Mailer Pricing with Zillow Trulia Redfin DataTree Algorithms (LI 703)

Mailer Pricing with Zillow Trulia Redfin DataTree Algorithms (LI 703)

Transcript:

Jack:                                      Steve and Jill here.

Jill Dewitt:                           Hi.

Jack:                                      Welcome to the Land Investors Show, understanding land investment talk. I’m Steven Jack [Butella 00:00:08]-

Jill Dewitt:                           And I’m Jill Dewitt broadcasting from sunny Southern California.

Jack:                                      Today, Jill and I talk about mailer pricing. How do you price your mailer using Zillow, Trulia, RedFin, and Data Tree algorithms. All of them or just some of them?

Jill Dewitt:                           This is going to be really [crosstalk 00:00:27]

Jack:                                      Interesting stuff.

Jill Dewitt:                           I’ve been waiting for this show. I saw the title coming up. I’m like, “Aw, this is going to be one of our biggest ones.”

Jack:                                      This is Data Week this week.

Jill Dewitt:                           Yes it is.

Jack:                                      You know how like there’s Shark Week? On cable TV. It’s Data Week.

Jill Dewitt:                           It’s Data Week.

Jack:                                      And I will fully confess that Shark Week is probably more interesting, but a lot less profitable for nearly all of us.

Jill Dewitt:                           Whoa, whoa. Wait. Shark Week is more profitable or Data Week? Data Week is more profitable.

Jack:                                      See she’s already not listening.

Jill Dewitt:                           No, I really wasn’t. I’m going to be honest with you, Jack, I’m actually … I was halfway into a doodle.

Jack:                                      I know I can see. Before we get into the show, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free.

Jill Dewitt:                           It’s going to be fun to see what my drawing looks like at the end of this show. Completed drawing.

Jack:                                      I know.

Jill Dewitt:                           Okay. Steven, is it really Steven asks? I guess we have another … okay. Anyone practicing holding deals till I have a buyer?

Jack:                                      Deeds.

Jill Dewitt:                           Oh, excuse me. Anyone practicing holding deeds till they have a buyer to keep the purchase amount hid? Oh I know this is not without risks, but I was wondering if anyone practices this to not have your buyers be able to look up what you just paid for a lot you are reselling. That’s kind of funny. I don’t think it matters.

Jack:                                      If it matters.

Jill Dewitt:                           I don’t-[crosstalk 00:01:48]

Jack:                                      This matters in houses, by the way. If they see what you bought it for, they’re going to try to negotiate a better deal.

Jill Dewitt:                           It didn’t slow us down. It hasn’t slowed us down.

Jack:                                      No.

Jill Dewitt:                           Because we don’t hold back recording house deals.[crosstalk 00:01:57]

Jack:                                      Because here’s why … actually that’s how I was going to answer that question. If you have a buyer that’s real concerned about that, then they’re not the right buyer.

Jill Dewitt:                           It’s like you go … everywhere you go, you know they’re making money off it to get it to you. They only way of you doing this is if you live on a farm and grow your own food and build your own car. We all know that the next person’s making some money off it. It’s just you want to make sure that it’s a good amount, and they feel good about their price. The purchase. So I actually don’t think this matters. I’ve never even really thought about it, you know?

                                                There’s times that … here’s for example. I know … I look up what people paid for their properties. I like to know. Because sometimes it makes a difference and honestly, I want them to feel good about selling it to me. I want them to make some money off it. And then me to make some money off it, and the end user to really feel good.

Jack:                                      That’s one of the reasons that I chose you. Here’s why.

Jill Dewitt:                           Thanks.

Jack:                                      There are certain people and certain cultures around the world who, if given the opportunity, and the chance will negotiate with the person until they are dead. Until the person that they’re negotiating with … every single penny is soaked out of that person and they’re half dead, staring up at you and wondering what just happened. That’s now how we do business.

Jill Dewitt:                           Right.

Jack:                                      And there are some people that I learned very early on in commercial real estate that back then that drove the culture.

Jill Dewitt:                           Right.

Jack:                                      I think you’re hurting your … I know you’re hurting yourself in the end from a reputation standpoint, from a stress standpoint. I think that in a good real estate deal, everybody should walk away saying, “You know what? We did okay.”

Jill Dewitt:                           You’re right. And [crosstalk 00:03:56] we know all the numbers and everybody … nobody gouged anybody else or did anything crazy to the next person because you’re right, how long do you want to be in this business? We choose to be in this business for life.

Jack:                                      Reputation is only a very small part of it.

Jill Dewitt:                           Right.

