12,000 names on one side, 40 buyers who have actually closed on the other

Question

Two people have offered to handle dispo for me when I get something under contract, and I have no way to tell which offer is worth more.

The first sends a monthly email to a list he says is over 12,000 investors across three states. He showed me the send volume and the open rate, which was around 11 percent. He wants 30 percent of spread.

The second has 40 buyers. He knows all of them by name, he told me which four of them buy in the price band I am working in, and he says he can get an answer on any deal in 24 hours because he calls rather than emails. He wants 40 percent of spread.

On paper 12,000 beats 40 by a lot and costs less. But 11 percent open rate on a monthly email means most of those people are not reading, and I have no idea how many are real buyers versus dead addresses from 2019. The 40 name guy is more expensive and if his four buyers all pass, I think he is out of ideas.

What I cannot figure out is whether reach or depth is the thing that actually moves a deal, or whether I am asking the wrong question entirely and should be looking at their closings instead of their lists.

luis_carrera · Answer

You answered it in your last sentence and then talked yourself out of it. Ask both of them for their last ten deals. Days from taking the file to a signed assignment, and how many of those ten closed rather than fell out. That is comparable across both models and neither list size nor open rate is.

The 12,000 number is doing something to your brain that it should not. A list is a claim about the past. Somebody collected those addresses at some point for some reason and nobody has audited them since. Forty buyers he can name is a claim about right now, which is more verifiable, and you can spot check it by asking him for two of those four and calling them yourself.

Where I would push back on the depth guy is exactly the failure case you named. If his four pass, what is the second move. If the answer is that he posts it to the same public marketplaces you could post it to yourself, then the 10 percent difference in spread is buying you four phone calls, and that is a worse deal than it sounds.

I spent five months comparing spreadsheets before I bought anything, so take this as someone who knows the trap. Pick based on the closings and give one of them a real deal.

12,000 names on one side, 40 buyers who have actually closed on the other

1 reply