It IS a numbers game, but Quality Matters Too
I think there can be a tendency to over-emphasize numbers when it comes to contracts and that getting contracts is the wrong thing to incentivize.
Getting a contract is not a guarantee of a closed deal. Indeed a large percentage of our contracts historically have not closed, even when we’re doing our best with vetting them.
Don’t Incentivize the Wrong Thing
In our business team members get bonuses for closed deals. That way we’re all pulling together toward the same goal- the only kpi that is directly tied to revenue. [Sidebar- Harvard business Review Article on Incentives]
I have an opinion that anybody can get contracts and it’s proven to me by all the wholesalers who send me deals that are overpriced.
When I was a young real estate agent. I got my first listing by giving the seller the price he wanted even though it was too high for the neighborhood I could go out tomorrow and get 10 contracts If I just said yes to all the sellers that thought their house or land was worth a certain price.
We’re in it to Make Money, How Do We Do That Effectively?
But really, what are we doing? The point in wholesaling is to get contracts that we will be able to sell and close quickly. As my son likes to say it’s about the velocity of money. How quickly can I turn deals and keep bringing in money?
If we’re trying to close a large volume of deals and make money within 30 days on those deals, we want properties that we’re quite confident will sell. We’re not always going to get it right but doing the extra work upfront really pays off when you are able to sell deals quickly.
Taking deals at too high of a price or with issues with title or in the case of land, extreme slope or easement isuues, etc- creates more strain on the team to try and sell them and solve issues, especially when some of these deals never close. This is time and energy that could have been spent working on closing priced right, saleable deals.
What’s a quality deal? What Should I Monitor
Here are a few things to check?
- Cooperative seller who is engaged and responsive
- Good price where you can make money (and the seller is happy with their payout).
- Good area where deals are happening, people are buying.
Those are three top things to consider
Seller- Do they reply to calls and texts in a timely way? Were they reluctant to sign, or did it feel like a win-win? Are they shopping around for price, or do you have a good rapport and bond with them, where they wouldn’t jump ship for a grand or two?
Price- Does your market research indicate that you can create a win-win-win? That your seller is good with their payout, you can make an assignment fee that feels good to you, and the end buyer can feel like they’re getting a good price?
Area- Is the property in an area where deals are being done? Beware of rural areas, high crime areas, impoverished areas where there’s very little activity.
In conclusion
Yes it’s a numbers game, and the more contracts we get, the higher our chances of closing deals, but we must be careful not to fill the machine with hard to close or overpriced deals because then we are hindering ourselves from the primary goal of any business- making money.