OfflineHello DG family. I wanted to share with you a true story about the importance of following the RBBP step by step. This is a painful recount of my first deal that went bad. But first let me tell you what I had already accomplished before that deal began. I had already found a realtor, atty, title co, rehabbers, project mgt, mortgage broker, tenant screening service, credit repair co., joined a local REI club, researched Buyers in my area with Matt's tips, and began working with my re agent to submit offers.I was using Matt's system of making lots of offers with his parameters as a guide. It took some time to get the contracts where I wanted them with "and/or assigns" and the contingencies in place. My realtor had experience with investors, but this approach was all new to her and she needed to get everything approved by the Broker at every step. Note, working with FSBO's will not pose those particular hurdles! OK...so here I was, followed the RBBP to the letter and ready to go!! Not so fast! I found an estate sale that was offered at 49k and my realtor shot me some comps putting the ARV at about 80-90K. This was a large house at 2300SF 1.5 story detached 2 car garage with fp, basement, in a downtown that was putting lots of money into it's infrastructure and City Market area. It was across the street from a elementary school, 1 block off main, 1 block from City Hall and walking distance to post office and drugstores, and restaurants. So, I locked it up for 31,5k. First mistake...not following Matt's formula 100%. While this was a good deal(FOR THE RIGHT BUYER) none of my buyers(5) wanted it! Now here are the lessons all!! I allowed my realtor to convince me that a $1000.00 earnest deposit was necessary(WRONG), second, instead of dropping everything and focusing on this deal asap I continued to look at other properties losing valuable time to close this deal! At this point I didn't realize that after going back and forth with counter offers taking up precious time, that the closing date was fast approaching! I had my 14 day inspection period in there as a contingency, but believed it was a sure sell(WRONG AGAIN). As a matter of fact, it turns out that my 14 day inspection period put me 1 day over the closing date due to the fact that the acceptance date had been pushed back by counter-offers(oops again). Not dropping everything else and concentrating on this deal cost me my out people! I was resigned to lose my earnest deposit and count this as painful boat of lessons learned! NOW, this gets more interesting! I didn't want the property as it didn't fit my buy and hold strategy(perhaps why my buyers didn't want it either)and thought my earnest deposit was the cure(NOT SO FAST AGAIN). The listing broker threatened to hold me accountable for commissions and damages for their client!WHOA! Thankfully, I had my team together and my atty handled this with a letter. I did however agree to release the earnest deposit In good faith to the Seller. Now, if you haven't already noticed where I went wrong(my re agent included) here it is in a nutshell:
1. make sure your offers allow you, or your buyer all the exit strategies. Price it right from the beginning.
2. contracts: make sure you have your contingencies in place and do not lose track of closing dates!
3. Drop everything and begin to market that property with lazer focus to your buyers once it's under contract or better if you know it will soon be!! Time is of the essence!
4. Make sure your earnest deposit is listed as the "only" means of cure in case you have to default as the buyer! You WILL NOT need to go through this if you heed this advice that was painfully learned Right?
5. Follow the RBBP to a "T" and have your team assembled. Continue to add buyers even if you think you have great ones lined up! Use every avenue possible to market that deal ASAP!
I closing I just want to say don't let failure hold you back. I was rocked , but not ruined.
---I got richer by failing. I found out that people who do not fail also do not succeed.---
Robert Kiyosaki, Rich Dad Poor Dad
Good luck to you all!!
Thats why I dont use realtors, and give your self 60 days to close, and yes focus on getting the deal closed. I would not use a realtor, they just want your money, I use only ten $10. dollars for earnest money, I know people on here say this and that about earnest money requirements, sorry I use ten if thats not good enough for the deal then move on, these realters are not the way to go, bandit sign marketing, work with FSBO's are where its at, they want to get there house sold not steal your earnest money from you. As a matter a fact I have realtors calling me off my bandit signs, but I dont do any business with them at all, don't need them, I'm sure ther's a good realtors out there, but I get it done with out them, 1k loss is a lesson for sure, here's hoping your next deal will be good and a win-win-win for you. I would think twice about using realtors, try the FSBO is where the action is, when you hang a bandit sign and they call you, only you know about that deal, you have the fisrt shot at getting there business.....you know anyone can go to a realtor, finding your own deals is $$$$$$$$$$$$ in your pocket..remember your buyer already know about the stuff on the MLS, old news create your own leads and get they on contract for ten dollars earnest money, then market the deal to your buyers, and collect a $500. earnest from your buyer to make sure they are committed to close the deal,you follow the deal to close go to closing and collect your assignment fee, you are flipping right, wholsaleing....good luck out there and just get it done..John H.
"Action and Mistakes" always-outweigh "Analysis Paralysis"
...Just do It"
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You stumbled, but did not fall. They cannot keep a strong man down. Learn from this and move on. Thanks for sharing. God Bless.
Sandra
"You can never get to the top, if you are not willing to climb. Do not look at the difficulty of the climb, only anticipate the view from the top."
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"In all things, wait on the Lord."
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Why weren't they chomping at the bit to buy your deal? Did they tell you? Between the ARV & the contract price, it looked like a good deal. Getting feedback in this stuff, is essential to your success.
