Referral Marketing System - Amazon S3€¦ · Referral Marketing System. Referral Marketing System....

Referral Marketing System

Preview Of What You Will Learn

Sections:Introduction...............................................................................................................5

Building Referral Business..........................................................................................7Why You Need Referrals Laws and Regulations

Target Networks......................................................................................................13 Adding Realtors to Your Network Working With Other Investors

Using Mortgage Brokers

Referral Marketing Strategies.......................................................................................15Communicating with Referral SourcesGiving is Receiving Turning Old Leads Into Deals

Referral Marketing Mistakes.........................................................................................19Common MistakesDamage Control

Wrap Up.............................................................................................................................21

You Will Be Able To:• Understand the importance of using referral marketing

• Feel confident in your ability to implement referrals into your marketing strategies

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The most successful investors are always experts in marketing. One specific type of marketing separates the very best from everyone else – it’s called referral marketing. This is a way to form relationships with real estate professionals where they will send you leads that they either are not working on or those you both can profit from. The best investors don’t just read or learn about referral marketing - they live it.

When you are in the beginning stages of your investing career, it is likely that you won’t have tons of money to spend on elaborate marketing campaigns. You will have to rely heavily on the campaigns that won’t cost you a dime. Setting up referrals from professionals in the real estate business is a huge benefit to any investor and should be one of the main focuses of your business, especially if you are just starting out. Having broader expo-sure often leads to new opportunities, prospective clients, and new ideas; and there’s no better way to achieve this goal than through networking.

You want to train Realtors, mortgage brokers, and other real estate investors to send you leads. Referral-based marketing truly is a reliable way to filter leads into your business without high cost and without much competi-tion, but providing a whole lot of opportunity.

Introduction

Make no mistake about it…you NEED referral business. Referral marketing is one of the most cost-effective methods of generating more leads to a business!

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Introduction

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Although it may sound too good to be true, you can find people in your market who have the leads you need, and in most cases, will hand them over for free. When you think about the basics of referral marketing, you are asking for others to provide recommendations of your services. A professional referral source must be completely comfortable with you before they will recommend your services to a client. And trust is built upon relationships, which are also known as your social capital. In the referral business, how well you perform will directly reflect on them. If there is no trust in your relationships or partnerships, your business will suffer. You not only have to know your business, but you have to know how to present your knowledge as well.

Why You Need ReferralsSometimes, we become so focused on advertisements and marketing plans that we ignore the basics. Referrals are the most powerful form of marketing that you can use, and also happens to be the least expensive. Refer-rals have a heavy impact worth more than any other marketing strategy. Having leads come your way by the efforts of others will create more time for you, and save you more money to put into another area of your business.

You should know how to measure the effectiveness of your campaigns by looking at how long it takes to implement them, what kind of leads you generate, and what the leads cost you. Because referral leads aren’t going to cost you a dime, this method is definitely an avenue worth pursuing.

Overall...

• Your business receives more clients that you would not have been able to have on your own.

• Clients are able to work with you and have an experience they may not have known about otherwise.

When you network, you increase exposure; you gain opportunities, prospective clients, and new ideas. Referrals and repeat business are also far less expensive than having to market for new prospects. By having a revenue source constantly flowing, your business can grow.

The delicate process of building trust and establishing rapport begins by making a positive first impression. The first step is to structure relationships with individuals like attorneys, mortgage brokers, and real estate agents.

Building Referral Business

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Building Referral Business

Laws and Regulations While it is important to welcome referral leads into your business with open arms, it is equally important that you know where your boundaries are when doing so. As you reach out to your potential referral sources, know that there are some regulations around how you reward them.

As of July 21st 2011, Section 8 of the Real Estate Settlement Procedures Act (RESPA) and Code of Ethics made it legal to pay referral fees to Real Estate Brokers but not to other individuals in the industry. In enacting RESPA, the U.S. Congress sought to prevent mortgage and title companies from paying referral fees to real estate experts and others who could refer settlement services to consumers. Congress believed that those costs could be passed along to consumers. However, Congress recognized that if real estate professionals provide legitimate goods and services, they are entitled to be compensated.

