are a lot of things you can put off but marketing isn’t one of them.
In order to effectively market your real estate business so that you always have leads, you must have a marketing plan.
Once you have implemented your marketing plan, it’s time to move on to your customer plan.
Exactly What Is a Customer Plan and Why Do You Need One?
A customer plan is a document that you create for your specific business. The customer plan for a real estate business would look much different than one a doctor created for their medical practice.
If you look at most businesses, they spend a lot of time writing business plans and marketing plans that attract customers. However, almost no one has a plan for keeping those customers (AKA motivated sellers) once you have gotten them to call you. Real estate is no different from any other business; it’s all about the customer. In our business they just happen to be folks that want or need to sell a property.
Your customer plan should be a detailed document that outlines everything needed to create a remarkable customer experience. This is the time for innovation; the time to think outside the box. If you really want to be the standout company in your marketplace, you need to find a way to reinvent the way you do business and deliver that exceptional customer experience.
Once you have created your customer plan, it also serves as a roadmap for making your company the absolute best company in your market.
Companies that got it Right
When you talk about companies that disrupted their markets, the first two companies that immediately come to mind are Uber and Airbnb. These companies “reimagined” the taxi business and the hotel business.
Uber changed the model of taxi business forever. People everywhere like riding in a regular automobile much more than a stinky taxi. Airbnb is another company that completely changed the customer experience. They reinvented the way customers choose accommodations when they travel. They are definitely giving hotels a run for their money.
What about cameras and voice recorders? Smart phones have pretty much replaced the need for both of these devices. They forever changed the way we take pictures on the go.
When I think back to the company that changed the way real estate commissions were traditionally paid, RE/MAX was responsible for that major change. Agents no longer had to share their commissions with the broker/office. If you are a RE/MAX agent, you pay a fee for everything; office space, copies etc. but you don’t share your commission. They reimagined the way Realtors get paid.
So the next question is …. how can you create a customer experience that is so different than what people are used to that you become “the one” they all want to work with?
It All Starts with the Customer
The first step is to know your potential customers. Don’t worry about your competition; worry about your customers. Once you know who your ideal customer is, then it’s time to create the best customer experience possible. Focus on creating the experience and the rest will take care of itself.
Of course ultimately this is about getting the deal. But more than that, it’s about creating raving fans that result in referrals, testimonials and repeat business.
Nurturing Your Leads
It’s easier (and cheaper) to nurture a lead than get another one. That’s a fact. Now don’t mistake this for trying to make a deal work that really isn’t a deal. That’s not what I’m talking about. This is about creating an experience for the seller at every touch point that is remarkable.
Anatomy of the Average Real Estate Deal
This is a very basic overview of the way a real estate deal goes from start to finish.
You spend a lot of time and money generating leads
Your marketing results in the seller contacting you about the property
At some point you will have a phone conversation with the seller
The next step is to look at the property if the initial screening call went well
You inspect the property and decide whether or not to make an offer on the property
After negotiations that offer is accepted or rejected
If the offer is accepted you will proceed to the closing/settlement (and get a testimonial)
If you look at the process it’s all pretty mundane. Ask yourself this; looking at these steps, is there anything there that would create a remarkable customer experience? I don’t think so.
So let me ask you this:
If nothing were off limits, what could you do?
What would you change?
Is there a way to “reinvent” the way this process evolves?
Where can you innovate?
Let’s Do a Little Brainstorming Here
Let’s start with #1 which is lead generation and look at how you might reinvent the direct mail process.
If everyone is sending the same direct mail pieces; letters and postcards, what can you do differently? How about sending out a newsletter with helpful homeowner tips as your first mail piece? Instead of starting with a letter or postcard that says “I want to buy your house”, you begin your relationship with “Hi I’m Sharon, and I have some helpful tips for you today”. The point is to make a different first impression than everyone else.
Think of it this way; send the sellers something they will enjoy reading and in the process they will be introduced to you as a person rather than a business that wants something from them (their house). By doing this, over time you become the trusted resource in your market. At the bottom of your newsletter let them know that you buy houses and share your contact information.
Taking this thought one step further, why not replace one letter or postcard every quarter with something that would be useful to the sellers like a quarterly newsletter or market update? Information to create these information pieces is readily available on the internet, so it’s really pretty easy.
Doesn’t that make a whole different impression than a “we buy houses” letter or a postcard that’s all about you and your company? You bet it does.
I would like to challenge you to look at each one of those steps in the average real estate deal and think of a way you can “reimagine” the way you do business. Find ways that you can be remarkable in this crowded marketplace of real estate investing.
According to the National Association of REALTORS, FSBOs accounted for at least 8% of all home sales by 2015. What is significant is the fact that many of these homeowners looking to sell will use their friends, relatives, and neighbors as mouthpieces to market their properties.
What These Numbers Imply:
Many of the people who will help a homeowner sell a home not only have offline relationships, but online ones as well. That means that they will talk about the homes that are available for sale with people in their social networks.
Considering the fact that 51% of home buyers find their homes via the internet, you cannot afford to underestimate the value of social media in your business. Where do you think they will go to ask for recommendations from when they decide to purchase a home? And who do you think will be in a good position to let them know about an available property?
To put it simply, if you do not have social media accounts, you face losing up to 51% of your potential client base. And that means you will struggle to sell any homes you invested in when the time is right.
Without social media platforms, you also stand to lose real estate leads that would otherwise have helped you get that property that you have always wanted.
Most first time home buyers are not willing to search for a home on their own. And yet despite the high demand for agency services, many realtors do not even bother to market their listings via social media.
What These Numbers Imply:
You would do well to offer your services as a real estate agent to first time home buyers. You can do this by placing ads on social media platforms like Facebook.
