At Adwords Nerds, all we focus on is the real estate investment space. A natural byproduct of that is getting to see interesting trends and data.
One of these trends is the increased skepticism of the industry as a whole.
In case you haven’t noticed, there’s a lot of stigma associated with the “we buy houses” movement. What began as a catchy slogan, company name, and branded signs on the side of the road has now resulted in becoming a major search term in queries like this:
And there’s more where that comes from.
In fact, some simple keyword research can show you that there are a number of keyword phrases, searched nationally, all centered around a general skepticism or distrust of real estate investors (or as they know you, “cash home buyers”).
Why the skepticism?
As I see it, there are a few reasons homeowners naturally view investors as sketchy:
First, the offer you’re making seems (and often is) too good to be true.
Think about it this way. A homeowner is interested in selling their house, and sees your website, mailer, or signage: “sell your home for cash in 30 days,” or “we’ll buy your house in cash in 7 days.”
Now, here they are, looking to sell their homes as quickly as possible, but totally thinking that the only route for them is going through a realtor, showing their homes to prospective buyers, going through multiple inspections/repair cycles, and then negotiations and closing.
They read your material, and think, “this person is saying they’ll buy my house, at the price I’m looking for, in cash, in just a few weeks?”
The “at the price I’m looking for” part is important.
I know you never said you were going to buy their house at full price – but that’s what they’re assuming. After all, do you really think there would be so many searches questioning “are cash for homes companies legit” if you clearly stated: “we’ll buy your home in cash, for 60 cents on the dollar”?
They’d clearly understand, that as with selling a used car to a dealership, they’re giving up some of the equity or value they could’ve gotten had they taken the time to find the right buyer, in exchange for a much faster, more convenient sales process.
In that case, it’s not a “scam” at all. It’s just a matter of what they value. Want a sale in 7 days, as-is, where everything is done for you? You can have it, just at the cost of some of the value of your home. Want full price for your home? Take the longer route and look for the right buyer.
Don’t get me wrong, I totally understand that you don’t have the luxury to say all that needs to be said on one sign, or in one flyer. My goal is to simply illuminate here some of the reasons for homeowner’s objections, and why they’re quite reasonable.
Second, almost anyone can do it.
Similar to the trades industry, anyone with some desire can jump into business whenever they want. And just the like the trades industry, people know they need to carefully vet who they work with.
Think about it this way: the low bar to entry has, one one side, made it so that you can enter and try and help homeowners solve their problems and grow a successful business. But it also means that naturally, there’s going to be some bad eggs out there. You think of it as passive investing, or real estate investment, they think of it as robbing them of value.
So, how do you build credibility?
The question is: if search trends and data show you that people are (understandably) skeptical about the offer you’re making, how can you build credibility?
Put differently, what can you do in order to build trust with homeowners, so they don’t write you off as a scam, or feel that they need to search you out?
To answer that, I’ll be drawing on answers that existing real estate investors have given me, in addition to some of my own marketing perspective.
1. The most important thing: tell the truth. Make clear in your communications that you aren’t for everyone, who you are a good fit for, and be transparent.
Seth Godin has famously said business owners need two things: for customers to know they exist, and to trust them.
How do you build this trust? By telling the truth.
See, at the end of the day, good marketing is not a slick webinar funnel, PPC campaign, or re-targeting ad. Good marketing describes the pain that you solve for customers, and why you’re the best at it.
The moment you begin hiding the way things work, the real cost of the product or service, or act like you’re a service for everyone, is when you get in trouble.
Here are a few things to note with this:
You shouldn’t be ashamed of, or try to hide, what you do.
Nobody is for everybody. And with everything, there are pros and cons. When you sell a car to a car dealership and want to do a trade-in, you know they’re not paying you full value for what the car is worth, right?
And yet, you don’t assume they’re scamming you. Because (as long as they’re reputable) they’re not. They’re offering you the ability to sell your car today, in like 1 hour, so you can drive off with another one. The alternative is list their car on social media, Craigslist, etc., show the car to strangers, negotiate with them, and finally get it sold.
The dealership offers speed, time-saving, and ease. The private sale offers more money.
And here’s the important part: as long as the customer knows the difference, there’s no breach of trust.
Assuming the dealership is ethical and just operating under industry standard practices, there’s no reason to mistrust them just because they offer less. Of course they do! You expect it, in exchange for what you’re getting.
This means it’s crucial to explain who is a good fit for you, and the pros and cons of both sides.
