By Ron LeGrand — Last article we discussed presenting offers. In this article, we’ll to talk about the next step which is follow-up; the fourth in our five steps to success. There are actually three times when you’re going to need to follow up, so we’ll discuss each.
The first time you’ll follow up is when you’re dealing with a prospect after you prescreen them, which means that it’s a yes on the property information sheet yet you’re not ready to complete a deal today. This means this prospect should be followed up on because a lot of these will be converted to deals at a later date if you do the follow-up that most won’t.
The second type of follow-up you’re going to need is on the hot prospects where they say yes now and now you’ve got a few things you’ve got to get done to get it under contract.
The third type of follow-up is after you get them under contract. Follow-up is such a neglected portion of the steps that are required to make money in any business. If you will master this, you’ll make a lot of money where a lot of folks won’t and you’ll finds the deals that you do get will go better because you took care of the details along the way. A small detail left out can create a large problem and has many times prior. Honestly, most people have no system whatsoever to do the follow-up; they rely too much on memory and therefore issues come up that really could have easily been avoided.
Let’s talk about the first of our three types which is a prospect that you’re not going to buy from today but is worthy of following up on later. Here’s a real simple system:
Get yourself a file box with files in it, 52 of them, one for each week of the year. Don’t put dates on them, just put June Week 1, June Week 2 and so forth so they never go out of date. So here you are with a file box with 52 files in it and the month and the week of the month so now it’s simple when you’re discussing a property with a prospect today and you can’t get it to a conclusion because they’re not ready yet you just decide in your mind, “Alright, when do I want to follow up with them? Did my conversation dictate how long that would be?” and just stick that property information sheet in whatever applicable week that is.
Now when that week arrives, you should have them sitting there waiting for you to call and you don’t have to remember anything. Yes, I know that’s an archaic system, but it still works. If you’d rather do one of your own electronically, go right ahead, but the key is do not waste these leads. Remember, all sellers’ minds will change with time and circumstance, so don’t take a prospect that’s not ready today and discard them because a lot of your deals will come from the follow-up.
The next of the three types is when you are at a point when the seller says, “Yes, I’m ready,” so now you’ve got to go through the steps I’ve described in the prescreening article to get out to the house and get it under contract. If you didn’t read our last article, go back and do it now because it literally will take you through all the steps of the follow-up required to get to the contract.
The third type is the follow-up after it gets under contract. When you leave the house, you should leave with a signed agreement. If you didn’t, now you have another follow up step and that’s to go back when you and the seller agree and get a signed agreement. Honestly, I don’t go back to the house, I make them bring the contracts to us. But, I’m fully aware in your early years you’re so eager to get the deal you’re going to do whatever you have to do. Regardless of who’s going where or when, you still have to follow up to the point to where you pick up that contract or all of the work you’ve done up to now is for naught.
Once you get that contract signed, the next step is to probably do a title search. If it’s a purchase agreement, I will always do a title search before I go any further because I’m going to buy it, and I would not buy a house without doing a title search.
However, if it’s a lease-option agreement requiring a tenant-buyer before it’s actually a deal, then I very well may not do a title search until I get the tenant-buyer located and committed, and at that point we run a quick title search. In fact, that’s exactly what we do around my office. Once we know we have a deal, we run a title search just to make sure we are not going to have any title problems and put the buyer in a bad position. Our next article will be on closing the deal, and in this case that means we’ll get a contract signed. We’ll talk more about that then.
Of course, if you leave the house with a signed lease-purchase agreement you have closed the purchase of it because there are no further steps required to continue, except do a title search as I just discussed. Once that agreement is signed by that seller, you control that asset and your five steps to buy are complete.
You also want to be prepared in case the type of deal changes after you arrive at the house during your conversation. For example, you assume that when you get to the house it’ll be a lease-option deal, but after you arrive and start having a conversation with the seller you discover the seller would rather just deed the house away and sell it instead of lease-optioning it to you. That means you will switch from the lease-option agreement to take possession of the house to a purchase and sale agreement that says you’re going to buy it and take over the debt subject-to. Ask yourself, “What kind of an agreement would I need regardless of what situation I get in to?” Again, think that through before you get there and be prepared for the possibilities. After a while, it’ll be second nature to you.