However, unlike most realtors, do not fear to market your listings via social media. You can choose to promote your listings once a week. During this time, you should ensure that you list all the homes that you have available for purchase and write a short description of each of them. If you do not promote your business in this manner every day, it is highly doubtful that your audience will get tired of it. Just politely ask people to share and then sit back and watch the power of referral marketing in play.
If you have invested time providing value to your audience in other ways, the results of marketing your listings on social media will be positive within a short time.
No matter which way you look at it, social media posts are more likely to be shared far and wide if you incorporate visual content within them.
What These Numbers Imply:
If you have a social media account, and your marketing efforts are not bearing fruit, it is time to analyze whether you have taken the time to include images.
Consider using high-quality detailed images of any listings you choose to market on social media. Incorporate infographics to not only increase the chances of your content being shared, but to also improve your online visibility and reputation.
Infographics can be based on reputable statistics about what is going on in your little corner of the real estate industry. For example, if you are a probate real estate investor, consider finding links that prove the benefits of probate properties for home buyers. Considering that over half of home buyers will find homes to buy online, an infographic showing the benefits of buying certain types of homes may be the ultimate determinant on what home they end up purchasing. And all those people on social media may help drive a huge amount of traffic to your site.
Social media is great for interaction with potential and existing clients. It is also wonderful for referral marketing. And eventually, many of the people who see the links you share on your social media page will show up on your business website – assuming that you have one.
What These Numbers Imply:
When you have half of home shoppers reading general home information via their mobile devices, it makes the nature of your website even more important.
Perhaps the first question should be: do you have a website? If not, what are you waiting for?
The second question is: is your site optimized for mobile users? If the answer is no, then you need to get moving to rectify the matter. According to We Are Social 2017 Global Overview Report on social media, there are 2.547 billion mobile social media users. It is for this reason that you need to move quickly to optimize your website for mobile device users.
If you don’t rectify the issue of mobile site optimization, expect Google penalties to apply. This means that you will experience lower online visibility and ultimately, a lower amount of traffic.
And if you want to boost your real estate business, then not having a good website is counterproductive even if you spend time promoting your brand on social media. You are going to lose a lot of potential customers who would have wanted to learn more about your properties. Is that what you want?
The number of company decision makers that make use of social media in order to come to a decision regarding what to purchase or how to proceed is quite significant.
What These Numbers Imply:
You cannot ignore the role of social media marketing when it comes to influencing decision makers. Suppose you have commercial properties that you would like to sell?
In order to appeal to the people at the top, you need to set yourself as an authority that VPs and CEOs can trust. And yet despite how effective social platforms can be for this purpose, only 27% of top companies say that their C-Level Executives are actively involved in social media.
If you want to stay ahead of the game, do what your competitors are not doing: use social media to elevate your real estate brand. Post long-form content on social media sites like LinkedIn and share your expertise on platforms like Facebook. Make sure that images of your properties appear on Instagram and Pinterest.
The more people you attract with your content, the higher the likelihood that you will attract the attention of decision makers as well. So when it is time for you to sell that commercial property to bring in the money, you are going to find a large audience that is willing to recommend your property to as many people as possible. In addition, you may just find the right buyer without much effort.
It takes work to market your real estate business on social media. But you know what? This type of internet marketing platform is free at the basic level, offers you the chance to appeal to a larger audience, and enables you to cultivate a good relationship with your potential and existing customers. All these things make it much cheaper and much easier for you to find and good properties that have a higher chance of getting sold easily when the time is right. It is therefore in your best interest to use social media to make a difference in your real estate business. What are you waiting for? Get started today!
Today’s real estate investors face the uncertainty that a changing market brings. From issues with lending to interest rates and disclosures, building a real estate business can be a daily challenge – though one that can be met with hard work and a dedication to the industry. If you are building a real estate business, then you need to have access to all of the information that will help you to build your portfolio.
One of the key pieces of information that you need in order to create a real estate business is to have accurate information as to which properties are currently on the market. Having access to good leads is the single best way to ensure that you are finding the options that you need in order to beat other investors to the negotiating table and get a great deal.
Understanding that leads are a key component to building a real estate business is one thing. Being able to access them in a historically tight market is another thing completely. Current market conditions are making it nearly impossible to purchase a home using a traditional manner without completely overpaying for the property or having to compete with a long list of other potential buyers. This is simply not a model for success for a real estate investor.
Leads are the Way to Build a Profitable Real Estate Business
Not having leads can cause your business to stall in a way that can be truly detrimental over the long term. Karen Rittenhouse, an expert in buying and selling real estate said, “As an investor, the key fundamental element in the first level of your real estate investing business is creating systematic and consistent lead generation. If you are not focused on lead generation, you do not have a business, you have a hobby or a dream.”
Think about it this way. . . if you don’t have any way of knowing what is on the market, or get that information when it is too late and the price has been driven too high, then you will miss out on opportunities that could change your financial future. Timely, viable leads have to be an integral part of your real estate business if you expect it to grow. Otherwise, you will simply have a “hit or miss” strategy hoping that you find something that you can afford and that is available when you need it.
The experts at Realtor Magazine say it this way, “The sea change in real estate these past few years has made leads more valuable than ever before. . . Whether your overall strategy employs cutting-edge technology solutions, tried and true methods, or a blending of those, the end result should be to turn leads into business.” The value in real estate leads is that it opens doors of opportunity for you to purchase homes on a consistent basis, giving you a way to fuel your business.
Where Can You Find Great Leads?
If you have worked in real estate for any length of time, then you know that finding viable leads can be one of the hardest parts of the business and one that can cause a whole host of problems in taking your enterprise to the next level. The experienced professionals at Realtor Magazine said, “But most [investors] encounter problems somewhere in the process of moving from lead capture to lead conversion . . . In particular, lead conversion — that is, turning a received lead into a face-to-face presentation — is a frequently a source of frustration.”