People on the whole understand dealerships. They don’t understand real estate investment companies. Now, with the advent of digital marketing, they’re finding you and you have ways to get your message in front of them.
The problem is, most of you are putting out an incomplete message.
You’re holding out the good, the pros of working with you, without stating the cons.
What you should be doing, is highlighting all the values you add to people’s lives, and the pains you solve, while at the same time qualifying who would be a good fit for your services, and helping them see the Pros and Cons.
Here are a few ways you could do that:
- Have a page in your main menu called “Who We Help”, that outlines all the audiences and situations that would be a good fit for you.
- Display somewhere, a summary pros and cons list of working with you, vs. selling through a real estate agent. Highlight the values of working with you (speed, ease, ability to avoid foreclosure and preserve credit score, and selling as-is); while also being transparent about the pros of Realtors (earning more money, in most cases, on the sale of their home).
- Do a video answering common questions and hesitations you receive, and explain how the process works.
The point is this: you need to describe the pains you solve for homeowners; who would be a good fit for this service (hint, it’s not everyone), and then detail the Pros and Cons of working with you. Let them decide for themselves. Then, when they contact you, they won’t feel like you deceived them, or like your company is a scam.
Here’s a piece of example language you might use:
“Are you a good fit for us? Here at ABC Properties, we offer the value of buying your home in days or weeks, buying it in whatever condition it’s in, paying you cash, and basically taking care of everything for you. This means that you won’t earn as much as you might going through a realtor, but you get a faster, easier, no fee sales process. So our recommendation is: if you need to get the most money possible, and don’t have trouble waiting for your home to sell on the market, you’re not in a rush, then go with a reputable realtor. If speed is more important to you, and you just need a house sold, or a realtor has told you they can’t help you because it’s too run down or in need of repair, then we may be a better fit. Call us today and we can help you decide.”
See what you did there?
You highlighted all the awesome things you offer. You are a great solution for some homeowners, just not all. You clearly stated who should consider working with you, and you shouldn’t. And if you want to get really bold and transparent, you can even run a page of recommended, vetted, ethical real estate agents you recommend if your services aren’t needed.
Imagine the trust that would build in your brand! No scams; no hidden language; just up-front transparency about who you help and who you don’t.
But that’s not all – you need to back it up and maintain transparency.
It’s not enough to put some nice language on your website or mailers. You’ve got to walk out the transparency when you talk and meet with homeowners. You’ve got to be willing to tell homeowners that you don’t think you’re the best fit for them, and that they’d be better served working with a realtor.
Can you do that? If not, you’re probably not trustworthy, and not in the best interest of the homeowner.
If you’re a homeowner, how can you tell if an investor you’re working with is shady? More importantly for this audience, if you’re an investor, what should you say and do to show yourself trustworthy?
Here are a few tips from actual real estate investors:
2. Commit to helping the homeowner find the objectively best solution for their situation.
A lot of times, as investors, you come across families or homeowners that are in tough situations. They just had a loss in the family; their facing foreclosure; they can’t make payments and are facing foreclosure; they’re elderly, in a run down house they can’t repair or list, and they’re about to be homeless.
They are in need, and they are vulnerable, and they are desperate. This means that you need to take extra care to help them navigate this time in their life well. Yes, you might be the best solution for them, but you might not. And if you aren’t, they need you to tell them that.
Niel, the owner of South Bend Fair Offer says, “someone that is willing to take as much time as needed to go over all options and help the seller make the decision that is best for them is someone that can be trusted. Someone low balling sellers and taking advantage of their lack of knowledge is something that rubs me the wrong way.”
That’s exactly right.
Your job is to meet the homeowners, and help them identify the best solution for them. The burden of proof is on you, to prove that this industry isn’t shady or untrustworthy.
3. Don’t hide the fact that you intend to repair, flip, and sell their home to make profit.
Look, everyone needs to make profit, or else they don’t stay in business, and can’t provide services and solve people’s pains right?
But something about the home buying industry feels like you need to “hide” the fact that you’re trying to make profit. Instead, you should be transparent about that.
Think about it, does anyone really expect you to take huge risks buying really run down properties, then flip them, all for no profit? Of course not. One bad flip can cost you your business. You’re taking on huge risks to do what you do.
