Shoestring Marketing for Short Sale Leads

Every day, it seems, I talk to a real estate investor who is having trouble with marketing, only they don’t put it like that. They all want to know where to find the good deals. Sound familiar? They want to know what they should be doing differently, because what they’re doing isn’t working. Their cash flow is way too inconsistent, and they’re all wondering if there could be a better way to get leads.

I love answering that question, and I can do it in one word: referrals.

I have coaching students all across the United States who have a jam-packed pipeline of pre-foreclosure and short sale leads, and they spend absolutely no money on marketing. How? They have solid sources in their local markets who feed them free leads to these properties on a regular basis.

Before you go referral-hunting, you need to initiate a couple of referral-friendly programs in your business. The first task is to set up a referral fee structure for professionals who are willing to send you leads. Fees can range from $200 to $2,000, and this extra incentive from a done deal is a very motivating and very simple policy for you to begin. The second task is to develop a Gift Referral Incentive Program (GRIP) for private individuals who take the time to talk to a homeowner in trouble about working with you.

Now that you have the carrot, let’s look at who might be in a position to grab the stick. The only cost of using this method of marketing is your time in getting to know these people.

Attorneys: What you’re looking for is an attorney who deals with financially distressed people on a regular basis. The strongest potential lies with bankruptcy and divorce attorneys, who can and do accept referral fees. Divorce attorneys may have clients who are each demanding that the other pay the mortgage, so nobody does and the property goes into foreclosure. Bankruptcy attorneys frequently represent homeowners in trouble. A good bankruptcy attorney knows that, if a client files for bankruptcy protection, the client should still sell the property to eliminate the foreclosure from their credit report after the bankruptcy has been discharged. Don’t count out other attorneys who don’t specialize, but who do have clients like these. Get to know them, too, and ask for their help.

Mortgage Brokers: Since so many mortgage brokers have put people into houses that they couldn’t afford, they often feel some sense of obligation to help distressed homeowners who were once their clients. Refinancing doesn’t work when the homeowner is over-leveraged as so many are today. Consider bringing up the possibility of building a direct marketing campaign to promote both of you. For example, the mortgage broker can create a direct mailing campaign to generate possible leads for refinancing; however, the broker can include in his marketing that for those people precluded from refinancing there is another option — you. Conversely, you as the investor can do the same thing, but with a twist: you can market the option of either selling the house or trying to refinance. Since 90 percent of attempts to refinance end in failure, the lead will come back to you, the investor. Make sure that the mortgage broker pays for the direct mail campaign. When your short sale deal closes, pay the mortgage broker that referral fee.

Title Companies: Mortgage brokers who are attempting to refinance a person facing foreclosure always work with a title company. If a title company is aware of the work that you do, and you send them business, they will send you leads for those refinance deals that failed. Title companies are also staffed with people who are in the real estate business. They hear things going on throughout the area and the industry. If they are aware that you want those leads and that you also pay referral fees, they will send you these leads when they come across them.

Construction Companies: Contractors suffer the same feast and famine cycle that afflicts real estate investing. If you are working with a contractor, see if that person can act as a “bird dog” for leads. Contractors, builders, and odd jobbers are surrounded by people who are in the real estate business. They come across other people who may need your help or know someone who might. Again, make sure to advertise your referral fee of $200 to $2,000, and continue to create relationships with them, and they will bring you opportunities.

Friends and Family: Keep your GRIP flyer and business card handy. You don’t need to come across like an insurance salesperson, but a quick elevator speech with the GRIP flyer or card for them to hold onto is always a good idea. You never know when someone will call you with a great lead.

Other Investors: When most of the real estate investing community was into rehab, we were focusing on short sales. We quickly realized that many rehabbing investors didn’t know what to do with properties that were over-leveraged and heading to foreclosure. We told these investors that we wanted those deals and would pay them a fee if it closed, usually $1,000 to $2,000. This turned out to be a great way for us to meet other investors, learn about their business, and pick up several additional leads each month.

Sellers: When a deal closes, and the goodwill of the homeowner is at a peak, always ask for referrals and testimonials. Birds of a feather flock together! People in foreclosure know others who are in foreclosure. It happens all the time. Just ask and see who they know.

The more people you get to know, the more leads you can get. Happy referral-hunting!