Here is the basic breakdown of what you need to be aware of:

• Prohibited Fees - It is illegal under RESPA for anyone to pay or receive a fee, kickback, or anything of value because they agree to refer settlement service business to a particular person or organization.

Example: Your mortgage lender may not pay your real estate broker $250 for referring you to the lender.

It is also illegal for anyone to accept a fee, or part of a fee, for a service if that person has not actually performed settlement service for the fee.

Example: A lender is not permitted to add to a third party’s fee, such as an appraisal fee, and keep the differ-ence.

• Permitted Payments - RESPA does not prevent title companies, mortgage brokers, appraisers, attorneys, settlement/closing agents and others, who actually perform a service in connection with the mortgage loan or the settlement, from being paid for the reasonable value of their work.

• Penalties - It is a crime for someone to pay or receive an illegal referral fee. The penalty can be a fine, imprison-ment, or both.

Helpful Tip!Do not try to structure a marketing agreement on your own. In some states, only licensed mortgage brokers may be paid for taking loan applications, and in others, real estate brokers may be prohibited from receiving dual compensation in the same transac-tion. Proceed with the guidance of an attorney familiar with RESPA.

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In real estate, we’ve found that the best leads are generated from Realtors, mortgage brokers, and other investors. To build your network of professionals who you will be work-ing with in your business, you’ll have to reach out to these three major power players. Continually expand your network through these target networks in order to maintain your referral chains. Here is a breakdown of each one:

Adding Realtors To Your NetworkSetting up referral marketing with Realtors allows you to leverage yourself with other real estate professionals. This is great to do if you are just getting started, or if you’ve been in the business for years. In order to build these successful relationships, you will have to put in your time to grow and nurture them. If you do it the right way and with the right Realtors, your efforts will come back and reward you. Just the same, however, if you don’t put in enough effort, you will easily become frustrated sorting through leads that are never going to amount to any-thing.

When you network, you won’t be going after every Realtor under the sun. In order to turn a Realtor into a lead source, you will have to do some coaching. If you don’t walk them through the process, they may just send you listings off the MLS. There is a huge difference between a listed lead and an unlisted lead. You want to convince Realtors to call you before the property is listed, and before the competition starts chomping at the bit. You’ll want to form a strategic relation-ship so that you receive the leads before they hit the MLS.

Here’s how we would begin a phone conversation when calling the top Realtors:

“My name is _________ from _________ and I’m an investor who buys and sells properties in the __________ area. I work with a lot of Realtors who bring me properties that need to be closed on quickly or are in disrepair. The majority of properties that I’m looking for are not on the MLS, because as you and I know the MLS is a competitive environment. So I’m looking for Realtors like yourself to give me a call when you come across a property that fits my criteria.”

Target Networks

Find Your Top Realtors Who:

• Do a high volume of work• Do not buy houses themselves• Are easy to work with• Specialize in an area

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Target Networks

Next, we go into little more detail as to who we are and what we do:

“I’m a very serious investor and I’m not looking to waste your time. Here’s how I can benefit you…if you bring me a property before it is listed, you can earn both sides of the commission. I may be buying the property a little lower than what the home would normally be listed for, but our offer is a very unique as-is, cash offer, and provides the owner with a quick and simple solution. I figure no one is going to have a better relationship with the seller than you. You’ll be able to explain to the seller how serious we are as buyers and that if we present them with an offer, we;ll stick to it.

You are going to find Realtors who won’t go for this arrangement. If that’s the case, then simply move on to the next one. However, keep in mind that the majority of deals are done off the market. This is because most of the good Realtors have relationships with people who can close on the deals fast. When you speak to Realtors on the phone predominantly in a referral relationship, explain how you will get these short sale listings and a lot of retail buyers and sellers calling you. Only a small portion of the thousands of leads we get will actually be renovations. This is when we throw out the idea of us referring listings to them. We’re causing a stacked effect because we are coupling two great benefits for them to work with us:

1. They can be a dual agent and receive double commission if they sell us an off-market listing. 2. We have a steady stream of referral listings and buyers that we can send them.

