When was the last time you didn't source a deal (i.e., become aware of it for the first time) via email? Where did it come from instead?
Whether the deal came to you (e.g., teaser) or you went and got it (e.g., contacted an owner) doesn't matter so much to me.
Call or in-person
I'm not doing my job properly if the first time I see a deal from the major brokerages is email first (via a blast). In the markets I'm in I'm always on the phone with the big guys asking what's in the pipeline. Also when you're touring in-person you always need to ask what they think they can break loose for you because people are way more willing to spill the beans face to face than through a phone call.
Also I'm more apt to find out about a deal thats already being markets through a call even if I've gotten an email 3 times about it. Brokers on here please note: today is Columbus day which means 75% of the italians in NYC took off the day for some reason, its very quiet and I still have 75 emails. I'm going to miss that teaser if its a day I'm getting 100+ emails.
Great context; thanks for sharing! Also appreciated the Columbus Day joke (note my last name).
I hear this view a lot: "I need to be in front of the big brokers a lot (phone and in-person) to stay tuned into what's on and what's coming." Could you say more about why this adds value for you?
For example, what do you do with the knowledge that a deal is coming to market soon?
> I'm more apt to find out about a deal thats already being markets through a call even if I've gotten an email 3 times about it. ...its very quiet and I still have 75 emails. I'm going to miss that teaser if its a day I'm getting 100+ emails.
...this suggests information overload is part of the problem. Maybe this is where the calls to brokers kind of help you stay current?
Is the goal to have full visibility into the set of available deals in your strike zone at any given point in time? How much of your time and effort does this require? How important is it?
Looking back over this it's a lot of questions. I'm super interested in this topic. I encourage others to pile in here and share your views.
Brokers only have so much bandwidth as well. If we get a good off-market lead (ie No control of the deal) we may only call up 5-10 of our closest and trust clients about it. We need to trust that they won't go blabbing our lead to the world, disclosing confidential material, won't take fee, and will work through us.
If we get the listing (control the deal), we are more secure in our position and typically market it off-market for a few weeks in the beginning. We only take it to the 30-50 prospects we know will work through us and won't take fee. We actively email and call on buyers to pitch and get feedback, and stay on enough to cut through the noise of their crazy busy day to day.
This persistence in getting the deal in front of these people and cutting through the noise to actively market your property is the majority of value that we bring to our clients. This works in the sellers favor as well because we will do the deal for a discount if we can keep the deal in house. It's also a quicker process for the seller, and time is money.
Most of my buyers appreciate it because many rarely have enough time to track the open market, and appreciate the follow up to get them looking at deals. Many times, great properties at won't ever even hit the open market and may be limited to a closed door bidding process.
Only after those few weeks of off-market activity does it hit the open market, and by then, a significant portion of the logical buying pool has taken a look at it and passed. For less than stellar properties here is benefit to the seller as its the best way to find a potential buyer at or near asking, but they will be paying a higher commission and the process may take longer. For buyers, it means it has been picked over, and is almost a deterant in some cases, especially if the listing gets stale.
If we don't have control, but the potential seller has great price expectations, it may only be shown to 1-3 people before someone pounces. As brokers we only get paid when deals are done, and the quicker and less hassle, the better. If I find someone with great price expectations willing to look at offers, but not willing to sign a listing, I may only tell that handful of people because I'm incentivized to get deals done and don't want to get a bidding war started. Especially if it let the seller get ideas about slowing up the process by taking it to market, or raising prices.
With no listing contract I'm not obligated to the seller and am incentivized to help my buyers get the best deals, and they're more incentivized to work with me. I do land, so I deal with a lot of unsophisticated sellers and highly sophisticated buyers. Keeping in touch with my buy-side regularly is critical as finding the right development sites requires a lot of misses, feedback, and constant acquisition criteria changes to get just the right site to get to yes. This back and forth of pitching and feedback is critical in getting through the brokers bandwidth as well.