The important thing is to not hide that you’re a business, and trying to make profit, and that that doesn’t need to come at the expensive of helping people. Nonprofits providing clean water help people, but their staff still get paid. Plumbers fix your clogged pipes, but they still want to make a good living. And you buy houses in weeks, from people who need the money or the sale, but you still need to make money.
Carter, of Carter Buys Homes says, “I would say transparency is very important so making sure that the investor is very clear with their intentions is important. The investor should be willing to tell you exactly what they plan on doing to your property and how much money they anticipate making on it.”
In my work in the industry, I can tell you from talking to clients that one of the top questions investors get asked is, “are you going to low-ball me” or general expressions of concern about the offer.
It’s so powerful when you choose to be transparent about pricing. When you aren’t afraid to show homeowners a breakdown of your numbers, and say to them:
- The current housing market, and what other homes in this neighborhood sell for are $xx.
- Your home is probably worth $xx.
- I estimate your home has $xx amount of repairs I’ll have to make.
- Here is the profit I try to make on each deal: $xx.
- That means I can buy your home for $xx. If that’s not enough, you could probably get more if you went through a realtor – just make sure to factor in the fees and commissions you’ll have to pay out from the sale to them.
4. Focus on the homeowner, not the house.
If you’re in real estate investment, you’re in the business of helping people. It’s not really optional. The whole premise of this industry is built around people being in situations, which, if they were not in, would mean they would never need you.
Think about that.
If they weren’t in such difficult situations (whether self inflicted or not, it doesn’t matter), they would just sell through a realtor. Something about the crisis they’re in means that they’re now in need of your service.
That means that they can’t be just a house or a number to you. They are people in crisis first. In fact, they may be in one of the biggest crisis’ of their lives. This means that you need to focus on them, and what is best for them, first and foremost.
Good real estate investors are interested in helping homeowners resolve problems they may be facing. They never want to “win” at the expense of the homeowner. They want the homeowner to win as well as well as win themselves. Good real estate investors spend time talking to homeowners to discover their concerns and needs. Bad investors don't listen, talk over the homeowner when they are talking and can't wait to get out the door.”
Phillmon, Metro Home Buyers, “Homeowners can identify bad investors from good ones by recognizing signs. A good investor takes the time to listen, be responsive and professional to the needs of the homeowner. A bad real estate investor lacks communication skills and may not seem genuine in their actions as well.”
5. Always tell the truth, be honest when you don’t have the answers, and do your best to educate clients.
Talking to homeowners, especially when it’s your first few times, is scary. It just is. It’s a weighty thing to have to walk through a home, meet new people in tough situations, try to come up with an accurate number, and process if this is the right thing for them.
That said, it’s crucial to admit where you don’t have the answers, and to know that it’s OK to not know everything. You might get asked a question you can’t answer. Just be honest, and say so.
It’s no secret that this is an industry where just about anyone can enter and start a “business”. Lots of gurus are holding seminars and teaching prospective investors that they “don’t even need cash” and can use other people’s money to get started.
Because of this, it’s all the more important to have your stuff together. When you show up, show up with:
- An understanding of the house’s and neighborhood’s worth.
- Information for the client.
- Professional material to help you stand out from the fly-by-night guys and gals you’re competing with.
Shelly is the co-founder of Simple Solution Homebuyer, and believes that one of the clear signs of a reputable investor is their ability be honest, straightforward, and answer all questions a client has, “a reputable investor is able to answer questions thoroughly as well as explain all possible outcomes for a client's particular scenario. An ethical investor will be a true resource and problem solver for their client and provide them with information that allows the client to make an informed decision. If an investor fails to provide straightforward answers, gives a client conflicting information and makes the client feel pressured into making a decision that investor is likely unethical.”
Don’t miss that…
A trustworthy investor will explain all the possible outcomes, and help the client make an informed decision.
That’s huge. Here’s why: it requires loss and sacrifice sometimes on the investor’s part.
Let’s say you know that you can close a client, but this deal wouldn’t be in their best interest. You know that with a slight pivot, they could go through an agent, and make $15,000 more – but they’re scared, stressed, and see you as an easy way out.
What Shelly is saying is that an ethical, honest investor will explain every route the homeowner can take – and what each outcome will be. So you say, “hey, I can buy your home for $xx, in xx days, which will help alleviate your stress and help in a, b, and c ways. But if you do [x], you could make $15,000 more potentially, you just have to wait maybe a month more. What would you like to do?”
Are you willing to be patient, to potentially lose deals, in exchange for building trust? A good investor is there to help the homeowner, present all their options to them, and explain each of the potential outcomes so they feel confident in the decision they’re making.
