The Seven Deadly Sins in Equity Marketing

This course comes from compiling 35 years of experience, successes, and failures; attending hundreds of real estate marketing events; observing others; and gathering input from fellow brokers. My definition of Equity Marketing is where a broker tries to accomplish his or her client’s goals, using all the skill and talents the broker possesses, to move the client to a more beneficial position in his or her asset portfolio. This may include a multiple of the following: cash sale, owner carry financing, creation of notes, exchange for any other asset (1031 or not), gifting, JV, partnering, and developing, along with several other equity marketing formulas you may know.

However, all of the above are only possible if the broker has developed a good relationship with and has an understanding of the client, utilizing the different skill sets referenced earlier. At the March SEC meeting in Utah, I will be leading a discussion on seven mistakes I see brokers continually making. You may have others that aren’t on my list and, if so, I hope you will contribute, making for a livelier, interactive discussion.

But today, I want to briefly mention one of the Seven Deadly Sins several of us have made more than once:

Working with unknowledgeable or inflexible brokers.

I have found that clients are far more receptive to equity/creative marketing than many brokers. Many “For Sale Only” brokers may not comprehend equity marketing until they own real estate. I believe that there is very little chance for their increased understanding if they don’t own real estate or walk in the shoes of those they represent. Working with knowledgeable brokers gives the equity broker a much better chance for success. “For Sale Only” brokers tend to have a closed mind to simultaneous exchanging or creative ideas—and thus waste your time—unless it is a cash sale transaction, making them exactly the right broker to work with. These brokers appear to be thinking for their clients, primarily because they don’t understand, and therefore they don’t present the benefits you may have crafted. In doing so, they do a disservice to their clients. Often, it has nothing to do with the benefits for the client but rather their understanding of the benefit for themselves, the big question: “How do I get paid?”

However, we must always remind ourselves that 90% or more of all RE deals are done the old-fashioned way: cash for deed. Many successful brokers have only known this avenue and will choose to proceed on this path, and many are very successful in that effort. We are never going to, nor should we try to, change how the majority of the real estate market/brokers function. We have all been the beneficiary of a normal cash transaction. As equity brokers, we can be equally as guilty of trying to provide a creative solution to a property because it is our way, and the market or the property type is a highly sought-after, cashable asset. In that case, we should be careful in presenting any creative solution because that can easily be a waste of our time as well. If the majority of the successful “For Sale Only” brokers also understood what you know, you might need to change careers. The large shops have a huge marketing advantage over my small, low-budget company; however, the unique skill set that we have allows us to compete quite well, especially in soft or down markets.

Many equity marketing deals come together when there is not enough cash to purchase, not enough cash to finance, or not enough cash to lease. Then what do the “For Sale Only” brokers do? They typically lower the price, telling their client that the market will determine the value, potentially giving away the client’s equity. We equity brokers need to get creative to protect the client’s equity.

Always keep your antenna up for a good cash broker who is open-minded and willing to explore the concepts of equity marketing. That is probably where you came from. No one is born an exchange/equity broker. We develop these skills over time with education, marketing, and mentoring. Pay it forward, be an educator and mentor to those “For Sale Only” brokers you know who are open-minded, and reproduce another equity broker into the equity marketing arena.

Lastly, we need to be cautious of the fringe players, particularly where there is a possible integrity issue. Our creative, fast-paced, humorous style sometimes attracts bad actors. We must monitor the quality of those we choose to work with.

I hope to see you in Salt Lake City on March 17, 2019.

Ted J. Blank SEC, CCIM, EMS

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