This post originally appeared on the REImobile.com blog. CLICK HERE to view the post.
As real estate investors, we all need to be constantly focusing on increasing our motivated seller lead to deal conversion rate.
The cost of motivated seller leads is astronomical for most investors. Typically, investors are spending between $150 to $450 or more for each lead!
If we don’t increase how many of those leads we make money from, we could go out of business.
What’s the Real Problem Here
Getting motivated seller leads to build inventory for your house flipping business is only part of the battle.
“I don’t ever get any good leads…”
“You can’t get deals like that where I live…”
These are just some of the statements I hear all the time from real estate investors that don’t have their lead to deal conversion ninja skills honed.
The problem most likely isn’t that they aren’t getting good leads or that those kind of deals can’t be found where they are. They just aren’t converting as many of the leads as they could be.
The problem is almost always that they just don’t know how to properly convert those leads into deals.
It’s Bad Business To Not Maximize Your Profits Per Lead
Maybe you’ve heard that house flipping is all a numbers game. That’s true.
What doesn’t have to be true is the ratio of leads to deals you do.
Usually, you will hear that it takes 100 calls to get 10 great leads to make offers on and you will end up with 1 deal. I don’t really like those numbers at all because they just plain suck.
We can do better than that. Much better than that.
My house flipping business regularly is able to make offers on 33% to 50% of the calls (and website submissions) we get. That already is much better than the 1/10 leads to offers usually given for a typical house flipping business.
Of those offers, we typically buy 20% to 30% of the houses. Again, much better than the abysmal 10% of offers to deals that are commonplace.
Here’s how to improve your conversion rates without having to do anything terribly difficult.
Destroy Your Competition
Much of why so many real estate investors hover around the 1% range of calls to deals (remember, 100 calls, 10 offers, 1 deal) is due to competition. Other investors are snatching up those deals.
There are 4 specific things we do that much of our (and likely much of your) competition just doesn’t do consistently.
- Answer Our Phones Ourselves and ImmediatelyWhen a seller calls us from our marketing, we immediately answer the call no matter what we are doing. Even if we are at the dinner table, we will stop and answer the phone.I’m constantly being told from motivated sellers that they just started calling phone numbers for people that buy houses and I was the first one to answer my phone out of the 5 to 10 they already called. Guess who’s more likely to get the deal.Some investors use call centers to answer the phone calls and get information from the sellers. This is a decent solution if you do not have the ability to answer the phone. The problem I have with this method of answering these calls is that you completely lose all ability to create rapport with the seller.Building rapport with a seller is more important, most of the time, than the offer you end up making. Do not discount this. This how you beat your competition every time.
- Confidence on the PhoneThis relates to the previous advice in that it’s about building good rapport. Most motivated sellers that call are unsure of what is involved with selling their house to a real estate investor.You build great rapport by being confident on the phone (difficult in the beginning for most, so don’t worry if even thinking about answering calls from motivated sellers causes anxiety) and taking the time to explain what the process is for you to buy their house.
Being confident comes from being prepared to answer their questions. We cannot guess at all the questions that will be asked but we can be prepared for the typical questions such as:“How does this work?”“How much can you give me for my house?”“Will I have time to move?”“There are tenants in the house, is that a problem?”
- Immediately Set an AppointmentThink about the situation from a motivated sellers’ perspective.They have a house that they want to sell and are searching for someone to buy it. If you were in their shoes, you’d probably be a little nervous about the process and possibly embarrassed about the state of the house.You probably would be happy talking to someone that answered their phone right away, was friendly, confident and sounded interested in buying your house.You let them know you are interested by immediately setting an appointment to see the house.If you encountered someone that did all of those things, you’d feel that you had done what you set out to do when you started looking for a buyer. This would likely prevent you from contacting anymore investors. Competition eliminated.
- We’re PreparedWe run our numbers and are ready to make an offer before we go to see the house.We look up comps and determine a potential value for the house after it’s fixed up. We then use our formula to determine our maximum allowable offer (simply 70% of the after repaired value, minus the cost to fix it up).Obviously, we do not know how much it will cost to fix up because we haven’t seen the house yet. But, we have our number already determined and can determine the fix up cost while at the house.After we walk through the house, we can tally up our estimated repair cost and subtract that from the number we already calculated and can make our offer.There were times when I was a new investor that I left and went back to my office to determine my offer. By the time I called back, the sellers had already accepted another offer. Don’t find yourself in that situation. Make your offer on the spot if you are able.
Make Them An Offer They Can’t Refuse
Many investors think that the highest offer always wins. This simply isn’t true.
I’ll let you in on some of the reasons sellers sell to us, even when we offer less than our competitors.
- We understand sellersStudy after study has shown that we buy from people we like. Though we are buying houses and sellers are selling them, it works the same way. We are actually selling our service and they are buying it.We show empathy when we meet with sellers. This goes a long way with them as they are usually apprehensive about dealing with real estate investors that are marketing that they have enough money to buy houses for cash. That can be intimidating.Many times sellers are facing situations they are embarrassed about or stressed out about. If you can genuinely show you understand what they are going through, they will more easily open up and feel comfortable with you.If you cannot genuinely relate to sellers, do not try to. Doing that will be obvious and backfire.Be who you are and it will work out better for you than the guy that shows up and tries to be all knowing and high-powered. Sellers most likely will not relate to that guy.
- We present an actual contract as our offerThere was a time when we would just make verbal offers to sellers while standing at their doorstep. It was way too easy for sellers to just tell me they’d think about it. I was not converting many of those leads into deals.We then switched to using an actual contract to write out our offer and presented it to them while sitting down somewhere comfortable in the house. I think there is a little bit of an expectation that you would like a decision when you sit down and discuss the offer to them.
It’s guaranteed that they will give you more time to discuss your offer and make sure they understand everything that is involved. This is very important because an offer and process that people do not understand is an easily disregarded offer because it leaves too many unknowns.
- We do not push themDon’t be pushy. Nobody likes a pushy salesman.If a seller asks how long they have before they have to make a decision, it’s best to tell them they have as much time as they need. You could always add that, though they can take days to decide, you are looking at, and making offers on, other houses all the time. If you happen to put several under contract before they decide, it could affect your ability to buy their house.
- We make everything easy for themMake as much of the process as easy for them as possible. Eliminate as much resistance as you can and you will convert more leads into deals.Clearly explain what happens if they accept your offer. Let them know exactly how things will go down and what they will need to do (usually not much as the title company will do most of the work).Clearly explain the contract in terms they can very easily understand. I highly recommend you have a real estate attorney create you the simplest contract with the simplest language they can (I know that’s gotta be hard for them….lol). You just don’t want people hesitating to sign an agreement because they don’t understand it.We also like to tell people they can leave behind whatever items they want at the house. This allows them to not worry about having to get rid of furniture and trash they’d rather not deal with.
Have a Round Hole and a Square Hole
Don’t try to always fit round pegs into a square hole.
Why not have other ways of profiting from leads you get that don’t fit your investment criteria?
Do you buy rental properties but come across leads for houses that are too expensive for the rents they will fetch? Do you flip houses and come across leads where the seller owes too much?
You can bird dog these leads and even put them under contract and wholesale them.
Unfortunately, I don’t have enough room in this article to cover these things in detail here.
But, you can download a free copy of my ‘3 Most Effective Techniques to turn 50% or more of your Leads into Deals’ guide right now:
The free guide describes several options for making money from leads you get that don’t fit your investment criteria as well as our techniques for following up with sellers if they don’t immediately accept our offers.
Roughly 50% of our deals come with follow up. Get the guide and find out how to double your lead to deal conversion rate.