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Today is an amazing episode! It is going to be a case study of fix & flip they did on a property that they just closed recently. David and Mike share some helpful tips about wholesaling and know how they got this lead. Check this out!
Things that will cover in this episode:
- Talks about the property that they just closed recently
- How they got this lead
- Learn how to negotiate with the Seller
- Step by step to get this deal
- Why some people didn’t close a deal
- And so much more!
David: All right. In this episode today, we are going to be talking about a deal that we just closed today like 30 minutes ago. It just closed and this is a case study about a fix and flip property we did.
Mike: Yeah, this is a fun one Dave, cuz this one we were literally just like how do we make that much money on this deal with all this other stuff that happened and we’ll get into all that, and the moral of the story was I mean, I think that the correct answer is we bought it right. We bought it at a great price and instead of wholesaling it off, we said let’s go ahead and have the team fix and flip this one and that’s what we decided to do, right?
David: That’s right, but we bought it, right? and that’s really what made it such a good deal, I think.
Mike: Oh 100%, so Dave, this one was really- I mean you, I know you personally just followed up and followed up and followed up with this guy. There was a couple reasons for that too, right? I mean, in addition to some title issues, I think it was a lead you had started working, right?
David: Yeah, absolutely it was so let me pull it up here on this CRM.
Mike: That’s what I was just trying to do too.
David: And uh let’s actually kind of run through this in detail here.
Mike: Yeah, where did the lead-
David: I’m kinda curious how long ago- yeah, where’d it come from, all that type of good stuff here.
Mike: Right, so first step, where did this lead come from? And I’m looking at the- our CRM here and it says that it came from Google AdWords.
David: Oh wow, we haven’t done that in a while so this is an older lead for sure. Let’s see when we’ve created the lead.
Mike: It’s over a year ago.
David: Over a year ago. So, we created the lead April 4th so that’s probably what? 15, 16 months ago and it looks like it came in from AdWords, and it was the seller, which is so strange cuz he’s older.
Mike: Yeah, you wouldn’t expect that.
David: You would not expect- he was like 80 years old so I would not have expected him to come in that way via AdWords, but that’s where the lead came from, so this is an AdWords lead, and he wrote do you need to sell your house fast? Yes. What is your ultimate goal? And his was just to sell the house. What kind of repairs and maintenance does the house need? He said kitchens and baths need remodeling. How long have you owned the property? He said 25 years. Is there anyone living in the house? And he said yes, its owner occupied. So, that’s the basic data that we collected from AdWords from our campaign.
Mike: Yeah, it’s pretty cool to see all that information that we pulled just- yeah, just on day 1 before we even spoke to him really.
David: Which is awesome. I love that. So, that’s when the lead came in and how. So, lead source was AdWords, and it came in on April 4th of 2019 so that’s over a year ago. Now, we just finished the rehab, so we didn’t wholesale this one. We actually bought it and fixed it up and sold it today, we flipped it.
Mike: Well, it closed today,
David: Closed today.
Mike: So, we’ve- we actually, I mean we finished it probably I don’t know- I don’t even know maybe a month or two ago? I mean, it was finished and then listed and then-.
David: We’ll get to that.
