How to Survive as a Real Estate Agent During a Recession
There are three main ways to survive as a real estate agent during a recession.
- Property Management / Leasing
- Listing Short Sales
- Listing Bank Foreclosures.
Property Management / Leasing
As mentioned in our article How To Start A Property Management Company, this was one of our main incomes for years when we went through and survived the 2008 real estate recession. In that article, I go into details on exactly how to build a property management company from scratch, making six figures every year! This target market is recession proof with the ability to generate sales from it as well.
When the real estate market goes into a recession and values decrease, many people and investors do not want to take a loss upon a sale. Some purchased at value less than what it is worth in the present day. Prime opportunity to survive as a real estate agent during a recession.
This alternative is to lease their property out, generate income and wait until the market goes back up. And it will! Remember, the real estate market is cyclical. Check out the graph at the end of this article to see the real estate trends from the 1800’s.
Leasing real estate was a huge market for us when the real estate market crashed. Thousands of people were removing their homes for sale from MLS and relisting for lease. So we jumped in.
We target marketed specifically to absentee owners in communities where they were more heavily owned by investors. In the article mentioned above you even find one of our mailers that you can replicate. It worked and worked well.
Real Estate Survival With Short Sales During A Recession
It is estimated the suicide rate doubled in the last real estate crash due to foreclosures. According to RealtyTrac, 861,700 families lost their homes to foreclosure in 2018 alone!! Short sales gives people real hope with real outcomes to rebuild.
When we decided to take on this venture in order to survive the real estate recession, we ran into many sad stories sitting down at the kitchen table. Husband is trying to stay straight faced while his wife is sobbing and the kids are trying to listen in. I explained everything is going to be alright. There is a good chance we can get the short sale completed. We just need to start the process. There is also a good chance if they keep their credit in good shape they may be able to buy another home in 18-24 months.
Other tables I’ve sat down at, the husband and wife were on the brink of a divorce simply because of their financial situation. Tears, fights and hopelessness all set in. And directly in my presence. These were the intense conversations. Wife is yelling at the husband “I told you we shouldn’t have bought such a big house with a big mortgage!
Other short sale clients were investors. They were more shrewd. They knew it was not a good asset and needed to unload it. Some investors had multiple properties they listed with us. One guy in particular had 7. We got all 7 short sales approved and closed during the real estate recession.
In any case if you take this very important job on you will be rewarded by helping a lot of people out.
So How Do I Become A Short Sale Expert?
Learn as much that you can about short sales. We developed the Short Sale Mastery Course for this. It is a fairly inexpensive to gain the necessary knowledge to market, list and sell short sales!
During A Real Estate Recession Target Market Lis Pendens.
A Lis Pendens is a pending lawsuit usually between a bank and a borrower for non payment. Most clerk of courts are online these days. Just type your city or county with clerk of courts after it to find the appropriate site. Then find the area where you can search public record. Here you can find out a lot about a person including marriages, mortgages and Lis Pendens.
Lis Pendens are filed every day. More or less depending on where you live. The problem is, most are filed with only their names and legal descriptions of the property. Making it extremely hard to cross reference and get the addresses and contact info for these individuals. This is why RedX is an extremely effective tool to get preforeclosures and their phone numbers to call.
With this LINK you will get their initial fee of $149 waived!
How to market to prospective short sale clients.
So how can we help save people from foreclosure? You research the Lis Pendens and market to them explaining there are alternative options such as a short sale. As mentioned above you can get this info literally at your fingertips with the link above.
Once you have this info you can begin your campaign. You can mail this database. You can Cold Call from the phone numbers provided by the site above. And you can door knock. All techniques are discussed in the article Short Sale Process.
Consider creating a brochure made educating the reader on what a short sale is, how it works and the benefits. If you are door knocking or cold calling, use a script like the following:
Hello my name is Steve with Maxim Realtors. Are you the owner of this home (or the home on Maple Street)? (Yes). Well the reason why I’ve stopped over today (called you), is your property has a Lis Pendens recorded on it. Are you aware of this? (Yes).
Do you know what a short sale is? (Somewhat but we don’t care! We are gonna give it back to the bank when they knock on our door!!). Oh boy. I feel a little scared for you can I explain why? (Ok).
Well when a foreclosure is completed after so many attempts to take possession of the property they will show up at your door with the local authorities and you will be forced to move out. You don’t want that do you? (I guess not).
Well here is your chance to be able to sell your home similar to a transitional sale. You will know the date of when you will close on the property. You will not have a foreclosure on your record. And there is a good possibility of a waiver of a deficiency judgment. Meaning the bank will not come back after you for any monies owed that was shorted. If you get foreclosed on, odds are the bank will come after every dime that you owed them including attorney fees.
