Researching Deals Before Contacting Owners

Most real estate and "found money" professionals invest way too much time doing advance prospecting (otherwise known as researching deals) before reaching out to potential clients. Here's a hard reality about our business:

You will only successfully contact (much less do deals with), a relatively small percentage of people on your prospect list.

Therefore, you'll waste a ton of time and money doing advance research on deals that never end up getting off the ground, if you try to answer unknowns in advance.

The Harsh Truth

In the end, you will likely never even get on the phone with a particular prospect! The deal will never get started.

Luckily, since our lists of prospects can be so large, we only need to connect with a small percentage of our leads to make our business a runaway success.

Real estate investors and found money professionals often insist on grasping the "ins and outs" of a situation before even attempting to reach out to a client. Big mistake.

If you follow suit, you'll end up spending your time doing a bunch of $10/hr tasks, and miss out on the $1000/hr tasks (hint: doing deals) that make our business so lucrative. You didn't get into this business to do $10/hr work, did you?

Ignore this principle at your own peril - if you do, you may tell yourself that the business "doesn't work". In reality, you're just doing it (slightly) wrong!

How To Do It Right

Gathering details of a particular deal can take a lot of your time and money, and should be done only AFTER the "client" (owner or claimant) is found and a possible deal started.

When it comes to distressed real estate transactions or the opportunities they create, use this principle (I learned it from Joe Kaiser as a longtime student of his):

Get the client on the phone, and get a deal in the works. Then get the details. Renegotiate if necessary.

Are you uneasy with that sequence? It's not uncommon.

You're uneasy because you have to almost immediately move past the comfortable research stage (and out of your comfort zone), and actually start doing deals.

If you want to cash big checks, (or any checks at all) you need to get to the dealmaking stage as soon as possible. No way around it.

Admission: I too like to feel 100% comfortable that I know all the answers, before I call someone. It's human nature I think. But if you work that way you're almost certain to fail.

The "Minimal Research Model" - 7 Simple Steps

1. Start with a list of prospects (Pre-tax sale owners? Claimants?)

2. Eliminate obvious losers (properties assessed at $100, overages for $100, etc)

3. Assess what the prospects on the list have in common (Losing their property soon? Unclaimed money somewhere?)

4. Take steps to contact the prospect (you will not be able to find 80-90% of them - sorry!)

5. When you get a hold of the prospect, play a bit "dumb" - because you are! You really don't know all of the details of the situation yet.

6. After stating the purpose of your call, gather as much info as you can; strike up a rapport with the prospect; and tell them what you think you might be able to do. For any unknowns, tell them you need to see what you can do - nobody minds that.

7. At this point it's worth it to contact an attorney if you have doubts. Yes, it will likely cost you $250 per hour for competent advice. You'll have a shot at making 100X that amount on a good deal.

Bottom line: Prospects don't need to feel like you're a total genius. Actually, they feel much more comfortable if you come across as a regular person who happens to know a bit about the subject matter.

Attorneys?

Attorneys know all the answers, right? Sort of.

You'll generally frustrate your attorney by asking nothing but hypothetical questions - because without details of a "real situation", there are many variables that could impact the answer.

Here's something tough you probably won't hear anywhere else either. If your only contact with your attorney is asking questions about deals that never end up happening, you'll be discounted as a "wannabe", even if you're paying.

"Players", clients who do regular business, get their calls answered immediately.

Work The Bottleneck

Always concentrate your efforts on the biggest bottleneck in your business.

Assuming you're starting with a valid list of motivated (pre-tax auction?) sellers or claimants, your bottleneck is almost always getting a client on the other end of the phone.

Start there, and worry about the details when you have someone who wants to do business.

{ 13 comments… read them below or add one }

Jay Whiting January 18, 2012 at 9:07 pm

I did the After Tax Sale Overbids deal a few years ago and found of the 30 or so in Clark County NV, I was only able to reach two of them. One was divorced, it had been in both names and the Xwife refused to paarticipate. I then learned that Nevada Statutes prohibit a finder from getting more than 10% of the overage so I got out of the business. I did not try other counties or states.

