Phone Pitch: Expired Listings

Let's be honest; do you like calling people on the phone to solicit business?

The answer cannot be yes.  I simply refuse to believe it.  It's loathsome.  I hate it 

with all my might.  I would truly rather lift heavy things from one corner of a room

to another corner of a room all day than try and get someone to listen to me about anything on the phone.  I hate the phone to begin with, may God bless whomever invented the text message.

Now let's face it.  Sometimes you have to do what you have to do.  Sometimes you gotta sit your ass down at the desk and get out the notes and make the calls.  Desperate times call for desperate measures.  Ok, enough with the stupid cliches.  We work for money so lets talk about how you can make some money by calling expired listings.

First realize why listings expire.  In many cases people simply didn't price their homes correctly and they missed that first 30 day tidal wave of happy homebuyers with whom it's best to do business.  These are the people I've mentioned in my previous post who bicker with their real estate professional.  These are the people who should have shut their pie-holes.  Expired listings are frequently our friend Joe FSBO, who finally got a clue and "did you a favor" by listing his home with you.  Not because he realizes he's an idiot and situated himself outside the market, but because he's under the impression that a realtor should have a cell phone full of colleagues and buyers with checks already made out in his name.  Joe FSBO, what a jerk.

Here's some tips to make you more effective in contacting property owners with expired listings.

1. Obviously we identify ourselves and warm up to the best of our ability with whomever does happen to answer the phone.  Take their temperature, empathize with their concerns about the market, concede that real estate is slow, but assure them that homes are moving and qualified buyers are out there looking for great deals.  (Acknowledge, Empathize, Overcome)

2. Be sure to be clear as to what they feel prevented them from moving their home.  You cannot get them to list with you if you don't know their true objection.  If they blame the realtor, ask them to tell you more about where that realtor failed.  We can tell from experience it's more likely the owner failed the realtor, but expressing that is not going to get you a listing.  Once you know what their problem is, don't sell them that.  Ha.  It's basic.  Find out what they hate so you know not to bring the conversation there.  

3.  DO the math.  Find out the date they first thought about selling the home.  Find out the date they first listed the home (smoke out Joe FSBO by saying something like "You did the For Sale By Owner" sign on this property if I recall correctly, right?".   You absolutely need to know with whom you're dealing with if you plan to succeed.  From the time the first sign went into the ground to the day they decided not to extend the listing agreement.  This chain of events is crucial in order to do the equation below.

Basic Money Line.

I advertised my property myself at $700,000

Estimated market value of same property $580,000

Time since house first went on sale: 28months (listed 12months/2 brokers)

Estimated market value of property today $410,000

Approximate monthly mortgate payment $3,200

Lets start with the mortgage payments.  I love this part.

It cost these homeowners $89,600 to keep this house.  Not factoring any maintenance, or insurance or whatever else they spent while living there when they really didn't want to.  $90k is an expensive mistake.  That's almost the difference between what the market would give them for the house and their astronomical original asking price.  Plus, nobody took them seriously and probably nobody even bothered to make an genuine earnest offer.  Bring that to their attention.  Verbal offers are worth the paper they're signed on.

Now lets us continue to the real heartbreaker, today's value.

How's that $170,000 drop taste?  Bitter, I'm sure.

"Do you see by not taking the advice of a professional you've cost you and your family

about $260,000?".  "From what you've told me, Mr. FSBO, had you priced your home appropriately you would be ahead of the game by about $100,000, and that's taking into 

consideration the $30k commission a licensed real estate professional is entitled to".  

Punch ... now hug.

"I'm sure you see the value now of working with a licensed and skilled professional, Mr. FSBO.  Would you be interested in stopping the bleeding and getting that home sold?"

If they talk about waiting for the market to go back up before they make that decision, remind them that the market isn't assured to go back up.  It goes in cycles, true.  But when?  What if this downward trend is really a re-aligning of how prices SHOULD be and the next upturn of the cycle doesnt happen for 30years?  Are they interested in staying where they are for the next 30 years?  What if when the banks start lending again, the rates are back up in the teens?

He should be sick by now, make him well.