Jack:                                      It really is. It centers around that there is a culture about negotiation. I mean, think about like in bazaars all over the world, negotiation is how they do it.

Jill Dewitt:                           Right.

Jack:                                      I mean, even we’ve done it, Jill in certain … when on vacations and stuff just for fun. And I don’t enjoy it. I really don’t. I don’t want to pay retail on anything. I’ll tell you that.

Jill Dewitt:                           You know what’s funny about that?

Jack:                                      But I’m not sitting around trying to get … I’m not trying to put somebody out of business.

Jill Dewitt:                           Do you know, here’s what’s funny. I don’t know if it’s age or if it’s my financial status now, but when I was younger, I used to think it was fun and I was really hoping to get a good deal, kind of thing when I was … say we’re in Mexico on vacation. I like traveling and I’m buying jewelry. I don’t know why it all comes back to jewelry, but it does.

Jack:                                      It does-[crosstalk 00:04:58]

Jill Dewitt:                           It does … I don’t know. Anyway … fits on a boat. But I used to try to get a good deal, right? That was my whole thing. Now I look at them going, “You know what? I know I’m supposed to negotiate so I want to negotiate. They’re counting on me to negotiate, but I really kind of don’t care. I’m kind of paying it forward a little bit. I’m happy to take that $40 silver necklace. I could probably get it for $15. I don’t care. I’ll pay $25 I know the guy has more food.” Is that bad? Is that really bad of me? But I kind of see it as paying it forward and I’m not … I don’t really care about negotiating that much.

Jack:                                      No. Here’s the numbers on a house that Jill and I are about to buy and sell. We sent the offer off for $350 bucks, found out there was some stuff about that we had to reduce the price. The seller wants to move to where their children have relocated. So we re-negotiated the price to $325 and this is after we talked to the person that we’re buying it … who we’re going to sell it to and the person we’re going to sell it to is totally happy that we are going to make $25,000 on the deal.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      And the reason that she’s the person that we called first and she is the person that we called first on all these deals in this one specific area is for exactly what we’re talking about. She knows we’re going to need to make a little bit of money too and she’s having a real tough time coming up with deals from other people other than us.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      Are we gouging her? No. Could we put it on the MLS? Could we paint the mailbox?

Jill Dewitt:                           Sure. Paint the door.

Jack:                                      Do a lipstick flip and make probably 80 grand on this house.

Jill Dewitt:                           Yeah.

Jack:                                      You know, we’re not going to do it because the next one probably will come in today in the mail.

Jill Dewitt:                           Yep.

Jack:                                      And we’ll be ready to make 20 grand on the 25 grand with this woman. She’s happy. We’re happy. The sellers are happy. [crosstalk 00:06:50]

Jill Dewitt:                           You know what’s so great about that, you know what happens now? I call her … whenever I call her, it’s two rings and this is what happened yesterday and it’s, “Hi Jill.” Right away. I am on her radar, man-[crosstalk 00:07:02]

Jack:                                      Because it’s Christmas for her.

Jill Dewitt:                           She’s like what else do you have? And she goes over to look at it within two hours of me calling her.

Jack:                                      That’s because she knows-[crosstalk 00:07:11]

Jill Dewitt:                           What kind of deal-[crosstalk 00:07:11]

Jack:                                      The universal rule in real estate is you make your money when you buy it. Not when you sell it.

Jill Dewitt:                           Yep.

Jack:                                      So that’s hard to digest when you’re new.

Jill Dewitt:                           Definitely.

Jack:                                      So do we hold deeds? I’ll tell you the truth. Really what his question is. Do you hold a deed … you buy a piece of property, got it signed, it’s sitting on your desk, and you wait until you sell it and get the deed ready to go and then send both deeds into the county with one of them on a sticky note. This is for land now. Because there’s no title insurance involved. With a sticky note that says please record this one first. So you own it for literally about a minute before the second one gets recorded. I can tell you we don’t intentionally do that, but it just happens that way.

                                                We have multiple properties I know that we’re waiting for deeds back from the field notary that have not been recorded, but we have sold them already.

Jill Dewitt:                           Right. Because as the signing is happening, you could be marketing it and sold is what Jack means. And that happens all the time, but do we do it deliberately? No.

Jack:                                      Right.

Jill Dewitt:                           I don’t deliberately go, “All right. Put it in the hold pile until it sells and then send them both in.”

Jack:                                      Right. So this is a good-[crosstalk 00:08:15]

Jill Dewitt:                           It’s a good question though.

