Sep. 1, 2007 Edition

You CAN Succeed In A Buyer's Market!

How building a team equates to building your business
By Ernie Hughes

Ernie Hughes

It is a buyer's market. And as much as I hate to say the words, I have no choice: "I told you so."

Going back as far as January 2006, I wrote articles for The Vestor's Voice^® stating that the real estate market was in for a change, and that the seller's market we were in was evolving into more of a buyer's market. Does that ring a bell?

Since then, a number of articles have appeared in the newsletter, written by me and others, on the same topic. They've all included information about how to respond to the market swing, and how to make the successful transition into an assignment and wholesaling strategy.

Dr. John Hayes and Mike Blatney have addressed the very same issue on more than one occasion on The Real Estate Investor's Hour on WBAP radio. Dr. Hayes has also written about it in his blog.

Many franchisees have received the message loud and clear, and have adapted their buying strategy accordingly. They are buying at deeper discounts -- much deeper -- recruiting new investors, and building teams to support their new strategy. They are making more money and buying more houses than they were during the seller's market.

With their success as proof that an assignment and wholesaling strategy is the way to go, and all the attention this subject has received, why is it that many of you continue to buy houses to rehab and retail?

With a burgeoning inventory of houses in every market across the country, far fewer buyers, and tighter lending restrictions, do you really want to compete with the tens of thousands of houses on the market in your hometown? As Mike Blatney has stated, if you are going to rehab and you want your house to sell, it had better be the best -- and best-priced -- in the neighborhood.

So why is it that you are still buying houses to rehab and retail?

• Is it your comfort zone; all you know how to do?
• Are you living in a buyer's market, yet still thinking with a seller's mentality?
• Are you afraid of volume? Of buying more houses?
• Do you not know what to do to change your model?
• Are you living in denial about the market change?

If you have any one of these feelings, get over it. The sooner you accept the reality of the market, the more quickly you will recover from living in a seller's market state of mind.

The reality is that this buyer's market is going to be with us for quite some time. That's the good news. The bad news is that if you don't change your buying strategy, the market is going to pass you by. It will continue to cost you money, and may ultimately cost you your business.

So why is this market good news? You see, our business was born out of a buyer's market. Ken D'Angelo would be elated if he were alive today. He started this business in this kind of market; not once, but twice: first in the late '70s, and again in the late '80s. I certainly am glad we have a buyer's market. You will be too if you start thinking more like a wholesaler instead of a rehabber.

Here's what you can do to succeed in a buyer's market:

• Build a team of professional buyers and sellers.
• Treat every lead call like gold -- don't over-screen.
• Convert a minimum of 50% of your lead calls to appointments.
• Make written offers on all appointments attended using your numbers, not the seller's, and leave the contract if you don't buy on the first appointment.
• Recruit new investors -- make personal contact with them, don't e-mail blast. Then cultivate personal relationships with them.
• Make more deeply discounted offers. You will be surprised at the response.
• Buy using a 70-80% wholesale strategy, 20-30% rehab if it is a homerun. If you rehab a house, start the repairs the day you close. Time is money.
• Buy and hold for rental.
• Educate your team about selling houses using FHA, VA, the Bank of America program, and small bank financing. It's a must with the lending industry in turmoil.
• Have you ever heard the phrase "Buy low, sell high"? Now is the time to do it!

Although I am an advocate of wholesaling and assigning houses in a buyer's market, utilizing just one buying and selling strategy will eventually put a stranglehold on your business. Building a team of professional buyers and sellers will help you grow your business and build a balanced sales organization.

If you want to succeed in today's buyer's market, heed this advice, you won't be sorry. Don't make me come back in another six months and tell you, "I told you so."

If you need or want help planning your business model, our very capable FSMs can help you. Just call David Hicks or myself for assistance.

. . . Ernie Hughes is HVA's associate director of Franchise Systems Management. You can contact Ernie at 972.761.0046, ext. 155.