While some real estate professionals can’t seem to meet with sellers, others find it difficult to find leads in the first place. There are opportunities to locate real estate leads by networking with others in the community, using social media, buying ad space or even using SEO tactics, but all of these require that the leads come and find you. You are putting information out that will help people to find a place they can sell their home. That doesn’t help you to move the process forward on your own end, though.
Finding Leads You Can Pursue
When you discover that advertising and networking simply won’t help you to move your business forward, you need a new plan, one that involves being able to act on your own leads. Getting those leads is the only stumbling block. Once you have them, you can move forward with communication campaigns that will provide you with a non-stop stream of opportunities to build a thriving real estate business.
Luckily, with the advent of technology, new lead sources have been developed that can help you to get information that can give you an edge. These lead sources, such as the one developed by the experts at US Probate Leads, give you instant access to lists of homes that may be available for sale due to probate. Delivered to your inbox on a regular basis, each of these leads has been tested to ensure that it is viable and timely.
Why Choose Probate Leads?
There are many reasons to pursue probate leads instead of traditional real estate market leads. With the aging baby boomer population, more and more homes are coming available that can be purchased for a significant discount. Why is this the new trend real estate investors are experiencing? When a loved one passes away, someone needs to take responsibility for dealing with all of the personal items, investments and property that the individual owned prior to their death. To deal with this issue, the court assigns an Executor, who has the right and responsibility to close out the individual’s financial dealings. The Executor is charged with the decision making ability to sell homes, personal property and close accounts in order to pay funeral bills, medical charges, close credit cards and distribute money to the heirs. This responsibility comes with the ability to sell property, which is the point at which they become a lead for a real estate investor.
The Baby Boomer Generation Will Provide Extraordinary Leads
The aging of the largest generation in the history of the United States will mean that there are more leads than ever for real estate investors. What characterizes an actual “lead?” According to writers at Realtor Magazine, they state:
“I believe a ‘real lead’ is someone who will take action in the next 30 days and has a defined need or void that can be clearly identified and filled by my service. Either they have a high level of exclusive commitment to me or I can get them to that level by meeting with me (and they’re willing to meet with me). Eventually, I learned to tighten my definition to anyone who would buy or sell within a year. Then I tightened even more to anyone who would buy or sell within six months, then 60 days, and finally down to my current demarcation. If I had done this from the beginning, I would have saved myself from a lot of mistakes, anguish, and lost income. Now, I’m not saying to throw the long-term leads away. Actually, let me put it as clearly as possible: Do not throw the long-term ones away! Today, we’re finding people in the search process much earlier than before because they’re out looking and shopping. We need to engage and connect with them.”
As you can see, a viable “lead” is one where the Executor is willing to sell their property in the short term. The reason that so many Executors are quick to sell is that they need cash to deal with the estate’s bills. These can include more than just the cost of the funeral, but also credit card bills, income tax, real estate taxes, estate taxes, medical bills, home maintenance fees and much more. In reality, Executors need investors who are willing to purchase their home quickly. That said, short term leads are not the only ones that are viable. While you may want an Executor to sell quickly, having leads that you can pursue over the long term will give you a constant stream of homes to evaluate to add to your portfolio.
Due to the need for cash, probates tend to sell not only quickly, but for a reduced rate. The reduced rates you can find as a result of good leads can save you from thirty to fifty percent on assets owned by the estate. With some careful research, you can find many opportunities within each probate to profit.
More than Just Homes with Probate Leads
While you may think that probate leads will only give you information about residential property that is simply not true. With probate leads, you can learn about many investment opportunities that are available in any given estate. These can include commercial property, such as warehouses, office buildings and restaurants; vacation homes that can be rented out for a profit and enjoyed by your family; and apartments and condos. Additionally, you can find businesses that are for sale that are currently running that will quickly add a stream of income to your family.
With probate leads it is also possible to create more than just a real estate investment business. There are many associated services that can lead to profits. Thinking creatively about how you use your leads may include starting an estate sale service and helping Executors to sell the personal items that have been left behind by their loved one. Using a lead service can also help you to offer rehabilitation services to commercial property owners. If you have experience in antiques, collector cars, boats, art, ATVs, RVs, model trains or personal watercraft, you can specialize in buying and selling these valuable items by using leads to locate them.
The Best Source of Leads
If you are serious about building your business, then the best way to do so is to get your leads from the nation’s best source. At US Probate Leads, we offer the highest quality leads in the United States. Our trained team visits courthouses in every county across the country accessing the most up-to-date and viable probate leads. This data is sent to you directly to your inbox each week, saving you the time, expense and hassle of going to the local courthouse and sifting through filing after filing.
In addition to our leads, we offer a wide range of supportive services that can help you to build your business. From software to books, e-books, webinars, seminars and even individualized mentoring services, we can ensure that your business grows and develops to meet your vision. Call us today to speak to one of our friendly, knowledgeable team members about leads in your community or other resources. Call now!
Investing in tax lien certificates and tax deeds is a business that almost anyone can start. It doesn’t require any more than motivation, a small amount of money, and knowledge of how the system works. While I can’t help you with the first two requirements, my successful students and I can help you with the third one.
The Basics of Any Good Business
As the old saying goes, knowledge is power. The more you know, the better your investments will be – whether you are creating wealth through the stock market, by opening your own storefront, or by purchasing tax lien certificates and tax deeds.
Think of your investment business as an office building. Before the walls goes up, there has to be a foundation in place. Not only is the foundation the most important part of constructing the building, it’s the hardest part to do. It takes careful planning, using the blueprints (knowledge) to create a foundation that will support the subsequent structure.