I know there are more than 1 ways to buy yourself time to find a buyer. I would probably say 45 days is your best bet. Remember, too many contingencies may not make an offer as acceptable. Now, to come up with a good purchase agreement, involving no contingencies, which could give you the right to not necessarily back out of the contract but to not loose your deposit either, it would be interesting.
Technically, if you're negotiating a deal, you're not really in contract, are you? Or if you revise a contract, due to seller modifications, and you haven't agreed to the changes, are you still liable? I know when you sign on the line, it's binding.
1. make sure your offers allow you, or your buyer all the exit strategies. Price it right from the beginning.
2. contracts: make sure you have your contingencies in place and do not lose track of closing dates!
3. Drop everything and begin to market that property with lazer focus to your buyers once it's under contract or better if you know it will soon be!! Time is of the essence!
4. Make sure your earnest deposit is listed as the "only" means of cure in case you have to default as the buyer! You WILL NOT need to go through this if you heed this advice that was painfully learned Right?
5. Follow the RBBP to a "T" and have your team assembled. Continue to add buyers even if you think you have great ones lined up! Use every avenue possible to market that deal ASAP!
I closing I just want to say don't let failure hold you back. I was rocked , but not ruined.
---I got richer by failing. I found out that people who do not fail also do not succeed.---
Robert Kiyosaki, Rich Dad Poor Dad
Good luck to you all!!
Use bandit signs and put $1.00 down as earnest money.
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your lessons learned!
hope next one works out better for you,
Valerie
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Randy,
You did forget to tell us why your buyers did not take it. I can answer that for you I think. If the location was as good as you say it was one or a combination of the following was the problem.
1. Your ARV was too high. A $80,000 to $90,000 spread is way too much. You need to have A number. Go with $80,000
2. Repairs/remodeling needed to bring your ARV were too high.
3. You have no REAL buyers.
4. Or it WAS location.
Speaking of agents and the MLS. I agree 100% that FSBOs are the easiest and best way for NEW investors with no money to learn and get started. However, it is my OPINION that you don't want to limit yourself to no MLS or no agents.
I would not blow off REO, short sale and HUD offers. When you get around to fix/flipping your own deals what are you going to do. FSBO you own properties?? Not me, I use the power of the MLS and a great agent to sell my properties. There are so many things a great agent and the MLS can do for you.
So I work both. Distressed, unlisted, motivated sellers and the MLS through several agents. You limit yourself and the growth potential of your own business by saying don't do this or there is only one formula blah, blah. My latest fix/flip I paid more than the WHOLESALE formula but hey I could have known it all and passed on $30,000!
Earnest money. I just had a partner offer full purchase price as earnest money. Why? He wanted the deal that bad! $127,500 earnest money. He is a cash buyer so no big deal. He got the deal from someone that offered more but only $2500 earnest. So earnest money amount can be part or your offer strategy. Once again. nothing is set in stone or the "ONLY" way.
Keep an open mind, unless you have someone finding and buying your deals for you of course. As investors I think we must work every avenue possible to find the deals and keep our pipelines full. Start out with FSBOs and expand into every section. Several good agents are a must. Yes they make money, figure it as part of your costs. They usually make nothing off you when they provide the property. The seller pays right? You just have to close and not BS them. Yes it takes earnest money and some brains to get deals under contract through an agent. They only make money off me when I SELL a property. Then I will gladly pay their commissions. I don't market for owner/occupant buyers, I let the agent and the power of the MLS do that.
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Wow! What a lesson! Maybe putting your dates on a calendar will help you keep track of things...getting an extension on the close date happens all the time and definitely use the smallest EM possible. Hindsight is 20/20...I am curious why there were no takers it sounds like a nice property?
60 days to close?? What if the person is in pre foreclosure and the auction date is 3 weeks away? Just walk away or give up? Can't get 60 days to close, oh well!
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Thanks for your comments. I can see how focussing on FSBO's is easier and less risk involved. However, I also see it as limiting my plans for growth. I am currently using Bandit signs and getting a good response from FSBO's and some other opportunities.
Thanks for your insight John.
Sandra, thanks for the good words! Again, lessons learned!
The main concern for my Buyers was an unconventional floor plan with a 500sf addition that was poorly designed for mechanical. Also, most are looking at 1000 to 1500sf deals. So, more lessons learned.
As far as contingencies go, I'm modifying and using the mentor hotline for the RBBP.
Thanks for your thoughts.
Michael, Thank you so much for your comments. Here are a few more details.
ARV should have been listed at 80K
30k in repairs
Buyers are strong from my research: cash buyers from county records. One with 50 properties, and 2 with over 100 ea.
Location was not a problem
Unconventional floorplan, poor design(with addition), out of sf range, issues noted
I am definately going to continue using re agent as I don't want to limit myself as you suggested. My goals include setting up teams in CA, UT, TX, and FL. A good realtor can really help establish those areas. Also, your right I don't want to miss out on REO's, short sales, and HUDS. I will, however, work my bandit signs more to create more FSBO opportunities. I think I was so intent on creating a team and working with my RE agent that stopped thinking about a balanced approach.
Thanks again Michael for all your thoughts. I have learned a considerable amount in the last few months. Thoroughly enjoy reading your comments any time I see them.
Oh, by the way, why CA, UT, TX, and FL? Friends, relatives, and of course opportunities!
Thanks so much!
Thank you so much I appreciate this info
I am determined dedicated and will make it in real estate thanks Dean
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