Jack:                                      I haven’t said this on the show in a while, but I need to say it because it parlays right into it. There are a tremendous number of people that tell you that real estate is sneaky. There’s a sneaky way to do it and you’ve got to underhandedly kind of jab somebody or punch them in kidney to get what you want. And that’s just not the case. You don’t have to buy properties. It’s not a scam. We don’t buy property from old widows who have no siblings left to defend them.

Jill Dewitt:                           Right.

Jack:                                      It couldn’t be further from the truth. It’s 180 degrees different than what really happens.

Jill Dewitt:                           Right.

Jack:                                      Most sellers with houses and really more with land. Sellers with land, all they do is call us and thank us. “Thank you. I didn’t know what I was going to do with that property. At least I got something for it.”

Jill Dewitt:                           Exactly.

Jack:                                      And I really hope you go off and this is your business and make some money on it.

Jill Dewitt:                           Exactly.

Jack:                                      So this whole follow the dead people thing.

Jill Dewitt:                           I hate it.

Jack:                                      I do too.

Jill Dewitt:                           I hate it. Thank you.

Jack:                                      Be fair. That’s all.

Jill Dewitt:                           Awesome.

Jack:                                      It’ll come back to you. Today’s topic. Mailer pricing with Zillow, Trulia, and Red Fin algorithms. This is the meat of the show. So you’re welcome to take a nap.

Jill Dewitt:                           Okay, thank you. Back to my drawing.

Jack:                                      What’s the first thing we all do, specifically with houses, when someone says, “Hey, there’s this property at 667 Third Street.” In whatever zip code. And I’ve got it for sale.” We’re all on this email lists from wholesalers. Hopefully you are. “And I’ve got it for sale for $320,000. And it’s probably $100,000 less than it’s worth.” The first thing we do is put it into Google and either Zillow, Trulia, or Red Fin, no so much Data Tree pops up and they’re algorithm says, “Yep. The property’s worth $420,000. And these guys are selling it for $350,000.”

                                                But the second thought you have, “What’s wrong with it?” “What’s going on? Why would this property be cheap?” Or is the algorithm really right? Is that just some kind of technical sales pitch.

Jill Dewitt:                           True.

Jack:                                      So let’s look at the other two. Red Fin and Trulia. “Oh, wow. Those are pretty close.” Now we’re getting somewhere. Well, what kind of flaw is there? Is it on a main road? Is the roof caved in? Does it have a pool that doesn’t work? Big issues like … out in California everybody says, “Well, the foundation must be a mess.”

Jill Dewitt:                           Right.

Jack:                                      For some reason … well, it’s on the San Andreas fault I guess.

Jill Dewitt:                           Right. There’s a reason for that.

Jack:                                      So my whole thinking on this whole … because I’ve been doing it for years too and everybody I know does it. How can we hedge this off from a data standpoint where we don’t even have to look that up anymore because the offer that they receive from us was based on this data in the first place?

Jill Dewitt:                           Right.

Jack:                                      And that’s what we do.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      We use those algorithms. We literally hire a company overseas that charges us $3 or $4 an hour per person. In a mailer when I’m all done with it and I’ve taken out everything that I take out. Mortgages and everything else to look up the values. And literally put them in there. Put them right in the data set and then I price it that way. I’ll remove it … in certain markets I’ll reduce the price 80 or 90 or $150,000. In California’s case it’s way more than that.

                                                In the center part of the country, it’s way less than that, but it always leaves at least … whoever’s going to rehab it, they’re going to make more money than us. Let me put it that way. So my point is you can use these very sophisticated algorithms that these guys have designed … probably spent tens of millions of dollars to design … use them to your advantage for less than $3 an hour to get them all input in there and price your data that way.

                                                It works for info lots like a dream. We’re working in a very large county in the West Coast here to purchase info lots … for whatever reason there’s a lot of info lots and we have multiple buyers that love to build houses on them. And info lots is a great market. I mean, people … you can buy for five grand … if somebody owns an info lot, they’re never going to do anything with it and they don’t want to go through the marketing effort and all of it. You can buy a property for five grand, an info lot that’s worth probably 80.

Jill Dewitt:                           Are you going to share a little bit more about what you do when you’re doing your mailer pricing? I mean, you’re pulling in this data.

Jack:                                      I just did.

Jill Dewitt:                           Okay.

Jack:                                      I don’t think you were listening.

Jill Dewitt:                           I was. Oh wait a minute, but can you be a little more specific. I mean, detailed. I mean, do you line up all the numbers and do you-[crosstalk 00:12:59]

Jack:                                      Yeah, so picture a spreadsheet that’s got … on the left hand column, it’s got a thousand physical addresses of this is houses now. And then you move your way right on a spreadsheet and you have these … a column for Zillow, one for Trulia, one for Red Fin, and one for Data Tree. And they all have an algorithm that’s probably plus or minus 10, maybe 15 or 20% of what they think it’s worth.