This means they could potentially garnish wages and or lien other assets you own now and in the future. You would want to avoid that at all costs right? (I guess so). Well here’s what I’d like to do. I’d like to come back later today (stop by later today) when your husband is home so we can talk in detail about all of this and answer any questions you may have. This will not cost you anything. Does 6 or would 6:30 be better? (6:30). Fantastic! ** Give a brochure if you are door knocking and get their cell number.
Set a goal to contact 100 prospective short sale candidates a week. You should be able to get face to face with 20. You should be able to get at least 2 listings a week with this strategy. If your market average is $200,000 at 3% = $6,000. Do the math for 2 closings a month. You will make a great living and help a lot of people.
What is a short sale?
A short sale occurs when a bank accepts a price lower than what is owed thus preventing a foreclosure. You as the real estate agent can list the property on the open market and procure a buyer at fair market value. You will work with your closing company or attorney to submit all the appropriate documentation to the lender with the sales contract. Appropriate documentation includes but not limited to the hardship letter, personal financial statement Banks statements, Listing agreement, MLS report. FREE ShortSalePackage – Be sure to speak with your Broker and attorney before using any of this material.
Now this process usually takes 1-4 months for the banks to review all the pertinent information and make a sound decision on whether or not they will approve the short sale. They will also in most cases negotiate price and terms with the new buyer.
If they approve the short sale they will issue a short sale approval letter like this one Short Sale Approval Letter which includes whether they waive any future deficiency judgement. In many cases most lenders will. Thereafter the new Buyer will usually have 45-60 days to close. Oh! In some cases (try to request it in the package) the lender will actually give cash at close if they are insolvent so they have funds to move out of the property. We have had dozens of happy clients who have gotten thousands to pay for a moving truck and even first, last and security for an apartment.
List Bank Foreclosures / REO’s During A Recession
When the real estate market goes into a recession, foreclosures are inevitable. This is a huge target market to get listings. As mentioned in other articles, listings is the name of the game. So why not list bank REO’s? These properties are already foreclosed on and the bank now owns them and has possession.
The banks need to get these off of their books quickly as they are in the business of lending money, not managing or selling real estate. In almost all cases, majority of banks will hire a REALTOR to list and sell these properties.
What is an REO?
REO stands for Real Estate Owned. Also bank representatives will refer to it as a Bank Asset. Those representatives are traditionally called Asset Managers. And these are the people you want to get in touch with. They will be the one making the decision on what real estate agent to hire.
**You will want to learn and use this terminology when speaking with them.
How Do I Target Them?
You have to be aggressive. Just Google “Bank Asset Management Company.” You will find plenty of banks to search out and cold call. Another option is to stop into your local banks and ask to speak with a local Asset Manager. Smaller community banks may have them onsite.
Stand Apart During A Real Estate Recession With REO’s
You have to separate yourself from the competition. A few ways we accomplished this were the following:
- Initial inspection with security. When you get the asset assigned to you, the first thing you will have to is do the initial inspection. Report back the property condition and see if there is anyone living or squatting on the property. This can be a bit scary and dangerous. Also there can be big liability for this. So we guaranteed the banks that we will have a professional guard with our agent on every inspection. **I had a guy open his door with a shotgun next to him. He never pointed at me but it sure did scare the hell out of me.
- Financially Secure. Most times the asset managers require you to upfront ALL costs including ongoing expenses like electricity, water, lawn and pool services, etc. But also the initial and more expensive costs like trash outs and any renovation costs can get up there. They also reimburse in 30-60 days after you submit receipts. Asset managers need to know you are financially capable.
- Renovation Experience. I am a seasoned real estate investor with many fair and trustworthy contractors in our local area. Very important to relay this information. You are protecting the bank asset after all. You will be responsible to get bids from at least 3 contractors for each item and then oversee the project(s).
- Woman Owned. My sister previously owned 51% of our real estate company. We used her as the head person on this. Many times banks and government entities will give a shot to Woman and Minority owned businesses initially. If you have this capability use it to your advantage.
Provide Great Service To Banks During A Real Estate Recession
One of my buddies who is also a licensed real estate broker with his own company listed and sold over 400 bank assets during the 2008 real estate recession. If you work hard at this target market you can essentially have a handful of bank clients feeding you listings daily.
We listed and sold only around 50 bank assets through an asset management company called Brighton. They were our singular client that provided 50+ listings!
We could have kept on the phones cold calling other asset managers but more time of ours was focused on short sales and rentals mentioned above.
Survival During A Real Estate Recession Is Easier Than You Think
Look… You can easily survive as a real estate agent during a recession if you do one thing. ADAPT. This is what we had to do in order to keep our doors open. Not only did we keep our doors open, we made more money in this time period than when the market was “hot” pre-crash and present time 2018.
It was great. I would say at least 50% of real estate agents quit and got out of the business. This opened up so much opportunity for those who stuck it out and adapted. Always keep in mind the real estate market will go up and down. Study the graphs from the trends from the 1800’s to the Market Cycle Types.