Although its importance can’t be overstated, one day the foundation will be covered up. No one will be able to see it and it will become a forgotten part of the building. Nevertheless, the building must stand firmly on the foundation or it will crumble.
The same is true of a business. Your profits will speak for themselves, but no one will realize the time, research, and effort you put into creating a foundation of success. Just remember that without those ingredients, your road to profitable investments will be a rough one.
Understand the Process
The more comfortable you are with the process of bidding on tax lien certificates and tax deeds, the better your chances of making good buying decisions. One of my successful students, Craig Talkington, puts it this way, “You do it once and it gets easier every time you do it. It’s guaranteed. The worst that happens is you get your money back.”
Not only that, it gets more profitable! Recently, Craig bought a 10-acre tract of land at a Tax Lien certificate sale. It was next to a school in a bad part of town and everyone thought he was crazy. But Craig was crazy like a fox – he figured the school would eventually want to use it for expansion. He bought the certificate for $1,500 and later sold the property to the school system for $34,000. Craig kept investing part time and it didn’t take long for his profits to snowball.
Know the Rules
Each county is different when it comes to auctioning tax lien certificates and tax deeds. They have specific rules and particular bidding procedures. There are many bidding processes, I’m only mentioning two in this tutorial.
The bidding process at a tax lien certificate or tax deed auction varies. Two types are a reverse auction and rotational bidding.
At a traditional auction, bidding starts with a minimum amount and each subsequent bid goes up; in a reverse auction, it starts at the high point and then goes lower. This type of auction is used in the states of Arizona and Florida. In Florida, the bidding is on an interest rate that starts at 18 percent. The interest rate gets progressively lower as the bidding continues and may go down to less than one percent.
The state of Colorado, on the other hand, uses a rotational bidding process. This means the bidders are all given a card with a number; the auctioneer will go around the room in order from lowest to highest number asking for bids. At some rotational bid auctions, the numbers are printed on ping pong balls and put into a big drum, much like you might see at a bingo game.
Dates and times vary widely amongst tax districts, too. For instance, the state of Texas sells tax defaulted properties every month. Texas counties sell tax deeds; however the deed has an encumbrance. Texas allows the property owners to pay the investor directly and redeem the tax-defaulted property anytime within 180 days. The owner must pay the amount of the defaulting taxes on the deed plus 25%, no matter the amount of days the debt has been outstanding. You could easily make a tidy profit in less than 30 days and that is why Texas is a popular state when it comes to tax deed investing.
Obviously, there is a lot to learn about the particular rules imposed by each county and municipality – but learning them forms the foundation of your business.
Get Started Now
The most important thing is that you get started on your investment business. You don’t have to quit your day job; you need to make small changes and begin to control your destiny so you have money in the future.
Ask yourself, “Is this in my best interests?” The more you learn the better your investment business will be and the more you will like it. Tax lien certificate and tax deed investing is as safe an investment as you can imagine since it is secured by real estate, your money protected by tax code, and certificates pay one of the highest rates of interest in the market.
Ted Thomas is famous for showing newcomers and investors how to earn 6 figure incomes within 1 year of completing his training program. Conservative investors love tax lien certificates because they are predictable, certain and secure and sold by local government. Tax defaulted properties are sold at oral big auctions and online. Starting bid, only the back taxes…. More information at www.TedThomas.com
I recently read an article on the internet by Anna Sobrevinas about the names of people who own expensive homes. She said, “These are some of the names of owners of the most valuable homes nationwide, with ‘Stuart’ in the lead with a median home value of $334,022, according to a new research analysis by Zillow. “Alison” follows closely with a median home value of $332,403 and “Peter” with $325,126.
She went on to indicate, “Anne, with a median home value of $309,491, is one of the most common names of owners of the most valuable homes, and they dominate the West Coast. Annes in California have a median home value of $669,946; in Oregon, $387,160; and in Washington; $435,308.”
“This analysis reveals a lot of interesting—fun— differences between homeowner names and the relative popularity of less common or non-traditional homeowner names from region to region,” said Zillow Chief Economist Svenja Gudell.
My view of this data is that if they know the first name of these home owners they also know the last name. In other words, the homeowner has deeded the property into their own personal name as opposed to using a title holding Trust (where their personal name would not show up in the public records).
Owning ANY real estate in your personal name is an invitation to trouble. There are no advantages to owning real estate in a personal name…only disadvantages and risks. Talk to any long term real estate investor and you will hear stories of upset tenants coming to their house late at night or liens from co-title holders destroying their equity. It gets worse.
Using a title holding trust (sometimes known as a Land Trust) to keep your real estate investments private is smart business. By using a trust, you avoid probate, tenant problems, frivolous lawsuits, due-on-sale clauses, seasoning issues, reassessment upon sale and many other real estate related risks.
If you want to learn more about the wonderful world of trusts, please go to: www.landtrustsmadesimple.com for more information. Or, if you would like to attend one of my FREE Land Trust Webinars, go to: www.landtrustwebinar.com/411 Also, feel free to call me with any questions. I actually answer my phone! 1-866-696-7347
You’re always looking for something or someone to help you get over the next hurdle; to help you get to the next level. You know you need a coach, but you might be confused about choosing the right coach for you and how they can actually help you grow your business. You’re wondering if you will you be wasting your hard earned money.
Or maybe you are heading off in a new direction in your business, and you’re not sure how to put all the pieces together when it comes to branding and marketing. You know there is someone out there that can help you streamline the whole process.
If this sounds like you, I can tell you that you are not alone.
Each and every one of us wants to be better at what we do. We are all searching for the next thing we need to do or learn to grow our business. It has been my experience that choosing the right coach to help us master that next “thing” is almost always a game changer for us both personally and professionally.