Todd, owner of We Buy Houses Los Angeles, says “an Investor builds trusts with homeowners by doing what the investor says he is going to do. Meaning, when I offer a price to buy a homeowners house my price never changes. I stand by my price as I factor in all my costs such as repairs costs, my time, holding costs and closing costs that goes into buying a property from a homeowner. Also, when I schedule an appointment to meet I am always on time and if I'm late I call that homeowner and let them know I'm running late. When I am in full communication with the homeowner then that homeowner attends to gain trusts with me that I will get the job done in buying their home.
I stand out ethical as we do everything by the book. We transfer the property thru Title and Escrow. Nothing we are doing is under the table or behind the scenes. Just like any other property transaction we open Escrow with a title company and we get the proper insurance in place to cover the transaction of the sale.
What helps us investors be trustworthy is when we physically go see the property and meet the homeowner which is what I do. By doing that makes us a real and professional home buyers that will buy their home.”
6. Deliver what you promised and follow through all the way.
Up to this point, we’ve discussed how to build trust from the beginning, through the middle of the process: how to communicate your value on your website, being transparent, and what to say when you meet with homeowners.
But you aren’t done yet. You can make the best impression in the world, but if you fail to follow through, and the client doesn’t get the delivery you promised, you’ll lose the trust you’ve worked so hard to gain.
If you’re committed to following through, you can stand out from the other investors who get leads, talk to homeowners, but then, when the buyer falls through (the company who actually purchases the property), they walk away from the deal.
So if you’re the actual buyer, state that clearly in your materials or on your website. Highlight that, and educate homeowners on how other investors work who don’t have the money to buy the home. And even if you do work with a buyer, do your best to line everything up so you can deliver and close on the timeline you promised.
Corey, who runs Next Day Cash Offer, echoed this tip, “Have proof of funds when you go to meet with the homeowner. Show them that you actually have the money to buy. This will help build trust, reassure them, and help you stand out from other investors who meet with them and can’t show that they have the money.”
Bottom line: it does no good to build trust all the way up until the end, only to have the deal fall through and leave the client with a bad taste in their mouth.
7. Strive to be trustworthy in an industry notorious for unethical practices
I thought I’d save the best answer for last, to summarize this article. I say it’s the best, because although it’s insanely practical, he also hits the nail on the head.
This one comes from Keith, who runs Crowne Properties with a small team, “we do get a bad reputation as real estate investors, and it's SO important to build instant trust and report with sellers. I do this in 3 different ways:
1) I have local trusted brands at the very top of my website like the local newspaper, the Chamber of Commerce, and the BBB.
2) Then they scroll down to see that I have a picture of me and my family. This allows them to put a name to a face and is a subconscious reminder that I have a wife and kids (just like them, more than likely) and am just a regular guy trying to help people, not some faceless corporation that is driven by money and greed who will rips people off and steals their homes (because this is what they think of us…)
3) Lastly, when they call me, I make it a point to mirror their speech, rhythm, and speech patterns. This is another subconscious reminder that I am like them, and people like people who are like them.
The things I've mentioned above are things that give the ILLUSION of an ethical and trustworthy professional. More important than all this, is to BE an ethical professional. Become the person, the professional, and the business owner that you wish you were. Do today what you should have been doing all along. Raise your standards in your company, and demand that the people you work with raise theirs, and hold your accountable when you fail. This creates an atmosphere of growth and may create some tension for the first year or so, but it will benefit all parties involved for years and years to come.”
Couldn’t have said it better myself.
I don’t know what the future of the real estate investment industry looks like. All I do know is that as long as their are homeowners facing really tough circumstances, who can’t sell through a realtor, there will probably be a need for what you do.
My desire would be that the most trustworthy, ethical investors rise to the top. Investors who:
- Clearly communicate who their service is good for, and who it isn’t.
- The pros and cons of buying from them, vs. through a realtor.
- Put the interest of the homeowner first, even if that means recommending them to a competitor or trusted real estate agent.
- Have the money to buy the home, or have the partnerships required so that the deal doesn’t fall through.
- Educate the homeowners, and break down their offer number very transparently so the homeowner can make the best decision possible.
- Are sympathetic, loving, and compassionate.
- Deliver what they say they will, when they say they will.
So get involved with the community here, and keep growing. And if you follow these tips, and strive to be that kind of investor, then I wish you the best.