Does Farming Actually Work In Real Estate?

In my pre-licensing classes at Demetree School of Real Estate, farm area is probably the first vocabulary word I teach.  On day one, within the first hour of class, they learn that a farm area has nothing to do with agricultural.  Rather, it is a residential prospecting technique where the real estate agent specializes in a particular neighborhood.  I give an example, and the students usually chuckle in disbelief.  Someone always asks, “Does that actually work?”

It works like a charm.  It’s not exactly the fast path to success, but there is no such thing as a fast path to success. 

I have several Realtors who farm my neighborhood.  I probably get half a dozen postcards a week from different real estate agents.  I get Just Listed postcards, Just Sold cards, football schedules, soccer schedule, you name it.  I usually give it a quick glance, then because I’m a real estate instructor, I put it in a folder to use in class.  If I weren’t an instructor, I’m sure I would toss them.

The front and back of a farming postcard I received. It includes the name, phone, email or the real estate agent plus a customized link for me to get more information.

So the other day, our local Realtors Association sent out the ballots for the board of directors.  I recognized one name, not because he was student, not because I’ve done a deal with him, not even because I’ve ever met him in person.  I recognized him because I’ve been getting postcards from him. 

I haven’t voted yet, but in elections, whether it is for the local Realtor Association or United States Congress, the biggest hurdle is getting people to recognize your name. This guy that has been sending me postcards for a year has overcome that hurdle.

So yes, farming absolutely works. But just like farming the land, it’s not a quick fix. It takes a while.

How To Use Purchase Money Mortgage To Help Your Client

When you were sitting in the pre-licensing class, you likely thought, “I’m never going use this stuff after I pass the state exam.”  For the most part, you won’t use it.  But here is one thing that, if you remember it from pre-licensing, could save the sale.

Do you remember what a purchase money mortgage is?  It’s when the seller holds the mortgage, or when the vendor is the lender.  Usually when I teach this in class, people think this is crazy.  Why would the seller want to hold the mortgage?  For the same reason the bank wants to hold the mortgage – they make money from the interest.

Ask the seller to hold a purchase money mortgage. It might save the sale.

Back in the good old days, this is happened every day.  It’s not as common today, but it still happens.  In fact, I have a purchase money mortgage on the house I live in.

If the buyer didn’t need any cash, the seller could finance the entire $200,000 purchase.  Then, every month the buyer would send a check to the seller. The seller is acting as the bank.

The buyer gets the deed – this is not rent-to-own.  The seller is lending money that is secured by the house.  He puts a lien on the house just like the bank does.  He can foreclose on the house, the same way the bank would.  Every month, the seller will get a check in the mail.  The real estate agent gets a commission.  Win-win-win.

A more common example would be were the seller lends a smaller amount of money. Let’s say the seller wants $200,000 for the house.  The buyer has $50,000 to put down and is approved for a $125,000 loan.  In other words, the buyer is $25,000 short.  You could ask the seller to hold a $25,000 mortgage.  Every month, the buyer would send one mortgage payment to the bank and a different smaller payment to the seller.

If the seller doesn’t need the cash from the house, ask her if she would be willing to hold a mortgage.  If you represent the buyer, and the negotiations are a small amount apart, ask the buyer to hold a purchase money mortgage.  This might be the thing that saves the sale.

Good luck out there.

This Man Learned The Hard Way What “Caveat Emptor” Means

Recently, a piece of land was for sale at a tax deed auction in Broward County.  A man looked it up on the property appraiser’s website and some other public sites and found a photo similar to the one here.  He bid in the auction and snagged it for $9,100.  Here’s the kicker… he did not win the duplex.  He did not even win one of these villas.  He won the piece of grass that divides the two driveways.

Caveat Emptor

This photo from Google Earth shows what the man bought. He didn’t buy the house – he bought the strip of land in between the two driveways.

In one of those only-in-Florida situations, somehow this strip of grass is separate from the two villas.  The new owner is calling it deceptive and wants his money back.

I’m going to assume this guy never went to real estate school because one of the things I teach is that the rules of a tax deed auction or a foreclosure auction are “caveat emptor,” which means “Let the buyer beware.”

If you ever have a buyer who wants to skip the title search, this is why they need to do it.  In real life, you have to get a title search because the mortgage company requires it.  But if a person were paying cash, they could skip on the title search.  Here’s a good story about why the title insurance is worth it.  You want to be sure you are getting a house instead of a strip of grass with two mailboxes.

If you ever bid on a tax deed auction, or if you ever take the Florida real estate sales associate exam, be sure you know what caveat emptor is.

If you are interested in going to real estate school or getting your real estate license to ensure you don’t make a mistake like this guy, you can find me at Demetree School of Real Estate.