Cold Call Owners

To learn successful cold calling, follow the techniques of Realtors. Most successful real estate agents develop listing farms. A listing farm represents a neighborhood or other geographic area that an agent consistently cultivates to find sellers who will list their properties for sale with that agent. Agent cold-call techniques typically include telephoning property owners with names gathered from a crisscross directory, walking the neighborhood, talking to residents, circulating flyers by mail or doorknob hangers, and taking part in neighborhood or community-sponsored events. By cultivating a farm, an agent hopes to become known in the area and to position himself or herself to be the first person property owners think of when they contemplate a sale.

Take a lesson out of the real estate agent's playbook. Cultivate a farm in the neighborhoods or communities where you would like to buy. Circulate a flyer, for example, that reads:

Before you list your home for sale, please call me. I am looking to buy a property in this neighborhood directly from the owners. Let's see if we can sit down together and work out an agreement that will benefit both of us.

When property owners learn how they can save time, effort, and money selling direct, they may offer you a favorable price or terms.

Vacant Houses and Out-of-the-Area Owners. Your farm area will include some properties (vacant or tenant occupied) that are owned by people who do not live in the neighborhood. These owners may not see your flyers, nor will they be listed in a crisscross directory. To learn how to reach these potential sellers, ask neighbors of nearby properties or talk directly with the tenants who live in the property.

If this research doesn't reveal the owners' names and addresses, you can contact the county property tax assessor's office. There you can learn where and to whom the property tax statements are mailed. It's not unusual to find that out-of-the-area property owners are actually "sleeping sellers." That is, they would like to sell but haven't as yet awoken to the idea. With luck and perseverance, you could become their alarm clock.

Broker Listings. For any number of reasons, many properties listed with real estate agents do not sell during their original listing period. When this situation occurs, the listing agent will try to get the owners to relist with his or her firm. And quite likely, agents from other brokerage firms also will approach the sellers. However, here's what you can do to cut them off at the pass and perhaps arrange a bargain purchase.

When you notice a listed property that looks as if it might fit your requirements, do not call the agent. Do not call or stop by to talk to the owners. Instead write the owners a letter stating the price and terms that you would consider paying. Then ask the owners to contact you after their listing has expired. (If a seller goes behind his agent's back and arranges a sale while the property is listed, the owner is still legally obligated to pay the sales commission.)

Consider this possibility: The property is listed at its market value of $200,000. The listing contract sets a 6 percent sales commission. The sellers have told themselves that they will accept nothing less than $192,500, meaning that after selling expenses they would net around $180,000. You offer $175,000. Would the sellers accept it? Or would they relist, postpone their move, and hold out for another $5,000 to $10,000?

The decision of the sellers will depend on their finances, their reason for moving, and any pressures they may face. But you can see that even though your offer is low relative to the market value of the house, it still provides the sellers almost as much as they could expect if their agent found them a buyer. (Naturally, your letter offer would not formally commit you to the purchase. It would merely state the price and terms that you have in mind.) Also, when you make such offers, emphasize the relative amounts the seller will net—not price per se.

Do not conclude here that you should never use a real estate agent to help find your investment properties. A top agent provides valuable assistance in many ways. However, agents do deserve to be paid for their services. If you're planning to buy at a bargain price or buy on bargain terms (especially with low- or no-down-payment seller financing), where is the agent's fee going to come from? If you want to pursue the best deal possible, at times you may have to forgo an agent's services and do your own legwork.

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