I can tell you this for sure: you will almost always make more money faster when you hire a coach that can shave years off your learning curve.
Why is that?
The reason is, when we have the right coach to help us take those next steps, suddenly everything becomes easier. The path automatically becomes clearer. The obstacles begin to disappear. And during that process, we generally take a big leap forward in growing our business.
It seems to happen almost magically. That’s because choosing the right coach really can shave years off your learning curve.
What Is the Biggest Thing Holding Most Entrepreneurs Back?
The lack of a rock solid brand, and this is one area where a coach can really help you. Most people either have a weak brand, or they have no brand. What this means is that in most cases you are simply invisible. Who wants to be invisible?
If you look around your field or industry, you probably know someone that is great at what they do, but they are the best kept secret in their industry. No one knows about them.
Or, maybe this sounds like you:
You’ve built a business, and it might even be a great business. However the problem is that people don’t know about it. They don’t know that you are the expert in your field, and that my friend is poor branding.
Let’s Talk about your Brand
People think of colors and logos when they think about branding, and those are the visual components of your brand. What your brand really is though is how people feel about you. It’s also what they say about you when you leave the room. Yikes! What do you suppose they say? Chances are they say “Ben is a nice guy” or “Katie is a great gal”.
But let me ask you this; is this all you want people to say about you? What about your expertise? Where does that shine through? If you haven’t consciously built your brand, it’s probably non-existent. No brand = no shine.
You Need to Change the Conversation
What they should be saying is “Ben is the go to person in ___ (you fill in your field). If you want someone to do that for you, Ben is the expert. He is the person to call.
Or… “Katie is the most knowledgeable real estate person I know. No matter what your needs are, she can make it happen. There is really nothing she doesn’t know about real estate”.
That is what would happen if you had a brand built around your expertise. You have a wide circle of brand awareness and recognition.
Make no mistake about it; building a rock solid brand that shows the world who you are, what you stand for and exactly how you can help your ideal client shows up directly in your checking account.
It’s money in the bank.
Your brand and how it shows up to the world is much more of a determining factor in how much money you make than your actual skills and expertise. Now I want you to think about that for a minute.
I’m not suggesting that you don’t need to good at what you do, because you do. I am merely telling you that in your ideal customer’s mind, it’s all about perception. How you are perceived in the market place directly impacts how much money you make.
Marrying Marketing and Branding – Dollars in Your Bank Account
When you are able to successfully marry your marketing and your branding that’s where the real magic happens.
Remember that marketing is what you do to get leads in the door, and branding is what makes you stand out from the pack so that your ideal client chooses you (rather than your competition). When your marketing is on track and you’ve build a rock solid brand, you will be the obvious choice.
Okay, so your property is under contract, you’ve pre-qualified your prospect; they are working with the lender and everything is moving right along, right? Not necessarily. There are several steps to a successful closing and we are going to cover those one by one. Now remember, once you have your dream team in place, you will have the people available who will handle all of the details for you. In the meantime, you still need to know what all the steps are so you know everything gets handled properly.
Make sure you get a big enough deposit from your buyer so they have some real dollars invested in the deal. Even if they are going for one hundred percent financing I still get as much as I can in order to secure the deal better. If your buyer puts down a larger deposit they are usually more committed to going through with the closing, so this is a requirement for me. I won’t even consider a deposit less than $1,000.00, but I always try for as much as I can get. The higher dollar the property is, the more deposit I require.
Make sure that the lender or the mortgage broker orders credit and an appraisal on the property immediately. Usually, I will not consider a buyer who has not already been pre-qualified, so usually the credit check has already been done. Many lenders will try to wait until they get the contracts and other paperwork in before ordering the appraisal. This is a no-no. If you wait on the appraisal, it can hold up your closing by two to three weeks. Plus, if this buyer doesn’t end up buying the property, the appraisal can be used for the next buyer. Most appraisals are good for six months and now you have an appraisal that has already been paid for.
Follow up with the loan processor to make sure the appraisal has been ordered and that the other parts of the closing are moving along. Many times your title agent or your Realtor or your sales person will do this for you, after all they want to get paid too. Make sure they have everything they need from the buyer regarding loan documentation.
Follow up and make sure that title work has also been started. You want to make sure that everything is done in a timely matter so that there are no holdups when you go to close. Every once in awhile you may discover some small glitch in the title work that needs to be addressed, such as a deed that wasn’t done correctly. There would need to be an additional quit claim deed done to correct the mistake. Make sure the title agent understands the contract paperwork and what entity the funds are to be paid to. You also want to make sure they do the 1099 correctly so the right entity gets taxed. You will also want to provide the title company with a copy of the existing title policy. This means that they will be able to come forward from the date of your policy which takes less time and this may make the title search cheaper. Make sure the title agent understands who is going to pay for what regarding closing costs.
Call the loan processor to make sure the property appraised for at least the amount of the contract. Make sure your buyer has ordered a termite inspection, a survey, a radon inspection or whatever else is required by the lender in order to close. Is there anything you can do to move things along? If you have a copy of a fairly recent survey, you can provide a copy. This will also save time and move you closer to the closing. Has your buyer’s deposit been credited? Have they gotten the paperwork they need to the lender including employment verification and rental history? These are all things you need to stay on top of.
If your buyers are using city or county funds to supplement their loan, there will need to be another inspection done by the city or county. This is a stipulation of their program. Make sure this gets done quickly in order to address any issues that could come up with the inspection. If your buyers are having a home inspection done, make sure it is done right away. Not getting it done in a timely manner can hold up your closing.