At this point, we’re down to the area where we’re ready to fill out a contract. We’ll come back to that in step five after we get through the follow-up step. Before we do all of that let’s talk about the other steps involved in getting to the point where we’re ready to fill out a contract. I guess the first one is knocking on the door at the appointment time you’ve set. What I usually do when they answer the door is say, “Hi, I’m Ron. I’m here to take a look at the house.” They’ll greet you and invite you in and I’ll say, “Can I take a walk through the house?” They say yes and I say “Okay, no dogs or naked people?” and they chuckle and reply no. Then I do exactly that, take a walk through the house.
My walk through the house will take less than three minutes because I’m not going to pick it a part and point out any obvious issues that the seller is already aware are there. If the walls need painted, we all know that, I don’t have to point it out. If the house has an odor, no sense in mentioning it because there’s nothing the seller is going to do about it. Regardless of what the situation is, you do yourself no good by making the seller feel small because of the issues that are readily apparent with the house. The best thing you can do is walk around, take a look, shut up and get to the next step.
The next step, in my case, is to simply ask the seller, “Do you have any questions?” If they say yes, I’ll answer them as briefly as I can and go on to the next step. Be careful here when you answer questions. Your goal is to answer them briefly, not get in to a teaching seminar. The worst thing you can do for yourself is get diarrhea of the mouth. Your job is to get in the house, get the job done and get out of the house. You’re not there to make friends. You’re not there to have a fireside chat. You’re there to answer questions, get an agreement and leave. And believe me, the seller wants you out of the house probably worse than you want to get out of it. So when they ask questions, answer them briefly, shut up and move on to the next one until they’re out of them.
For example, if the seller says, “What do you mean by a lease-option,” your answer would be, “Well, that simply means I’ll lease the property, make the payments and take over the responsibility for all the repairs, and I’ll have the option to buy it.” That’s a simple answer, no seminar required. The last thing you want to do is to go in to people’s houses and deliver a real estate seminar. That’s not why you’re there. You’re there to buy the house and leave.
However, please make sure the seller understands key issues. Don’t leave the house without addressing all of the elephants in the room. For example, if it’s an ACTS deal your seller should be very clear on what your intent is, and that is to lease-option the property from them and find a qualified tenant-buyer they approve to install in the house and collect an assignment fee from that buyer. The seller must know their payment will not be made until 30 days after that tenant-buyer is installed because you keep the first month’s rent plus the assignment fee.
Make sure this is clear so you don’t have to deal with it later and you can avoid misunderstandings. Also, be wary of trying to make the seller aware of your intent if not necessary. On an ACTS deal your intent is vital and they must know, but when you’re buying a property subject-to or you’re doing a sandwich lease where you intend to stay in it or you’re buying it with owner financing, what you intend to do with the property really shouldn’t be a subject of discussion with the seller. You’ll scare them away by having all these discussions about installing tenants in the house and doing all these things, which will only cause more questions that are needless.
Do not make problems for yourself by flapping your lips too much. If you’re asked “Who will make my payments,” your answer is “I will.” If you’re asked “What happens if somebody tears up the house,” your answer is “I’ll fix it.” This is true when you’re going to stay in the deal, but it’s not true with an ACTS deal. If you’re working one of those, your answers will be different.
During this conversation is when you get a chance to lower the down payment if applicable. If we were discussing buying the house with owner financing, it’s here where you work real hard to get that down payment down and the same for the payment and, of course, get the term as long as possible. Don’t give up too easy. This is your opportunity to create a really good deal, and if you don’t take that opportunity while you’re in the house you’re going to hate yourself later when you start thinking back and saying to yourself, “Golly, if I’d have worked just a little bit harder I could have saved a lot of money on that deal.” And it is true, you could have.
So prepare in your mind how you’re going to go about asking the seller for a smaller down payment and for the smallest monthly payment as you possibly can. And remember, never be the first to name the number. Ye who names the number first loses. You’re always asking the seller what’s the least they can take, you’re never telling them what you will pay. If you tell them what you’ll pay, you’ll never get it for any less. If you ask them first, you’ll be surprised how often what they’ll accept is less than what you’re willing to take.
You’re not going to be an expert at this stuff in the beginning. Don’t worry about it. It takes time and a little bit of practice. But, if you get out there and get these deals done and do the best you can, you’ll still come out with great deals even though they get better as time goes on. Right now, let’s be happy with good deals, and soon we will work up to great deals.
One more thing, before you leave the house you might want to ask the seller for copies of all their documents, such as the deed and mortgage. If they have extra copies, go ahead and take them with you because you will want these before you close on the property. This is the best time to get them, while you’re in the house.
Okay, that’s enough for this lesson. Next article, we’ll talk about closing the deal.