Real estate truth can be difficult to find amidst all the fiction. In his fantastic book, "The Signal and the Noise", author Nate Silver so accurately points out that in this information age, the large and growing amount of inaccurate advice (noise) can drowned out the truth (signal). At local REIA club meetings and in online forums, real estate truth is being smothered by the loud noise of bad advice. And perhaps the most dangerous part about it, is that the fiction is coming from very well intentioned people.
Who is Creating all that Fiction Out There?
So who is creating all of this sincere and the-best-of-intentions noise? It is usually coming from beginners as well as those who have tried but failed in real estate. They typically have the most time on their hands as well as the most inclination to talk or type about the subject. By contrast, the most experienced real estate professionals, who have the most signal to share, usually spend no time answering questions on online forums and rarely speak up at local REIA club meetings. Instead, the best and the brightest of real estate quietly listen, gleaning insight and making distinctions; sifting through all the fiction and noise in order to pull out those rare, few nuggets of real estate truth. They may be searching online forums for answers or attending meetings of their peers to network and learn, but they are rarely doing the talking or typing.
How to Determine Real Estate Truth from Fiction
So how does one find real estate truth amongst all the fiction? How do you separate the signal from the noise? Much like experts in the field of determining monetary counterfeit, you have to know what the real thing sounds, looks and feels like. I was fortunate enough to have a real estate mentor who taught me what the real thing sounded, looked and felt like. I found that real estate truth rarely shouted from the rooftops, but instead, it usually whispered. Most people that have made very insightful distinctions in their business aren't quick to tell everyone unless it directly benefits them. Are you telling all of your competitors your best secrets? Exactly. (Note: Although I do try to provide fantastic information on my blog and in my videos, you won't find my best, top secret techniques and strategies in them. I reserve those for the people I work with and share in the profits with.)
I began to pick up on when things didn't add up based on what someone was saying or writing. A successful investor in my area many, many years ago told me to stay away from short sales. That didn't sound right considering he was doing short sales himself. Beware of the naked man who offers the shirt off his back.
I learned how to determine when someone was guessing or making conclusions based on limited data versus when they really knew their stuff. I read where an investor complained about how direct mailing to the probate list didn't work in his area. As I kept reading, I learned that she had only mailed 70 letters. Since direct mail has a 1-2% response rate, I knew that this person hadn't mailed enough letters to make such a sweeping assessment. But how many readers of that forum thread would not have known? How many would have accepted that noise as signal? Unfortunately, many comments and forums thread replies contain much noise and very little signal.
Real Estate Truth Can Be Counter-Intuitive
Real estate truth isn't always intuitive either, while fiction can sound very logical. In today's market, there is a buzz around REOs and Foreclosures since Banks are supposedly desperate to dump their distressed assets as we begin to dig out of the bursting of the great real estate bubble of the mid 2000s. Banks are in the business of lending, not real estate management, so they want to get rid of the properties they foreclosed upon as quickly as possible, right? Sounds logical, doesn't it? Meanwhile, the real estate truth on the matter is that bank owned properties are selling for top dollar right now and most Banks are patiently waiting for buyers to pay high prices for them. Hedge funds and private equity funds on Wall Street are buying up bulk packages of thousands of REOs and Foreclosures directly from the Banks as well. Foreign all-cash buyers are scooping up as many United States foreclosures as they can. To many around the world, American real estate is a bargain and what better bargain in America can you get than a foreclosure? While competition floods into foreclosures, quietly, wise real estate investors are in the realm of working directly with sellers and avoiding listed foreclosures and REOs altogether.
Finding Real Estate Truth
Separating real estate truth from fiction gets much, much easier the longer you stay in the business and the more successful you become. Successful real estate professionals can distinguish the signal from the noise quickly and easily. Meanwhile, the beginners, the ones most hungry for signal, are most often influenced by the noise. If you are first starting out and are struggling to recognize the signal from the noise, common sense can help and experience is wonderful too. But perhaps the best and most efficient approach is to have a resource, a person or a team of people, who can determine real estate truth from fiction for you. What do think? Do you agree? In what ways do you disagree? I would love to hear your take in this subject below: