They are embarrassed, it seems, about having worked for a boiler room.
Not Chris Smith. Smith is the “Chief Evangelist” for Inman News, a company that provides real estate news realtos and brokers. He’s proud of having worked in boiler rooms.
Recently Smith gave a talk titled, “The boiler-room strategy for real estate success”. Smith freely admits that he currently runs a US$10 million a year boiler room:
Our startup Curaytor is only about 36 months old and we are approaching US$10 million in annual recurring revenue. And people think it’s because of the books and the blog. It’s because of the boiler room. It’s not because of the blog. The blog helps the boiler room stay busy.”
Smith’s talk is aimed at encouraging people to improve their sales technique. I’ve quoted at length from Smith’s presentation, because this glimpse of how a boiler room works is in the public interest. The more you know about how boiler rooms work, the less likely it is that you’ll be taken in by their sales pitch.
The best approach if you are cold called, is to put the phone down.
Boiler room #1: Fashion Rock
Pearlman was a music executive who created a series of boybands including the Backstreet Boys and ‘NSync.
In January 2007, Pearlman fled the USA after an investigation started into his company, Trans Continental Savings Program.
For more than 20 years, Pearlman had persuaded individuals and banks to invest in Trans Continental Airlines Travel Services Inc and Trans Continental Airlines Inc, both of which existed only on paper.
Pearlman was running a US$317 million ponzi scheme. In June 2007, he was arrested in a hotel in Nusa Dua, Bali. He was using the alias A. Incognito Johnson.
In 2008, he was convicted to 25 years in prison after pleading guilty to charges of conspiracy, money laundering and making false statements. He died in prison of a heart attack in August 2016.
Smith worked for a Pearlman company called Fashion Rock, not the ponzi scheme. He sold “event vacations” in Orlando, persuading young wannabes to part with US$3,000 to perform for talent scouts supposedly looking for the next superstar.
Here’s how Smith describes the job in his book, The Conversion Code:
I was given a name, a number, and a phone. My job was to call the leads and close them that day, including getting their credit card number.
Smith starts his talk with a description of what it was like to work at Fashion Rock:
“I’m actually gonna read a list of names here, and if you hear your name called, it means you still have a job. And if you don’t hear your name called, you have five minutes to turn in your badge and leave the building. That was how a meeting started, my first week in the boiler room.”
The coach told those that remained that he didn’t fire anyone. “They all fired themselves, because they didn’t hit their numbers. Now get back on the goddamn phone,” he said.
The next day, the coach gave Smith what he calls “an awesome lesson”:
“He said, ‘Guys, when I fired all those people yesterday, a lot of them came to me and asked for their jobs back. And I want to tell you why I didn’t re-hire any of them.
‘The first woman came in and she said she was pregnant, and she had not been getting a lot of sleep. The second guy came in and said he was going through a divorce. The next lady came in and she said her kids were sick.’
And he said, ‘The reason I didn’t care about anything that they said, is when I look at your numbers each week and each month, when we built the form, the excel doc to check ’em, we only leave room in the box for the numbers. No excuses fit. That’s why they didn’t get their jobs back.'”
Here’s another piece of advice that the coach gave to Smith:
“I want you to remember one thing when you’re closing, ‘Lions don’t ask lambs for food.’”
In his book, Smith writes this about his coach:
I was sad to learn after I left Fashion Rock that my sales coach had actually been arrested nine years earlier on federal bank fraud charges for his involvement in a telemarketing operation. He had actually developed a script that was too good, because it crossed several ethical lines and contained bold-faced lies.
Smith’s coach at Fashion Rock was Ayman A. El-Difrawi, who also uses the alias Alec Defrawi. In 1996, The Washington Post reported that Defrawi was jailed for four years and ordered to pay more than US$2.3 million “in restitution to victims of the scam he created through companies known as the Small Business Loan Association and Shearson Management Group”.
Perhaps surprisingly, Smith doesn’t mention his spell at Fashion Rock on his LinkedIn page.
Boiler room #2: Quicken Loans
After Fashion Rock, Smith worked for a company called Quicken Loans, one of the largest mortgage lenders in the USA. Smith started in March 2007, selling mortgages “when interest rates were over 7 percent and the housing market was crashing”, he writes in his book.
“We never did these kinds of loans that really started this mess, the subprime loans. We just never got into that business.”
But in 2010, a West Virginia fraud case found that Quicken had sold a complex mortgage product to Lourie Jefferson, that would have required her to pay US$107,000 after 30 years to finish off repaying a loan of US$145,000.
The judge found that Quicken had used an appraisal of the house that boosted its value to US$181,700, when the house was worth less than US$50,000.
In 2011, an Ohio court awarded US$3 million to borrowers who claimed they were victims of predatory lending by Quicken Loans.
In another lawsuit , borrowers and ex-employees accused Quicken of using high-pressure salesmanship to target elderly and vulnerable homeowners.
