Before you begin prospecting for profitable short sale opportunities you must build and develop your buyers list. If you've studied my course then you have enough knowledge to locate and close as many short sales as you are willing to work for, but the most important piece of the puzzle is having buyers on hand waiting to buy your short sale deals.
When people hear the word “list”, one of the first things that come to mind is that hundreds of investors with deep pockets are needed to make a buyers list. Although having a large active list would be ideal, it's not likely for most investors nor is it necessary. Your list should include both investors and traditional home buyers. In my first 24 months as a short sale investor my buyers list consisted of just a handful of investors and traditional buyers. A few were individual investors who were interested in acquiring 7-10 rental homes each and some were investors seeking wholesale deals. In addition, I had several first time homebuyers that I sold property to at huge discounts.
Within my first 9 months, I sold 4 properties to one investor and 8 to another. I kept 6 for myself that I either held as rental property or wholesaled within 6 months of purchasing them. My days were spent finding deals that fit mine and my buyer's needs and speaking with potential buyers that I could add to my contact list. So in reality I worked for 3 clients (my 2 investors & myself). Yes, I started doing short sales mainly for the long term investment opportunity. Buying and holding is one of the best strategies to use if you want to acquire large amounts of equity with the least amount of adversity.
I share this story with you to say that a quality buyers list is not soley determined by the quantity of investors you have, but rather on how many “ready-to-buy” investors you have on hand. You will know your investors are willing and able when they're being proactive and calling to see what you have available or when they are trying to grab the deal from you even before the ink dries.
Once you have a list that resembles something like this, you can now go out with confidence and find short sales that you will not only successfully negotiate but make a profit on as well. What's the use doing all of the work to get a short sale accepted and not being able make a profit? Let me answer that for you, there is none! Building your buyers list now will reduce the possibility of your deals falling through due to not having an effective exit strategy.
How Do I Build a Buyers List?
The first thing you need to do is take out a sheet of paper and make a list of all of the people that you know. The people that you know are called your circle of influence. Unless you have been living under a rock your whole life, this exercise should take a while. The purpose of this brainstorming activity is so that you begin to build your list with people you have a relationship with. Those of you who are realtors have probably been taught this same strategy.
For example, think of people who you've spoken to recently that mentioned buying a house or investment property. Also, think about people you know who are risk takers. You should also focus on people you know that have lots of friends and associates. In other words, let your mind stretch as far as possible to come up with a large list of rough prospects. I know that I said that it is not necessary to have a large buyers list, however, it is helpful to start off with lots of prospects to give you the greatest amount of potential investors to begin working with.
The reason you will want to start off with you circle of influence is because many times the people who will buy or lead you to those that do will be someone you know. The two investors I spoke about earlier were both referred by former co-workers.
The next thing you need to do is print up a stack of Buyer Information Forms (this form is included along with the legal forms and documents disc in the course). Then, start speaking to the people on your list and use this form as a guide to gather necessary information. You do not have to ask the questions as they appear; instead ask the questions in a conversational form so it does not seem obvious that your questions are predetermined. Begin speaking to the people on your list that you feel the most comfortable with so that you can develop your flow. You can now keep a record on all of your prospects for easy access. The form will tell you what type of property your potential buyer is looking for, how soon they will be ready to purchase, their price range, are they looking for a residence or investment property, how they will fund the deal, and so forth.
After you've made contact with everyone on your circle of influence list, you will then need to expand your list to others outside of people that you know personally. I highly recommend joining a real estate investors club or at least another business networking organization. Many of the people that you meet at these types of settings will be looking for their next profitable investment. If you can offer other investors real estate deals at huge discounts with minimal risk, you'll attract a pool of reliable buyers with deep pockets just waiting to snatch your deals up.
Developing Your Buyers List
Once you have a list of potential buyers to start building your list it is now time for you to develop it. How do you develop your buyers list? Well, the first thing you will need to do is qualify each person on your list. You'll want to separate your buyers into three categories.
1. Hot – Your hot buyers are those investors who know exactly what type of property they want and have the immediate resources to close a deal within the next 15-30 days. They are risk takers. Many of these investors have in the business for a while.
2. Warm – Your warm buyers are those investors who have somewhat of an idea of what they want but may also be open to suggestions if you have something worthwhile. They are your moderate risk takers. These investors are also financially able to buy but may be 2-4 months away.
3. Cold – Your cold buyers are those investors who have an interest in investing but may not be sure what they are looking for and may not be willing to assume much risk. If an absolutely great deal comes along at the right time they may jump on it. However, they are probably 6 months to a year away from making a purchase.
Once you have compiled and categorized your list the very next thing you will want to do is begin locating short sale opportunities. Begin putting out signs, posting internet ads, using car magnets, and posting flyers to create your initial buzz. As a result of you doing these things consistently, you'll most likely get several calls from other investors inquiring about the deals that you have available. These investors should be added to your buyers list and categorized accordingly. Many of the investors that contact you will be “hot buyers”. I have several buyers on my list that contacted me initially after reading one of my signs or internet ads.
Your list is a continuous process so you'll want to add new buyers and investors to your list on a daily to weekly basis. The more depth and qualified buyers you have for your short sale deals, the more money you will make. Do not make the mistake of going out and negotiating short sales without having a buyer or workable strategy to find one. Having buyers for your deals will make your job so much easier and give you the confidence and ability to put more deals in your funnel.