More Deals, Less Time

Recently I was coaching a student, and we came across what appeared to be an excellent opportunity. Because of my knowledge of the area, I was immediately able to give the student the right price to offer. I showed him how to negotiate the contract, which he did perfectly.

The result? With my knowledge, we were able to do only minimum work. While we found that the property wasn’t the deal we expected, we did so without wasting time. Since time equals money, it is essential to know your market so that you don’t work too hard for nothing.

We decided that this student, a new investor, was going to buy a house for $5,000 and wholesale it to an area landlord. Rents there were approximately $800/ month. Rehabbing would be close to $30,000. When we subtracted management, vacancies, taxes, insurance, and maintenance, the property would earn a 20% return. This was a great opportunity for anyone who wanted to become a landlord in that area—and a great opportunity to make a $7000 wholesale fee.

This looked perfect!

Did you notice that we didn’t get comps? Or that we didn’t stop to look at the area or pull the tax information? As a team, we received the lead from the student’s marketing. The student also drove by the house to check its condition, but he was unable to tell which house it was because the house numbers were gone. He followed up and filled out a lead sheet. From the information on the lead sheet, not from the comps or tax information, we created an offer. It was a standard buy contract, with no earnest money to the seller. Over the phone, the student was able to get a verbal agreement on the contract.

However, when the seller countered, we got a big surprise.

The seller crossed out a majority of the agreement and placed the burden of risk on us. He didn’t want to pay taxes for 2009 through 2015. He didn’t want to pay any liens from code enforcement or closing costs. He didn’t want to give a disclosure or a warranty deed, and he would only transfer the title with a quit claim deed. As if that wasn’t enough, he wanted to reduce our due diligence period to three days and close in five, with cash.

Let’s talk about the risk and negotiations of this opportunity.

Clearly, the counter offer was unacceptable because we didn’t know what we would be paying in back taxes and liens. The fact that the seller would only provide a quit claim deed caused me concern. (If you’re interested in learning more about the difference between a warranty deed and a quit claim deed, please send me an e-mail.)

So, to test how important some of the stipulations were to the seller, I counter offered with most of the clauses back in place. The seller replied with a request for a rewritten contract, so I called him and explained that we couldn’t run the risk of unknown tax liens and other expenses.

In the meantime, I instructed the student to call the county tax assessor and code enforcement. The outcome of this simple due diligence revealed that the property had $9500 in back taxes and had burned down two years before. The county had scraped the land clean and placed a demolition lien on it.

The Breakdown: We spent money to do mailers. We spent approximately 90 minutes creating and negotiating the offer and counteroffer. We saved time by working with our given knowledge, and we negotiated on the phone. The student spent 40 minutes driving to the property. In all, not much time.

True, we didn’t buy the property. But this is still a win, a learning experience. First, the student didn’t spend too much time on the property; he worked smart. Second, because of the work he did after the initial negotiation, he was able to see that it was not the deal we had imagined, and with very little time on our part, we walked away—giving us time to move on to another prospect.

Here is my question for you:

How much time do you spend doing due diligence and researching properties that you never buy? If it’s more than the deal above, you wasted your time.

As a coach, I train you to negotiate first. Then, you’ll know whether or not to move on before you waste your time. You can make a blind offer based on what the seller states as fact. Then, you will do number crunching from what the seller states as after repair value, repairs, and asking price.

Think of the time you could save if you learned to be confident in conducting this very basic negotiating strategy!

The conclusion is that we notified the seller how much the back taxes were and asked him to bring $9500 cash to the closing table. We asked him to reduce the price to $500, and we would take the vacant land. We would wholesale the land for $2,000. The seller did not respond, so the deal ended there.

Was this a negative? No, because all we lost was a small amount of time.

You can learn how to make your time work for you, how to make your time bring dividends. The old adage is true: Time is Money! In this case Your time is Your money. Let me show you how to use it wisely!

I am looking forward to meeting you and helping you on your way to a successful 2015!