Everybody wants to be in the know, and most everybody likes those secret off-market leads that only you and a handful of others know about. That ability to look and get in ahead of a bidding war or other bidders brings massive value to buyers. The ability to have a chance at a great site without anybody else looking at it or even knowing its for sale brings even more value. Staying on the top of minds of brokers by talking on the phone builds a rapport and puts you in that top 5-10 buyers that are first of mind when something good pops up off-market. That is why it is part of their job and compensation to maintain good relationships with brokers, its one of the few competitive edges you can get in this business and it only takes one great deal to earn yourself the right reputation.
Super thorough explanation; thanks for taking the time to share this. Couple of things I'd like your view on:
> This persistence in getting the deal in front of these people and cutting through the noise to actively market your property is the majority of value that we bring to our clients.
> Most of my buyers appreciate it because many rarely have enough time to track the open market, and appreciate the follow up to get them looking at deals.
As a former acquisitions associate that was dealing with crazy volume, I would literally forget about deals at times and would not remember them until the brokers followed up. Many times we wouldn't even START looking at a deal until the first round bid date, at which point we would do a quick and dirty and if interested use our relationship with the broker to tell us the min we would need to bid to make it to next round. Then we would start focusing on the deal more, go tour it and fine-tune a real bid. For this reason, each person on the team, would do their best to track their own pipelines (both analysts and originators), but many times things slip through the cracks due to the noise that was mentioned. Since you asked what that is - we're still closing deals and doing deep dives into DD on deals under LOI, going to conferences or events, or a partner brings in a big portfolio and its all hands on deck - these other things obviously take precedent, hence the new deal you just sent me might not ever get reviewed. That is of course, unless you get me so pumped about the deal that I run to my boss and tell him we need to reprioritize.
My buy-side clients are all developers and spend most of their day running around like their hair is on fire. More cutting through the noise of their crazy hectic days of constant meetings and fire drills, and a barrage of opportunities from other brokers. There are only a handful of solid infill land teams in our city, so they are not getting overwhelmed with deals in their inbox. The rest of our firm focuses on MM multi-family investment sales, and their buyers are definitely getting blown up with deals, but land isn't like that yet here.
As explained above and mentioned by the other poster, it's quite literally the opposite of where all the deals come from. If you are only see it first once it hits the open market, you are already too late to get the best deals. It's already been shopped to the logical buyers in secret, and you weren't one of them in the broker's eyes. Sure there are a few opportunities that go straight to market, but you will end up in a bidding war and have a much lower likelihood of getting the property at a reasonable price. I would guess that the old 80/20 rule comes into effect here with only 20% of deals even hitting the open market. Definitely not "literally where all the deals come from"
Great context again. Thanks again. Both points make sense.
On #1, it underscores the importance of knowing the "must-have" criteria for each of your buyers and then being able to communicate to them that you've found one of those. You need "the red telephone" in the Moscow-Washington sense.
On #2, I consider any deal you could possibly buy (not just widely marketed ones) to be your "pipeline". So this question was more about why buyers don't prioritize tracking this list somehow. Based on your thoughts and also brosephstalin's post above, I've concluded that a pipeline is just "nice to have", not "need to have".
On the bidding war topic, running a competitive process is the right move for a seller. I can't think of a sophisticated group that wouldn't run one when it really matters. Doesn't mean you need to go wide, but the most aggressive capital for a particular kind of deal should compete for it.
Oh, it's almost always the right move for the seller to go open market. Especially if they are sophisticated and have any semblance of the land sales process. Thing is that a lot of the land sites in my market are held by (and sometimes listed by) very unsophisticated sellers. It could be the little old lady sitting on some prime piece of dirt because the zoning and size of the parcel is attractive, but her house that has been in the family for 120 years happens to sit on it. The same goes for the agents they sometimes choose, with the Mary Sues from ReMax getting the SFH listing without realizing that it is truly a land play. They have no idea of the proper buyers to call on and get the deal in front of the right people.
Land sales is it's own animal, but the fact is that the majority of my sell-side is unsophisticated and the majority of my buy-side is very sophisticated. This provides it's own unique opportunities for the buyers and for me to create value by calling through the 1000s of duds to get to that great deal
When I don't have an exclusive listing agreement, I get to play the buy-side and not have to worry about getting the best price for the seller (in fact, it's the complete opposite). This is both a positive (able to potentially get my buyers into great deals) and negative (don't have control of the deal and don't know who else they've told about their pricing).