Jill Dewitt:                           Okay.

Jack:                                      You take that number … is this what you’re asking for?

Jill Dewitt:                           This is exactly what I want.

Jack:                                      You take those four pieces of those four numbers, and you divide by four. So you get the average. And then you cross check against two things. Number one, price per square foot. So you can find some kind of consistency in there.

Jill Dewitt:                           Okay.

Jack:                                      The last one I just did that went out was between $175 a foot. That’s what these companies think that it’s worth. $175-200 a foot, 210.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      So I know, based on that information, that we need to go in at around 125-150.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      Then I finally cross check it against census data, census tracked data and look for … then I throw a calculation in there. This is all in the house academy program. Step-by-step-by-step. And I look for wackiness. So when you re-sort, after you’ve done all that, when you re-sort it for the higher and the lower number, there’s always like 10, 20, 30 units in the dataset that something went haywire. Either the algorithm’s wrong. The census track data was wrong and so I chose to actively not waste the 40 cents to send an offer to them.

Jill Dewitt:                           Right.

Jack:                                      This is surgical strike pricing. If somebody else has a better way to do this, I would love to collaborate with them.

Jill Dewitt:                           Right. I don’t think there is one.

Jack:                                      Have to learn. [crosstalk 00:14:43] Always want to learn new stuff. But I’ll tell you, we had members in our group that are doing it this way, and we’re killing it.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      We have members doing it this way. That’s how I use their algorithms to price our own data and really it’s a … if not anything else, it’s cross checking it against … the old school way I used to do it, was just price per square foot and then see what sticks. Throw it on the wall. Go ahead.

Jill Dewitt:                           Tell me … can you … do any of these have any … I’m just asking questions here being … I’m being student. Playing the student here. What about land? Can I use any of these for land?

Jack:                                      So Zillow and Trulia and Red Fin for rural … and Data Tree for rural acreage do not apply because they don’t spend the resources, and they don’t have enough sales comparisons, and the properties are too scattered around to really get good data on it.

                                                However, for info lots … and we have two or three members that’s all they do is info lots and in a lot of cases, not a lot of cases, in some cases for farm land or real specific used land, it works great. If not anything else, it’s a gauge to see if you’re in the ball park.

                                                To price land, rural vacant land, this is a little bit off topic from Zillow and Trulia, what I do is I take all the properties in a … let’s say all of five acre properties in a given county in Tennessee and I look at it and make sure there’s no mortgage. 99.9% of the time there’s not and I look for just sort of anything that’s weird. And then I assign it a dollar amount.

Jill Dewitt:                           Based on?

Jack:                                      Based on what’s available for sale in that county. On land and farm, land watch, land pen, or any other … and hopefully the MLS. Now Red Fin has … and Realtor.com. Realtor.com and Red Fin both have … I should have put that in here. Realtor.com’s got some good comparison values too, properties from the MLS.

                                                So it’s harder to get data for rural land. So my approach is less sophisticated, but it yields the same result. Mostly based on experience.

Jill Dewitt:                           Mm-hmm (affirmative). Thank you, Jack.

Jack:                                      You can tell I’m excited.

Jill Dewitt:                           You or me?

Jack:                                      No, me. If you, the listener … if light bulbs are going off in your head after talking about this and saying, “Wow. I’ve done a few deals and that’s … boy if I had that information, we would have done better.”

Jill Dewitt:                           Right.

Jack:                                      This is for you.

Jill Dewitt:                           I’m so curious.

Jack:                                      If you turn the knob on the radio off so hard to the left that it broke off because this disgusts you, that’s okay. Buy your next property from the MLS.

Jill Dewitt:                           I’m so curious what everybody else does. What does everybody else do?

Jack:                                      Well, okay, lets … I would ask you that. So you’ve been talking to these sellers in Arizona for years now. And what have they said? Land sellers specifically. Have they said anything but, “Oh my God, I’ve been waiting for your call. Thank you.”

Jill Dewitt:                           Well, yeah. No, but I’m curious as far as-

Jack:                                      Like an investor?

Jill Dewitt:                           Yeah. What-[crosstalk 00:17:44]

Jack:                                      They wait for somebody to call.