Does the lender have your information in order to be able to order a payoff on any underlying loans on the property? Have they received the payoff yet and have you reviewed it to make sure it is correct? Don’t just assume that just because they have been given figures that those figures are correct. Make sure they fax you a copy of the payoff for you to review. Double check the per diem amounts and make sure you aren’t being charged a prepayment penalty if there isn’t one due. Make sure the most recent payment has been credited against the amount due. These are problems I have had to deal with. If the loan is with a private lender, sometimes it takes even longer to get a payoff from them. Some of them don’t know how to prepare one, so they need the help of the title company or their real estate attorney for this. This is also the time you might be able to negotiate a discount with them. This works especially well if it was a seller held mortgage. We have gotten private lenders and sellers to negotiate discounts on loans on several occasions which just made our paycheck bigger.
Has the buyer’s loan been approved? If not find out what the problem is and how to fix it if it can be fixed. If the loan has been approved find out what the proposed closing date is going to be. Has your buyer ordered insurance yet? You need to check this out and it needs to be done as soon as possible. This is another area where you could have a glitch. Sometimes the age of the property or the location of the property becomes an issue. For example, here in Florida where I live, if there is a hurricane brewing, we end up in a “box” which is a period of time where you can’t buy insurance until a hurricane passes. This can hold up a closing for several days unless the insurance is already in place. A buyer must purchase a homeowners policy for one year and it must pre-paid at closing.
If you are selling a condo or a home with a home owners association, make sure the lender and the buyers have a copy of the home owner association rules and documents and that the buyers have set up their appointment for their meeting with the condo association or home owners association. If they are not approved by the condo association or homeowners association, the rest of the closing is a mute point. You need to make sure your buyer’s get through this process successfully.
So now we have a set closing date. Make sure you contact the closing agent to make sure you get a copy of the HUD or closing statement before the closing takes place and before you arrive at a closing. Very recently we had a closing that didn’t take place because once we got the HUD all the figures including the asking price and seller assisted closing costs had all been changed. The closing price listed on the HUD was several thousand lower than the contract had called for. I have never seen anything like it and the deal never closed. Check the numbers! If there is a Realtor fee involved make sure the percentages are correct. Check the pro rated amounts you are being charged for property taxes or association fees. When you close on a property during the year, say in June and property taxes are due in October; you have to reimburse the buyer for the property taxes from January until the closing date in June since they didn’t own the property during that time period. The same would go for any association fees there might be. You will have to reimburse the buyer for the period during the month that they did not own the property. Double check to make sure these figure are correct. In my contract, if we are assisting the buyer in any way with closing costs, the buyer can’t walk away from closing with more than five hundred dollars. So this is another figure we check. Any amount over the five hundred dollars is credited back to our side on the closing statement.
Call your buyer and make sure they have gotten a cashiers check for any monies they have to bring to closing and make sure they know where it is and what time the closing takes place. Make sure they bring a photo ID with them. The lender will require this. Believe me when I tell you that these are all lessons learned from experience.
Now, Show up at the closing and don’t forget to bring the keys or garage door openers. Take several deep breaths and try to relax. Once you get through the closing take another deep breath, call your spouse and go out to dinner to celebrate.
Here is another point for you to consider. In my business, it is rare that I go to closings anymore since the whole closing process is outsourced. The funds from the closing are directly wired to an account for us so we get paid right away.
If I do go to a closing, I don’t go at the same time as the buyers. I usually go right after they are done with all their paperwork. The paperwork on a closing for a buyer is fairly time consuming and needs to be explained to the buyer by the title agent. I don’t like sitting at closings for an hour or more until I need to sign my documents. If you have done your due diligence and followed all the steps in the closing process, there isn’t really anything that can go wrong at the last minute, so breath easy but expect the worst.
Then when you get through the closing, cash your check or make sure your wire has arrived and go to dinner to celebrate!! For more information on Real Estate Investing tools and Marketing to Find Motivated Sellers, Buyers and Lenders visit Kathy Kennebrook’s website at www.marketingmagiclady.com. While you are there sign up for the free Monthly Newsletter and receive $149.00 in real estate investing tools absolutely FREE!
Well, you would’t know it from the way lenders keep borrowers in the dark about how to be a good borrower and qualify to borrow their money! You would think that lenders would be bending over backwards to teach, coach, and instruct borrowers on how to be a good borrower. We are simply told we need a good credit score.
As a result, anyone who wants to borrow money is obsessed with their credit score. The problem is borrowers have been led to believe that their credit scores are the chief determining factor to getting approved for credit—and it’s not true.
My intention in this article is to disclose some of the things I have learned over the last 25 years as a credit and funding expert. Many of these “secrets” revolve around what I call “fundability.” Fundability is far more than a credit score. Fundability is the composition and quality of your entire financial situation as represented by your credit “profile” such that a lender finds you attractive and desirable enough to extend you credit. As I have learned, fundability is measured by three major factors: credit score, credit profile quality, and underwriting criteria. Let’s take a look at each of one of them.
There are certain fundamental aspects of credit scoring that ARE important. The first of these is that your credit score, for it to be fundable, needs to be a FICO® credit score. Most borrowers are unaware of the difference between a FICO® credit score and what I call FAKE-O credit scores.
A FICO® credit score is a three digit score that is generated by filtering the data of one of the credit bureaus through a specific algorithm created by Fair Issac Company (FICO®). FICO® scores fall into two categories: the first is called an “unweighted” score and grades the raw data of your credit profile. This unweighted score is the score that lenders and creditors provide as part of their credit card offers. However, this score (even though it is a FICO® score) is NOT a score that is used by lenders to evaluate your fundability.
The second category of FICO® scores is what is called “industry-specific” scores. They are also know as “weighted” scores, because they are weighted for the particular industry where you are applying for credit. For example, if you’re looking to purchase a vehicle, the lender or dealership will be using FICO® software that weighs your previous auto loan reputation. If you have a good payment history, your score will be higher than your unweighted scores, but if you had a missed payment or repossession, then your auto score may be lower than your unweighted score. Industry-specific credit scores include auto scores, mortgage scores, credit card scores, etc.