By selling now (quickly and efficiently) he more than likely will still earn a nice profit from the original purchase price of his home.  And even if he does not, even if he only gets exactly what he paid into the home, what did he gain?  ............ wait for it....................

"nothing, you say?".... "well, actually... Mr. FSBO, you actually gained XX amount of years of free rent".  (give that a second to sink in).

Now go for the close.

"Mr. FSBO, I think you would agree that pricing and working with a professional are the keys to getting the most return on what is likely to be one of your key investments.  I suggest we re-list your property at slightly below the market average today to see what kind of qualified offers we get.  Remember, you have no obligation to me or to accept any offers you don't feel are practical for you and your family, but also remember that the time we already let pass cost you about $250,000 dollars".

"I'd like to meet you in person and discuss the listing of your home, can you stop by my office tomorrow morning?"   Always have them come to you, and if you can, schedule more than one fish at the same time.  Let them wait, or let them see you have other people waiting.  Your time is valuable.

I realize this is basic, but it does plant some aggressive phone tactics in the minds of some of us who are just dialing to be dialing.  You have to have a plan in order to close business.  As an investor, I took terrible delight in calling ol' Joe FSBO after he gave in and finally went with a realtor.  I'd do the math for him and remind him of my original offer, clearly showing him he would have made more by being smart and having me come right over with a check and a contract.  But I'm demented and competitive, no foolin.

You Missed the Boat

Spiraling out of control the real estate market has led to panic among homeowners, especially those that were planning on selling their property at a huge profit.  Unfortunately, real estate is not as easy as it looks.  Many a moron has pitched a sign in their front lawn thinking that anyone could do it.  Then they go inside and start planning what to do with their certain financial windfall.  Only to have that property sit on the market (ultimately missing the first wave of attention from real qualified and capable buyers) for months, eventually getting passed around by eager real estate offices/agents hoping to get lucky.

Rule #1.

Don't do it yourself.  It's stupid.  There's a reason these people spend all day in the trenches, it's so they'll know the real value of property.  Pay the stupid commission.  Nothing makes us quiver more than a FSBO sign.  I typically refuse to deal with them, even as an investor.

Rule #2.

Listen to your agent.  If you find yourself in a bicker with your chosen agent over the initial listing price, you've already lost.  They know what the market will bear.  It's also in their best interest to sell your property for the most they possibly can.  Keep in mind how many times that commission gets split before they actually see any money, some agents end up with as little as 1% of homes they sell.

A smart strategy used with tremendous success by the sharpest agents is pricing your property competitively, but on the low side of the market spectrum.  This is impossible to convince Joe FSBO, even after his property sat for months with nothing but tire-kickers parading through his living room and looking through his closets.  He only knows that the guy down the block got $XXX,XXX.00 for his house, so surely his home can command at least that much.   Joe FSBO needs a smack and a shot of reality liquor.

By pricing the property lower than the expected sale price you instantly get the attention  the serious and ready buyer pool.  These are people who listen to their capable realtors, and have had enough time analyzing the market to know what a great deal is.  Now what will be the outcome?  that's right...... offers!  Not just verbal back and fourths, but actually signed contracts from actual people with actual pre-approved mortgages.  They're looking to buy a property and move into it.  These people have budgets and good credit.  People with budgets and good credit can come up a little higher if they want something badly enough .  These are the people who will buy your house. You even get to filter out the "I'll buy yours when I sell mine" insects.  Like a screen door.

But do you see the difference?  Now you have power.  Nobody says you have to accept said offers.  Has anyone ever heard of a counter offer?  Is it unthinkable that more than one interested party might bring the price of the home back up to where it rightly should have been in the first place?  Nobody is going to begrudge you for waiting a little longer for a possible offer at a higher price.  If they do, fuck 'em.

In times like these it's the real money that comes out of the woodwork.  My first real estate class teacher taught me that.  His name was Peter and he sold houses in Elizabeth, NJ for 40 years.  When the market drops and people are in a panic, you see real money scoop up great pieces of property for unthinkable deals.  Maybe if play our cards smart, one day we can come out of the woodwork.