Jill Dewitt:                           What the heck and how do they trust them? How do they check their numbers? I’m so sick of hearing ARV I can’t even tell you because I think ARV’s a moving target. There’s no guaranteed whatever because all your ARV percentages are still based off something like this, which I mean-[crosstalk 00:18:06]

Jack:                                      You’re preaching to the choir here because I agree with you. Like, this makes so much sense. That’s what I just said about the light bulbs. If this make so much sense to me that it would take a serious sales pitch for me to like, really dramatically … well, somebody’s pitched me on buying property through their website portal that I mentioned it today or yesterday.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      I’m not convinced. And here’s why. You control everything. If people are calling you and saying, “I do want to sell my house. Thanks. I saw your billboard. I saw your [inaudible 00:18:36] sign. I saw your sign on the back of a pickup truck. Or any other reason. I do want to sell my house.” That’s just creating a lot of work for me.

Jill Dewitt:                           Mm-hmm (affirmative).

Jack:                                      I would rather get a callback on a mailer that I sent with very sophisticated pricing models. And say, “Yeah, Mrs. Smith, did you get my letter? Does the price in that letter work for you? Is it in the ball park?” “Oh, yes it is. And I have to tell you why. My son in Michigan just went through and I’m really thinking about-“. They don’t care about that.

                                                Your smoking out all the energy and effort by sending them a letter because they’re thinking about it anyway.

Jill Dewitt:                           Right.

Jack:                                      It has to start with data though. It’s Data Week.

Jill Dewitt:                           It is.

Jack:                                      Not Shark Week.

Jill Dewitt:                           Well, because the whole point is, if you’re going to do this, do it right. That’s … if you’re going to go through all the motions of getting the assessed information, all the ownership information, and you’re going to put the effort in to get the mail out there, why not do it when switch is, “Hey, let’s first use a little extra effort to reach the right people, check.”? And then two, “Hey, send then a real offer so you’re not wasting everybody’s time, check.”

Jack:                                      Yeah, my Dad said this and I didn’t realize it that he was right till way later in life, but he said if it’s worth doing, it’s worth doing right. So you can’t do this halfway and expect it to work. You might get lucky.

Jill Dewitt:                           Think that might be the first time I heard you quote your Dad.

Jack:                                      I’m sure-[crosstalk 00:20:04] saying that and reaction is something I was not doing-

Jill Dewitt:                           I was just kidding.

Jack:                                      So I’m sure I was doing something halfway.

Jill Dewitt:                           I’m joking. So, yeah.

Jack:                                      Well, you’ve done it again. You spent another 20 minutes listening to the Land Investors Show. Join us tomorrow for another episode called the Real Cost of Using Data to Purchase Undervalued Property. Not just the actual dollar cost, but the real cost of not using it and using it against what you really benefit from financially.

Jill Dewitt:                           Cool. And we answer your question, should you have one, post it on our online community, Landinvestors.com. It is free.

Jack:                                      You are not alone in your real estate ambition. Wasn’t that bad was it?

Jill Dewitt:                           No. No, it’s good stuff. [crosstalk 00:20:50]

Jack:                                      Stuff needs to get said.

Jill Dewitt:                           It does. Are you … the whole point of it for me … the whole point of why we’re doing all this and doing this show is to save people, you know what I mean? There’s a better way. And it’s not like … there’s enough property to go around.

Jack:                                      Oh my gosh, yes. There’s been a lot … right before the show we were talking about the Jack-Jill show, which has kind of gone now. This is the Land Investors Show and there’s no better place … this is just my opinion, and if there is I’d love to hear about it from somebody, there’s no better place for the amount of money and the amount of time and energy and resources that you have to put in to learn how to do this.

Jill Dewitt:                           Mm-hmm (affirmative). That’s true.

Jack:                                      For both houses and land. I’m telling you, listener, this is the place to do this. Whether you join our group or not-

Jill Dewitt:                           Right.

Jack:                                      You’re learning how the basic concepts of how to do it.

Jill Dewitt:                           For any property type.

Jack:                                      Yep.

Jill Dewitt:                           That’s the whole point for me. And as far as anything on the planet, I can’t think of … there’s really nothing that is the higher return that you can make per transaction than property.

Jack:                                      We have people emailing us every single week and in a bigger perspective, every month that say some version of, “We’re not a part of your group, but we took your concepts and now we’re buying apartment buildings all over the West Coast and we’ve made tens of millions of dollars and thanks very much. Keep it up.”

Jill Dewitt:                           Exactly. Yep.

Jack:                                      So if that’s how you choose to use this, then that’s great.

Jill Dewitt:                           Exactly. Thank you. Hey, if you like this, share the fun by subscribing on I-tunes wherever you are listening and while you’re at it, please rate us there. We’re Steve and Jill.

Jack:                                      We’re Steve and Jill- Information-

Jill Dewitt:                           And inspiration.

Jack:                                      To buy undervalued property.

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