So while you have been trained by the financial world to be score sensitive, no one has taught you the difference between FICO® and FAKE-O scores. If it does not have the FICO® registered trademark it is not a legitimate score—NO lender will lend on it. I hate (not really—just being polite) to inform all of you that the credit scores offered on sites like CreditKarma.com, etc. are FAKE-O scores and are not used by lenders to extend you credit. The best place to acquire your true FICO® credit scores is myFICO.com. It offers both unweighted and industry-specific scores. Another feature to the credit report you get from myFICO.com is that it also contains credit scores calculated using various versions of the FICO® scoring software so that you can see what the lenders see—regardless of which software version a lender uses.
As with all software, there are versions that are more recent and and there are versions that are older. The challenge is that when you go to a lender and submit an application, you do not know what version of the FICO® software they are using. To add insult to injury, when you pull your myFICO®.com credit report, you will see that there can be as much as a 20 to 70 point difference between scores generated by the different software versions. And each version grades the exact same data on your credit profile!
What’s more disturbing still is that lenders do not educate borrowers about the complexities of credit so that they can make intelligent borrowing decisions. Of course, we are not schooled in these credit vagaries. We are told only to pay our bills and we’ll have a good credit score. The secret is that “paying your bills” on time is only one of 40 activities on your credit profile that FICO® measures. Once again, our ignorance of those other 39 criteria leaves us in mystery as to how to positively affect our fundability and our credit approvals.
The second contributing factor to your fundability is the quality of your credit profile. Your credit profile breaks down into five distinct areas: your identity, your revolving accounts portfolio, your installment loans portfolio, inquiries, and derogatory or negative indicators (late pays, collections, liens, judgments, and other types of score limiting data). Let’s take these one at a time.
Your personal credit identity is the single most important feature of a high-quality credit profile. Lenders, credit bureaus, and FICO® do not think of you as a person in the traditional sense. You are an identity—a data set that they can quantify and track. Since you were never taught how to correctly apply for credit, you probably applied using various versions of your name and different addresses. Since the credit bureaus collect every scrap of data you submit in your applications, they have a record of every version of your name, every address you’ve ever applied under (even Aunt Mae’s where you spent the summer). Credit bureaus do this so they can collect and merge all your data to better identify you. The bureaus have spent tens of millions in data development and management, when it seems to me that it would just be simpler for them to instruct borrowers how to establish a credit identity and use it consistently when borrowing. But alas, such is not the case. One of the first things you will see when you pull you’re myFICO.com credit report is the veritable mess of inconsistent information that is listed under your personal information section (credit identity). It is vital that you present a single, clear, and concise identity to your current creditors as well as any future lenders.
The second area that contributes to a high-quality credit profile is what I call your “revolving accounts portfolio.” This is the collection of all of your revolving accounts: credit cards, credit lines, charge cards, and HELOCs (home equity lines of credit). The most important score contribution to you’re revolving accounts portfolio is your balance to limit ratio (known in the industry as utilization), followed by the average age of your revolving accounts portfolio. Next priority is the quality of each individual account. Quality is defined by the “tier” of the lending institution and the contribution of the account to the quality of the profile. While I can’t go into great detail here, you need to know credit instrument quality ranges from Tier 1 banks and 100% contribution to Tier 4 lenders and 40% contribution. Until now, we were never trained on how to build a high-quality fundable credit profile and so many of us have low-value “junk” cards which show a lender a lack of credit sophistication.
The third area of a high-quality credit profile is your installment loan portfolio. As with your revolving account portfolio, you can have a Tier 1, 100% quality loan, and you can have a Tier 4, 40% quality loan. The quality of the loan contributes to or detracts from the quality of your credit profile and the quality of your credit profile determines your fundability.
The next contributor to a high-quality credit profile are your inquiries. Inquiries count against your credit score for 12 months, but what we were not told is that the inquiries count against underwriting and fundability for 24 months. FICO® and lender underwriting software downgrade your fundability significantly when you have too many inquiries. How many is too many? FICO® allows one inquiry per six months without a significant degradation of your credit score or fundability.
After one inquiry per six months, there is a steep point-loss curve as you incur more inquiries. Additionally the quality of the accounts you are applying for will impact your credit profile. Finance companies, mall store cards, and other low-grade credit instruments have a greater negative impact against your score than higher tiered credit instruments.
Finally, the most powerful negative contribution to your profile and fundability is the presence of derogatory accounts or other negative indicators. The credit repair industry has increased borrower awareness about the negative impact of bad credit. Unfortunately, credit repair is not a solution that will help your fundability. Credit repair companies offer a meager dispute letter writing campaign in the hopes of removing a few negative accounts. While the removal of these accounts may improve your score a little, it does not improve the essential nature of your fundability as we’ve described in this section—credit repair does not help you build a powerful FUNDABLE credit profile.
By definition credit repair strategies and those service providers who offer them, are completely ignorant of fundability and do not know how to create a credit profile that will contribute to credit approvals. In fact, most credit repair firms, in a feeble attempt to help their clients “rebuild” their credit, refer them to low-value junk credit instruments, etc. These junk cards pay referral fees so the credit repair company wins, but the clients take another hit to their credit. It is a travesty how much ignorance there is among organizations who say they are trying to help disadvantaged borrowers.
Let’s take a look now at the final fundability factor: underwriting. Underwriting software expands the requirements of fundability significantly. Since it is the lender that is actually extending the credit (and carrying all the risk), lenders have developed (in concert with FICO®) their own underwriting criteria and software.