Structuring Pay for RealtorsBy working consistently with an investor who actively buys and sells properties, agents can predict a steady rev-enue stream based on level of activity. As mentioned in the sample conversation, your Realtor is looking to get both sides of the commission. There are several situations that could happen to affect the structure of their pay.

Example 1: Short Sale Deal Agents love working with investors on short sale deals because you can provide both cash offers and the ability to purchase as-is. You can also provide repair estimates to the bank. This is a unique opportunity for the agent to lower the price. It’s important to also note that lending institutions no longer dictate real estate commissions. The industry standard commission will be paid to all Realtors on a short sale, typically 6%. This new law allows Realtors to happily take on a short sale listing. It also helps to eliminate the need for the investor to negotiate a commis-sion payout for the Realtor.

Helpful Tip!Hold seminars in your area educating Realtors about short sales. Most Realtors have no idea that it takes at least 4-5 months to profit from a short sale. Explain and walk Realtors through the whole process. Inevitably, once the seminar is over, many Realtors will send their short sales to you because many would rather not do the work. The seminar serves as leverage to be in front of many people very quickly.

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Target Networks

Example 2: Anything But A Short Sale Deal If this is not a short sale transaction, you can give both sides of the commission to the agent because you don’t want them to list the property on the MLS. This is obviously more appealing to the agent since they would be getting less commission by listing it on the MLS if another agent brings the buyer.

If you are a licensed agent, you will get the 1.25% commission directly. If you are not licensed, you can have the agent put your half of the commission directly into a marketing campaign of your choice. What you do is let the Realtor know that you have to be paid for your time, and half of the commission is going to go into a marketing fund that will generate leads for the both of you. This is a way around losing out on a listing commission if you are not a licensed agent.

Working With Other InvestorsWorking with other investors will benefit you because at some point you will need to work with them to buy and sell your deals. They are a resource for your business, and it is important to have an awareness of your competition. If you haven’t yet already, sit down and make a list of the investors working in your area. Many investors actually get their start by teaming up with other investors and take those deals that they may not want or can’t get funding for.

Keep in mind that when you come across an experienced investor, they are likely to go after too much of the profit. Therefore, the best investors to form relationships with are actually new investors. Many new investors should jump at the chance to partner with other investors in the business.

Find Other Investors By:

• Attending your local Real Estate Investors Association(REIA)

• Write down bandit sign numbers, or numbers from otheroutdoor signs to build a contact list

• Research the Internet• Your investor-friendly accountant and attorney• Local auctions• Word of mouth

Helpful Tip!If you are a Realtor working with another Realtor, you can receive a referral fee. Typical referral fees for Realtors range from 20-30% depending on your market and price point. You need to be a licensed agent to accept referral fees.

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To build a relationship with other investors, you need to let them know you are adding value to their business. Many investors will jump at the chance to partner with other investors in the business. A method we have used when calling other investors is to ask them what types of deals they are currently working on, and also what leads they may have that they still are in jeopardy of losing and need to convert.

Structuring Pay for InvestorsIf another investor approached you looking for business, what would be the first thing that crossed your mind? Most people would immediately think of profit. Don’t beat around the bush. Let them know how they are going to get paid and when you are going to pay them. Payment structures are always negotiable, but there are a few basic guidelines that we follow:

Example 1: Wholesale Deal

If an investor brings you a wholesale deal, which they put under contract and all you have to do it blast it out to your list to find a buyer, then we would go 50-50 on the profit. If there is more work involved on your end, then it’s typical for them to get only 25% of the profit.

Example 2: Rehab Deal

On these types of deals, we look to pay the investor $5,000 upfront. If you don’t have the money upfront, this may be a little more difficult to work out with the investor because you’ll have to wait till you close on the property, and they’ll have to wait for their money. We have found that it’s easier to pay the investor upfront so they get their profit out of the deal rather quickly.