How boiler rooms work
Smith gives a few tips for making sales over the phone. They are also useful for anyone on the receiving end of this type of sales call.
“The other thing I learned as I researched conversion, looked at how the best companies handle the conversion, it actually comes down to something that I can break down for you: S-T-T. Which is Speed, Tenacity, and then Timeblocking.”
Speed means call internet leads quickly. Tenacity means ring again if you don’t get through. If you ring six times, Smith says, your “contact rate” will increase from 48% to 93%, Smith tells us. Timeblocking means calling between 8 and 10 am and 4 and 6 pm. That’s when you have the highest chance of having someone answer the phone. “That’s when we dial for dollars,” says Smith.
He recommends always calling again if no one picks up the phone.
“One last point here. I want you guys all to write this down. Double dial. When you call a lead, in 2016, and you’re calling them from a number they don’t recognise, what do you think they’re gonna do, guys? They’re gonna ignore it. So whadda we do when they ignore it? You call back immediately.
“If you miss a call and you don’t recognise the number and then like they call again, and it’s like, man is somebody hurt, I’d better pick this up. That’s called a double dial.”
The science of sales, or high-pressure salesmanship?
Smith talks a lot about the science of sales. He draws a diagram of it:
“This is the science of sales. Your job when you’re selling someone on the phone, or in person, is actually very simple. You have to get them more emotionally bought in than the cost during the time you have them. Then and only then you can do what? Close ’em.”
He explains what to do when people don’t sound interested in buying:
“When I was at Quicken Loans every single lead would call in, or we’d call them, and they’d say, ‘Oh, I don’t wanna refinance, I just wanna know what the rates are.’ Every lead would say that… So that’s a natural human thing to do. I call that a brick wall statement. And your job as a sales person is to get around that brick wall so you can keep the conversation going.
“And to do that there’s a really cool technique you guys can use. It’s called A-R-P. When you’re on the phone and someone gives you that brick wall, “Hey Chris, er, I’m not really looking to go see the home yet, I just wanna know if it’s still for sale.” The first thing you do when someone gives you that brick wall guys is you acknowledge what they said. ‘Oh, you just wanted to go see if the home’s still for sale? I’ll be happy to take a look at that for you.’
“Remember, we’re not face to face, so we have to almost say back what they’ve said. ‘Oh, you just wanna know what the interest rates are? No problem, I’ll pull those up.
“You acknowledge what they said, before you respond. But then what we’re gonna do is we’re gonna come up with a response that’s wet. Which means Works Every Time.
“So here’s an example. Get a call in from an internet buyer. ‘Hey, just wanna know if the home’s still for sale?’ ‘Oh, you just wanna know if the home’s still for sale? No problem, I’ll look that up for you. If you found it on Zillow it probably sold a year ago. Ha ha ha ha! How long have you been looking for a home, sir?’
“Right? That’s the pivot. So it’s acknowledging what they said, ‘Oh, you just wanna know what the interest rates are? Great question. They’re the lowest they’ve ever been in the history of interest rates. How much are you looking to save on your monthly payments, sir?’
“That’s the pivot back to the discussion we need to have. See, basically establish what those brick walls are and then establish the ARPs that work to get around those which is really cool.”
In his excitement, Smith forgot to tell us what A-R-P stands for. Acknowledge, Response, Pivot, is my guess. When you hear someone going through the A-R-P motions, just put the phone down.
Then Smith is off on his next abbreviation: F-B-T.
“If we’re gonna get these people more excited than what we sell, we’re gonna actually have to come up with about four to six of these. It’s called Feature, Benefit, Tiedown.
“Everybody in this room when they pitch, here’s what they do. They do Feature, Feature, Feature, Feature, Close. And they wonder why they can’t close anyone.
“If you don’t turn the corner and say, ‘Here’s how this feature’s gonna benefit you, do you agree?’ Then you go to the next feature. That’s how you move the conversation up.”
Finally, Smith talks about closing the deal.
“When you’re pitching and you’re at the end, and you’ve got them more excited than the cost, there’s actually a very simple way to close people without it getting awkward.”
If you still haven’t put the phone down, now is the time to do it.
“What you do guys when you close someone is you use what’s called a transitioning closing statement. So you’ve got them bought it, you can hear that they’re excited, they’re, ‘Yeah Chris, that feature seems to benefit me,’ and you’re gonna say this, very simple, ‘OK great. Here’s what happens now. We’re gonna do this. We’re gonna do that.’ You start foreshadowing the process of what it’s like to work together.”
Smith then talks about something called a “trial close”. Giving the buyer a choice for when training could happen, or photographers could come to photograph the house you want to sell, say Tuesday or Thursday. When he gets an answer, he uses his final technique. A slot close. He asks do you want to pay by credit or debit card for the payment?
“‘Would you please read me the digits, 16, all of them, four at a time, left to right.’ You gotta swagger up when you’re closing.”