Underwriting software takes into account credit score, income, debt load, current banking relationship (checking account, average daily balance, recency of last bounced check) and the 24 month look-back period. Underwriting software calculates behaviors over the preceding 24 months and measures it in a logarithmic scale. A borrower’s behavior over the last 24 months is the key indicator of what the borrower’s behavior will be for over the next 24 months. The 24-month look-back period cannot be underestimated in its importance to your fundability.
The next time you are at a cocktail party or social gathering and someone tries to dazzle you with their credit savvy, politely interrupt them and ask them to share their understanding of ANY of the topics you have learned in this article. When they stutter and hum and ha, overwhelm them with all your knowledge about fundability!
Every borrower in this country, and every individual in the upcoming generation needs to learn what we have reviewed here. We cannot remain in our ignorance. We cannot be “at effect” of these billion-dollar organizations who not-so-secretly profit from our ignorance. We need to turn the tables and make ourselves knowledgeable AND fundable. If knowledge is power, then applied knowledge is a superpower.
If you would like to know more about Credit Funding Optimization, go to CreditSense.com/frequently-asked-questions. We also have an exhaustive YouTube channel: YouTube.com/Creditsense. Take a moment and review our website or call us at 801.438.9090. You will find these resources available nowhere else. Read, study, watch, and get empowered with the knowledge that will transform your financial world. And for most of us, when we transform our financial world, the rest of our lives will significantly improve. CreditSense.com offers the only Credit Funding Optimization in existence. It is the only integrated process that optimizes your credit score, your credit profile quality, and your underwriting capacity so that you can become FUNDABLE.
After using Land Trusts to hold title to my real estate, contracts and notes for the last 40 years, I have discovered that 99% of the population does not understand the nature of a Land Trust nor the many benefits that can be derived. I consider this good news.
Because of their low profile, Land Trusts are very useful for (off the radar) real estate transactions. The following ideas are merely suggestions that you might consider. Be careful to think through all the ramifications before engaging in these concepts.
If you want to borrow money conventionally and you will use a deed to real estate as collateral for the loan, you will have to give the lender the full deed. In other words, you cannot divide a deed up into pieces no matter how much you are borrowing. For example, if you owned a parcel of real estate in your own personal name (your name is on the deed), with $100,000 of equity and you wanted to borrow only $20,000, you would have to collateralize that deed in full. In other words, you would have to give $100,000 of equity to secure only a $10,000 loan.
The Land Trust can be used to solve the problem of over-collateralizing a loan. The beneficial interest of a Land Trust can be divided into unlimited shares. Therefore, a Land Trust holding a piece of real estate with $100,000 of equity could use some of its shares (but not all of its shares as is required by a personally held deed) as collateral for a $10,000 loan. With a share value of $1,000 there would be 100 shares.
The beneficiary of the Land Trust could “temporarily assign” 10 shares for a $10,000 loan. This would leave 90 shares unencumbered that could be used for future financing. The flexibility of using a Land Trust far exceeds the standard method of title holding.
In another scenario, assume that two real estate investors have owned their properties (of similar current market value) inside Land Trusts for 30 years. Both investors are “out” of depreciation. Neither investor wants to conventionally sell their properties and incur huge capital gains.
Once again, the Land Trust trots in for the rescue. Each investor (beneficiary of the land trust) sells the beneficial interest to the other on an installment sales agreement. The terms are nothing down, interest only (no capital gain to report) and a ten-year balloon (enough time to figure out what to do next).
What this transaction accomplishes is a new amortization schedule for each investor (new basis). The deal is private and flies under the assessor’s radar (no reassessment upon the “sale”) and no transfer tax is triggered. If the parties involved so desire they can hold options to buy the beneficial interests back after (or during) the ten years has lapsed.
If you don’t think this will work, look up and read the tax court decisions on; Weaver, 71 TC No. 42. 1978; Rushing CA-5, 441 F.2d 593, 1971 and Pityo, 70 TC No. 21 1978.
The key to taking advantage of these creative ideas is finding someone who will “play.” Of course, my mind wonders to people who have studied my Land Trusts Made Simple® home study course or taken one of my live seminars. It is those who understand how the “game is played” that benefit you the most. I encourage you to seek out other “players” like yourself…it will benefit you greatly.
There are many other similar structures that I discuss in detail in my Land Trusts Made Simple® home study courses. Please go to: www.landtrustsmadesimple.com for more information. Or, if you would like to attend one of my FREE Land Trust Webinars, go to: www.landtrustwebinar.com/411 Also, feel free to call me with any questions. I actually answer my phone! 1-866-696-7347
Realty411 Announces Expos to be Dedicated to the Memory and Legacy of Geraldine Barry, REI Icon, Publisher and Friend GERALDINE BARRY
Local Realty Marketing Leader, Investor and REI Insider
Geraldine Barry passed away in a tragic accident in San Jose, Calif., on May 15th, 2019. We are in the depth of sorrow as we mourn the loss of one of the most dynamic, intelligent and gifted women in the Real Estate Investment Industry.
Geraldine founded and previously served as president of the SJREI Association, Silicon Valley’s hub for investment inspiration, forging connections, and building a reputation for calling the markets and leading by example with her own portfolio of investments.
She was publisher/founder of REI Voice magazine and in that position interviewed every major player on the real estate landscape from economists to industry thought leaders.
Geraldine lived in Silicon Valley and leaves behind a teenage daughter, Claire, and young adult son, Colin.
Widely regarded as an “Icon in the Silicon Valley real estate investing world,” Geraldine provided investment counseling and personalized financial plans and investing opportunities to real estate investors, high net worth individuals, and real estate newbies alike.
In addition to honoring Geraldine’s legacy in the REI industry at all remaining expos, Realty411 will reprint some articles that were written by Geraldine Barry in upcoming issues.