Jason Cochard for Land Academy
One thing that happens when you buy property is that you get letters from people who want to buy it from you. Lately, I’ve started to recognize some names. It’s funny to me, and I don’t take offense at all. Usually, I just try to experience the offer letter as a person would if they weren’t in the land business. A few things usually jump out at me, and I use the feeling as a way of improving my own letter template. I’ll note their lack of capitalization on things like “LLC”. I happen to know that’s how the data comes out of RealQuest, but I also know that it’s not hard to sort rows alphabetically on a column and scan a data-set for errors like that, copying and pasting so that a letter recipient sees “LLC” instead.
Based on the wording of the letter, and sometimes based on the sender’s name, I can usually deduce whether it’s a Land Academy person sending the letter. I’ve gotten some from colleagues I already know by name, others for whom I recognize the letter format, and others that are obviously not members.Some people out there teach systems that target certain kinds of owners, one of them being back tax properties. In my case, I’ll sometimes have a newly-delinquent tax bill that I’m planning on deferring until the close of the sale transaction, but the fact that it’s technically delinquent is enough to get some people offering me three digits for a property I paid four digits, which is worth five.
That’s what I’m calling floor play — complete and total bottom of the barrel priced offers — and I’d like to encourage against that. We’re simply better than that. I know how much mail costs, and I know the response rate I’ve gotten when my mailers have mistakenly been scraping the bottom. Granted, it’s not necessarily much different even when they’re “appropriately low,” because haters are going to hate. And now I also know the feeling I’ve gotten when receiving a floor play letter. In my experience, it’s the pricing tier that will blow up your deal-to-death-threat ratio and kill your strike rate, if you aren’t doing some really sophisticated scrubbing. And if your motivation for floor play is that you don’t have much money, then sending mail with a zero strike rate is probably too expensive to do twice.
Have I acquired property for three figures or less? Yes, and it’s great for ROI when it happens. But I have to ask myself, is that where I want to be, knowing I could target more expensive properties with a financial partner and do far fewer deals to achieve a given revenue target? For me, it’s not where I want to be.
None of my three-figure acquisitions were procured with our typical direct mail offer letter. To revisit the dynamics of an offer the way we do it, there are the following components in my view:
1. The announcement of an offer to buy
2. The announcement of the offer price
3. The seller’s emotional reaction
4. An indefinite time delay, sometimes infinite
5. The seller’s response
6. The buyer’s apology/explanation/justification (optional)
7. The seller’s decision
The nature of our offer letters necessitates a very long time delay on the emotional timescale, and time + emotions is how mountains are made from mole hills. This happens all the time when an offer is not substantial enough to be reasonable. Exactly the unreasonable letters I’ve received lately.
Based on my own three-figure acquisitions, I’ve noticed that — seller life situation aside — the emotional dynamics of floor play are different when no time delay exists between the offer price being revealed and the buyer’s explanation. This, while at the same time not flooding yourself with calls by sending teaser offer postcards and getting people to call you to find out the price (don’t do that). For three-figure floor play deals, I’ve gotten better results with a methodology congruent with enabling the buyer explanation to coincide with the offer price, nipping emotions in the bud, because human decisions run on emotions way more than we like to admit.
But, part of my point is, is that special unicorn methodology even worth it? That kind of deal is too small for title, so you’re closing it yourself, and since it’s so low you now have to perform every subsequent step as cheaply as possible to preserve that great ROI. Side note: I found an IRS lien during a floor play deal, so I killed it. I always wonder how many of those have a similar circumstance.For me, I run a no-floor-play zone. That doesn’t mean I don’t get hate, I do. But a great alternative to three-figure offers is to get into bed with a financial partner, skip the floor play and go straight into bigger deals.