Example 3: Listing Agreements

If an investor brings a short sale deal but there’s not enough of a spread to wholesale, we would pay $500 for just the lead. Having a license, we will only be making 2.5% commission on the deal, meaning if we give away more than the $500, we will be cutting into our profit too much. This arrangement needs to be held with the investor in the very beginning, so there are no surprises.

Target Networks

Helpful Tip!Even if you are a new investor, don’t say that you are one. You never want to come off as if you are a newbie. If proposi-tioned, instead merely say something to the effect of, “I know a few things, but I’m sure I am nowhere near your experience level.” Stay humble and ask to grab a cup of coffee one day so that you can learn the ropes.

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Using Mortgage BrokersMortgage brokers are another excellent lead source for short sales. Many homeowners try to refinance when they are facing foreclosure. When refinancing is not a possibility, mortgage brokers are stuck with the leads. By converting these leads into benefits for your mortgage broker, you can keep them com-ing back to you with more leads and more potential profits. Ideally, you are going to find the best brokers in the business that do a lot of volume and generate a ton of leads, similarly to your Realtors. Keep up with the market in order to get an idea of what numbers you should be looking for, as this varies year to year. Also, similarly to Realtors, you don’t want your mortgage broker to work with short sales or buy houses themselves. Unfortunately, the toughest part about building your list of mortgage brokers is that you will have to build the list yourself. One thing you will find is that many top agents work with top brokers and vice versa.

Structuring Pay for Mortgage BrokersYou need to be extremely clear with mortgage brokers when dealing with structuring their pay. There are banking rules involved. Set up a marketing fund for them and pay into those campaigns. If they don’t like to get paid that way then they are not a wheeler and dealer and they don’t understand the power of marketing. You will simply have to move on to the next broker. Here is how we have done it in the past:

Example 1 - Wholesale Deals $1,000 Marketing Contribution Or Referral In The Future

Example 2 - Rehab or Hold Deals$1,000 Marketing Contribution Or Referral In The Future

Example 3 - Listing Sale$500 Marketing Contribution Or Referral In The Future

Target Networks

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Target Networks

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Once your referral leads start rolling in, you will need to know how to convert them. There is certainly a strategy here and it will make you a lot of money if it is done correctly. You have a unique prop-osition. You can buy “as is” and use cash offers, and you can wait as long as it will take to complete the project. Here is an example of what we might say to a potential referral source:

“I get flooded with leads every single week and unfortunately I cannot work with all of them. One of the great things about work-ing with me is that I can help you do what you do best. It sounds like you list these properties and negotiate a great short sale. I can handle all the heavy lifting on the other end.”

“ I can provide a cash offer from the start. I can buy properties in as-is condition. With short sales, I know that many times you get an offer, you spend months negotiating, and then low and behold the inspection shows repairs that the seller cannot make. Well, you won’t have to worry about that...I’ve taken all of that into consideration. My offer will reflect an “as is” price. I’m going to also submit a cash offer, which will allow you to remove a lot of stress and also get an appraisal from the bank immediately. Keep in mind, even if this takes months, I won’t go anywhere. This is how I do business.”

Referral Marketing Strategies

Here are ten ways you can help create a positive first impression:

1. Be professional both in how you look and how you present your business.

2. Create trust and rapport quickly by “matching & mirroring” your prospect’s body language gestures, voice tone, and rate of speech.

3. Be personable and friendly, but don’t overdo it.

4. Engage in small talk before you start pitching ideas. Look for mutual areas of interest to a create common ground.

5. Be mindful of body language gestures and remember to keep them positive by unfolding your arms, uncrossing your legs, nodding your head in agreement, and smiling frequently.

6. Maintain direct eye contact.

7. Ask open-ended questions and repeat key words and phrases back. This not only helps to clarify understanding, but you also build rapport.

