“I understand that qualified buyers are becoming scarcer by the day. More and more houses I list are sitting vacant on the market while the owner eats the mortgage every month. Do I just tell them to wait for the market to come back or is there something I can do?” (Charlotte Realtor)
“In sociology, a tipping point or angle of repose is the event of a previously rare phenomenon becoming rapidly and dramatically more common. The phrase was coined in its sociological use by Morton Grodzins, by analogy with the fact in physics that adding a small amount of weight to a balanced object can cause it to suddenly and completely topple.” (Wikipedia definition of “tipping point”)
"The Times They Are A-Changin’” (Bob Dylan)
The tipping point is an interesting phenomenon. Malcolm Gladwell wrote a New York Times bestseller on the subject, bringing up a myriad of examples to illustrate it. In a business application, it basically says that a product’s life cycle (from conception to death) does not grow in a steady, predictable pattern; rather, it starts like a flat line of a few buyers that grows slowly to a certain point, then spikes suddenly upward (explosive growth!). This “certain point” is referred to as the tipping point. If you charted any successful product’s sales growth on a piece of paper, you wouldn’t draw a straight line going up, but rather a line that looks like a hockey stick. All companies want to enjoy the rapid sales (cha-ching!) that result on the blade of that stick.
I remember when I worked in telecommunications in the early 2000’s, almost every sales meeting touched on motivating us to sell a certain service. “It’s great”, “Clients just need to see the value in it”, “It’s all the rage in Europe”, and “Did I forget to mention how worthless you are?” were the usual exhortations we were subjected to. We just couldn’t sell it. “It’s garbage!”, “Why would clients waste their money on something they’re never going to use?”, “They can just pick up their phone if they want to communicate with someone!”, and “Let’s see you sell it!” were our explanations for our low sales numbers for this service. And what was the service we couldn’t sell? In hindsight, I can LOL. It’s probably something you use every day- text messaging.
It’s not like text messaging didn’t have business applications that we could reasonably sell our customers on using. Hospitals could send texts to their ambulance driver’s cellular phones with addresses to go to without the fear of no or poor cellular coverage affecting the response time. If you needed to get an important message to your boss while he was in a meeting, the text would get it done simply and discreetly. During 9/11, the cell towers were overwhelmed and cellular calls were futile, but texts still got through (for the few customers who actually bought this service from us!).
However, as the text messaging user base continued to slowly trickle in and grow (as we begged and pleaded each of our clients to use the service), something happened. Everyone started to ask for text messaging to be added to their orders (Asking us? Is this a joke? Did our sales manager put you up to this?) This $10 a month add-on service started to become real money as hundreds of thousands of users added it to their plans each month. This text messaging revenue lasted for years and still provides huge returns for my old company (and the wireless industry in general!). The tipping point was achieved and the profitability in that growth was beautiful for those who were able to take part in it.
So what does this have to do with lease purchases? The lease purchase tipping point is coming. People want to buy and the banks are not willing to play along. Banks are concerned with risk issues of their own (commercial real estate loan default, credit card default, upcoming bank regulation by Congress, keeping a huge cash buffer so they don’t ever have to take money from the government again, etc.). Consumers want to buy homes, but banks will continue to raise credit score requirements, down payment requirements, and reject any loan that doesn’t fit a tight cookie-cutter model so they can further eliminate their risk.
At that same time, more consumers than ever want to buy homes for the usual reasons (marriage, divorce, having kids, job changes, etc.). More vacant houses than ever will sit on the market unsold while eating away at the owner’s dwindling finances. More Realtors than ever will leave the real estate business as sales transactions dry up further. Babylon the Great (the banks) has fallen and we will all wait for the scraps of a few loans they occasionally leave us. Or will we?
Across the country, some enterprising Realtors are putting lease purchase deals together and transacting real estate. Their buyers and sellers don’t really understand how the whole “lease purchase” thing works, but they do. Every deal is a struggle of educating the other parties involved, showing the mutual benefits, ignoring naysayers who only believe in “clean” buy/sell sales, and negotiating commissions to reflect the value of what they bringing to the table. They are supplementing their income (and value!) now, but see the need for their services increasing every day during the next few years.
And at what point will these pioneers really be rewarded? At the tipping point, of course!
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company”specializing in rent-to-own (lease options) and rent-to-sell homes. You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://Twitter.com/BDFRealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.RentToSell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
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