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Rick Dawson January 18, 2012 at 9:53 pm

We usually get hundreds of leads per month and find a similar percentage of people. That's plenty of deals.

You can charge whatever you like in Nevada the first year because the funds aren't "abandoned" yet. So the law doesn't apply

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Earl Pileggi March 5, 2013 at 8:17 pm

Rick, I love the information provided but I would like to touch on this again because I currently work cases in Clark County NV, and we ARE limited to the 10% finder fee. Is there something that I am missing here?

Any agreement to locate, deliver, recover or assist in the recovery of remaining excess proceeds of a
sale which is entered into by a person who would have been entitled to receive reconveyance of the
property pursuant to subsection 4 of NRS 361.585 must:
(a) Be in writing.
(b) Be signed by the person who would have been entitled to receive reconveyance.

(c) Not provide for a fee of more than 10 percent of the total remaining excess proceeds of the sale
due that person.

Please advise

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Rick Dawson March 5, 2013 at 10:21 pm

It appears that Nevada has tightened the screws on the law. In most cases the law says 10% is on the limit on funds that are "presumed abandoned", and the definition of that term does not match overage funds, but SOUNDS like them.

An advanced strategy is to BUY the funds at a discount (pay $4000 for a $8000 claim) and then there is no agreement of any kind to deliver, locate, assist, etc. You're just buying.

The great thing about the overages business is that we don't need to work any particular state just because we live there. So work another one.

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Rick Dawson March 5, 2013 at 10:46 pm

It sounds like they have strengthened the law there, but I haven't analyzed it in a while. Usually it refers to "presumed abandoned" property which overages usually are NOT.

Options in a state like this is to buy the funds, which does not involve any kind of contract to assist, etc, it's just a sale and you buy at a discount then go collect everything.

Or work another state, since working your home state provides you little or no advantage. In fact it's usually a disadvantage because it's unlikely you happen to live in the best state for you to be working.

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Earl Pileggi March 6, 2013 at 8:12 pm

Okay great thank for the quick response.. Yes I am currently just doing Buyout.. "Assignment of Rights" This was a great option once I had built up a large enough Bank Roll to do 3-5 buyouts at $5k a piece with an agreement of X %. This was the only way to get around the finder fee limit of 10%.

Thanks again .. Love your blog.. This has been a great business for me. Any other blogs you can suggest for me? I am going to pick up your deed grabbing book. But i am just hoping that its not the same material as the Jack Bosch course I picked up just recently.
Thanks again .. and ill share my success stories on your blogs if you need more of those ..

R Holc January 19, 2012 at 7:21 pm

I've gathered thousands of prospects in Georgia and cherry picked the best deal to try to contact. Sent out hundreds of letters and only actually was able to get a contract with one person who never sent the heir information back. For some reason, people don't respond. I'm sure they think the contact is a scam. What would you suggest to get a higher response and help with creditability?

Reply

Rick Dawson January 19, 2012 at 9:07 pm

It sounds like you've done everything right. Why would they think the contract is a scam? It's a fairly normal proposition to see if someone wants to sell.

All I can say is, response is usually the least of our problems.

Also, be sure to work your returned mail. If you send hundreds of mailers, especially to out-of-towners (you said you cherry picked them), then you should get dozens of returns which are the true cherries.

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R Holc January 20, 2012 at 6:11 pm

Just to clarify, this was for tax sale overage. May not be the correct forum... Ron

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Al Barbuzza January 19, 2012 at 9:13 pm

Can these be done in Suffolk County New York?

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Rick Dawson January 19, 2012 at 9:33 pm

Yes, although it can be problematic getting your list. This is changing, however, see my post at http://deedgrabber.com/new-york-tax-sale-records/

Reply

dennis December 20, 2013 at 5:44 pm

can this be done in New Jersey

Reply

Rick Dawson December 20, 2013 at 6:08 pm

Sure, I've had several success stories from NJ for buying properties before or after the lien sale.

Reply

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