8. Never bad mouth your competition.

9. Listen more than you talk. While it’s important to educate people about the value of your services, as a general rule, you should practice listening more than you talk.

10. Be honest. If you don’t know the answer to a question, admit that you don’t know the answer, and tell them you will find out and get back to them.

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Communicating With Referral SourcesWhen you meet with a potential referral source, you can considerably increase the number and quality of referrals if you thoroughly educate them. Taking the time to educate your referral sources is a great way to differentiate your business from the tons of other investors in the industry who are probably courting them as well.

Explain to your referral source the who, what, how, what:

Who?Who would make a great referral?

What?What’s in it for them if they provide a referral?


Referral Conversion Strategy What good is a referral lead if it fails to convert? You have to map out a specific set of steps that will help to boost your conversion rate. Referral leads can definitely be warm lead, but what if the referral came from a source that gave them unrealistic expectations? Find out what those expectations are and make sure they match what you have to offer. Remember, you are borrowing the trust a referral has with the referral source, so don’t abuse it. Place your leads into one of two categories and follow up accordingly.

Create Hot Seller Leads Follow Up Folder• Get a Manila folder and write on the front - Hot Seller Leads• This is the folder all leads go in that you have not set an appointment for and you are in the process of

following up with to set an appointment to look at.

Create Warm Seller Leads Follow Up Folder• Get a Manila folder and write on the front - Warm Seller Leads• This is the folder all leads go in that you are going to follow up with and test with a verbal offer.

Giving is Receiving As an investor, you want to not only receive referrals from your colleagues, but give them as well. You will find tre-mendous value in working with others.

When generating leads from sellers, there will be times when those properties are just not feasible or don’t make sense for you as an investor. However, those leads don’t have to be a lost cause – you can work along with Realtors to refer these leads out. Although some sellers may object to working with Realtors, you want to try and sell the idea – specifically, the Realtor you are referring them to. Make sure to give examples of their performance, and ask the seller the following:

• Are you open to the idea of working with a Realtor?

• Have you worked with a Realtor in the past?

• Are you realistic about the price?

How?How should they go about referring you?

What?What are the exact steps you plan to take?

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If your conversation with the seller sounds promising, you should give the referral to your Realtor and inform them of the seller’s situation. At the end of the day, you want to make sure the referrals you give are relevant and can de-liver. If the referred business really doesn’t do anything, then you may not be taken seriously. When you are giving a referral, never let the prospect feel as if you are giving the referral for your sake. You want it to feel and be authentic.

You not only want to be giving referrals to the people you want referrals from, but you also want to make sure that when they do work with you, you provide them with the ultimate customer experience. Customer service is sorely underestimated, especially in the real estate investing business. It isn’t just about the technical aspects of buying and selling or renting homes. It should be a real customer experience for everyone who comes into contact with you and your business. Don’t just ‘say’ you are going to do something – follow through with it and wow them.

Turning Old Leads Into DealsIf you come across a seller who asks too much for their home, or who just prefers to list their home with a Realtor, there is still a way that you can benefit. Sometimes, it will actually work out even better in your favor.

• If the seller wants to work with a Realtor, you can refer one of your Re-altor contacts to them. In doing this, you can save face, and still make out on the deal. You know your Realtor contact won’t sell against you buying at a low price because you’re the one who originally sent them the lead, and they will want more future business.

• If the home doesn’t sell with a Realtor, you can come back into the deal and still be the buyer. At this point, you have more of an angle when you are ready to make an offer, and can avoid being the person to tell the seller that their house isn’t retail buyer ready. You avoid being the pushy investor, but still reap the benefits.


Remember!Real Estate Agents, Attorneys, Investors, Financial Advisors, Title Companies, and other referral sources have different motivations. Depending on their relationship with the customer, it could be one of several reasons:

• Desire to close and complete another transaction• Provide assistance under an advisory role• Reciprocal referral or lead exchange• Referral fee or commission split

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“It’s fine to celebrate success, but it is more important to heed the lessons of failure.”

– Bill Gates

Referral marketing requires a bit of business psychology, and a lot of time and effort. Sometimes it can feel like you’re peddling uphill. You have to keep your momentum going, or else starting over is going to be much more difficult. Most people just send out a referral campaign once or twice, and most people fail at getting much busi-ness from those campaigns. Getting business referrals just does not work like that. You have to keep at it, and keep climbing. In this section, we’ll touch on a few mistakes we know people make, and also how to fix any mistakes you may have already made.

Common Mistakes

Lack of consistency. This is a huge mistake in any aspect of this business; however inconsistency in your marketing will hurt the most.

Giving up too easily. Throwing in the towel goes along with consistency. Look at referral marketing just as you would farming – it takes time to nurture people to give you referrals. People aren’t always ready to refer now–they truly might not be ready or might not know of someone who can use your product or service.

Failing to keep a promise. Not keeping a promise is bad as a parent and it’s bad as an investor. If you say you’re going to do something, then do it. If you fall short on a promise, no matter how big or small, your trust and credibility flies out the window. Good luck get-ting referrals from that point.

Sending out the wrong message to the wrong person. It’s critical that your message is geared towards the recipient. Keep this principle in mind as you are crafting your message: What’s in it for them?

Asking at the wrong time. We live in a “what have you done for me lately” world and that means that if you haven’t done anything for the other person, they’re not likely going to want to do anything for you. Also, if you ask for a referral before the relationship is strong enough, you don’t have much of a chance for success.

Referral Marketing Mistakes

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Referral Marketing Mistakes

Failing to follow up. Not following up means that you are just not trying hard enough. If you really want to keep your referral source, then you have to do more than ask once. If you aren’t serious about asking for referrals, you won’t be thought of as a serious investor.

Not formally measuring. If you don’t formally measure your referral leads then you can’t fully understand your process or know if the pro-cess is even working. Have a system and track it.

Always giving referrals to the same person. This is not going to do you any good. You should have a short sale agent, rental management company, buyers agent, listing agent, a mortgage broker, general inspectors, engineers and others who you can send referrals to. Remember, your referrals are a reflection of you; send your people to those who specialize in their industry.

Failing to show gratitude. It’s more common than you think. You have to make it a point to thank someone after they give you a referral and incentivize him or her to refer you even more business. A thank you and maybe even a small gift can go a long way.

Not asking for referrals. This is probably the biggest mistake you can make in referral marketing. It’s simple, but if you don’t ask, you won’t ever receive. Less than 10% of referral business “just happens.”

Damage ControlOnce every so often we do make the mistakes mentioned in the last section. Some are more damaging than others. If you do get yourself into the position where you’ve at all tarnished your reputation or limited your ability to collect good referrals based on a past mistake, don’t worry, it’s not over. You will definitely have to work a lot harder to earn back the trust and respect that was initially laid down, but it is possible.

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Wrap Up

#1Determine Your Target Network

KEYS TO REFERRAL

MARKETING

#2Communicate & Build Relationships With

Your Network

#3Give & Compromise In Order To Receive

#4Follow Up & Maintain Your Relationships

#5Turn Referrals

Into Flips

This information is for educational purposes. We don’t believe in push-button profits—we believe in proven business systems, education,drive and hard work. We are committed to teaching you how to reach your goals. In promoting our educational programs, we illustratesuccess stories. We want you to know, students are not compensated for their testimonials. However, many of our most successful studentsjoin our team as Coaches and Trainers. As stipulated by law, we cannot and do not guarantee results or offer legal advice. As with anybusiness, your results will vary and will be based on your drive, effort, follow-through and other variables beyond our control. We believe infull transparency, and a high standard of integrity, that is why we encourage you to read our full earnings and income disclaimer by visitingwww.fortunebuilders.com/earnings-income-disclaimers/

FortuneBuilders | 960 Grand Avenue, San Diego, CA 92109©2013 FortuneBuilders, Inc. All rights reserved.

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