David: We’ll get to that. Okay, so he- we called and left him a message, so I’m going to go through each step cuz I really want to highlight the follow-up and the time frame it took to get this deal. So, April 4th was when the lead came in, so 4/4, right? And then we called and left him a message April 4th and then he didn’t answer. We then followed up April 18th, so that’s about 12 days later with another call, left a message. Then April 26th so roughly another eight or nine days later, I called and I spoke to Robert, and I set up an appointment to view it at Monday at 8 a.m. So, from the initial time the lead came into the time that we got an appointment was almost 3 weeks and that happens sometimes guys. You got to keep following up, follow-up is the key to this business. So then, I set the appointment, that happened on April 26th so then I ran the appointment on April 29th, so 4/29. So, three days later I went out and I ran the appointment and here is my notes, I’m going to read the notes to you guys. I said Bob is a nice guy, he has lived in the property for 24 years. He does not want his neighbors to know his business, so he is looking to sell the home fast as is for cash. So, he didn’t want a real estate agent listing the house and having a sign in the yard and it being all over the Internet. That was his motivation, it wasn’t that this house was falling apart or that he couldn’t keep up with the taxes or the mortgage or any of that. His motivation was he didn’t want his neighbors to know. Motivation comes in all sizes and shapes guys. Next, I wrote he has a mortgage on the property, I verbally offered him 180k and told him I would put the offer in the mail, snail mail, as well as send him the offer via email, so I did both. So, pro tip, do both, send it as many ways as you possibly can, get the offer to them, okay? Next, I wrote he is pretty old and he wants to move to the Lake of the Ozarks, the property needs about 30 to 40 grand to update everything. Eh, 30 to 40 was our spread at the time, it is super clean and has an ARV around 290k. So at the time, back on 4/29, April 29th, 2019, I estimated ARV of 290k. I’m making notes over here, okay. Next, I wrote has a nice fenced-in backyard with a patio, an unfinished basement, it’s currently a 3-2, about 1,700 sq. ft. I copied in the Zillow link, the Zestimate on this was 242 thousand and the AVM, which is basically another way of estimating values via the MLS was 291. So, we were going off of our ARV not on the Zestimate, but off of the comps and the AVM that we actually were seeing in the neighborhood. Another reason why Zestimate shouldn’t- should not be trusted, they’re great on the fly, but that’s not the number that you want to work with, okay? So, we figured at this point in time, the ARV was 290, then in my notes I have an equation, 290 times 0.75, that’s my discount rate, equals 187k and I offered him 180k. Now, I didn’t take out my repairs or a wholesale fee and I even went up to 75% because he had other offers at 150 and 165 already, this is the notes that I’m reading verbatim, and they must have not had the ARV as high as me. The rent estimate is about 1680 bucks a month, which is a great amount of rent. It also has an oversized garage, not only is it taller than normal, but it’s wider than normal. Bob, the seller was a contractor of some sort that always had ladders on top of his truck, and he didn’t want to park in the driveway and/or take the ladders off every time he came home so when he built the house, he built it tall enough to fit it in the garage with the ladders on and long enough on one area of the garage to where he didn’t need to leave the door open. So, it’s a good benefit and bonus for anybody else that’s looking to have a house that’s got a big garage, that’s basically how I looked at it.
Mike: Dump all those lawn mowers and work tools.
David: That’s right, you got an oversized garage, right?
Mike: So, regarding your offer though Dave, so you kinda skimmed over why you went a little bit higher. You said you did it because he already had some of those offers but we also instead of using 0.75, and this isn’t noted in there, I’m just guessing what our conversations were about this, is if you use 0.8 cuz this was a great area.
David: This is an area where we would typically go to 0.8.
Mike: Yeah, this is not a-
David: Nicest school district in St. Louis basically.
Mike: Yeah, it’s not a slummy area, it’s a top-rated school district. It’s a very good area, people want to live there, homeowners want to live there as well as tenants again David mentioned the rental rate. So, if you go to 0.8, if you take the 290 as that ARV that we had used before and you take it to 0.8, that puts you at closer to about a hundred, I’m looking at my notes here, about a hundred or 232 thousand I believe. Then if you take off 40,000 in repairs, you’re at 192 thousand so that still gave us 10 to 12 thousand dollars in spread over what the offer was.
David: Yeah, and the offer that we made was to buy it as a rental, I believe.
Mike: Was it?
David: Yeah, and that’s why I didn’t- I went to 75% and didn’t take the repairs off versus going to 80% pulling the repairs off and this scenario is very similar, I probably did it both ways, but I didn’t take the notes.
David: You know, and that’s one thing that’s hard to tell cuz it’s a year ago in the notes. I’m almost confident I looked at all the scenarios but in this one I’m like hey a rental, this works, let’s offer 180, it’s you know, in line with the other offers which I said he had at 150 and 165 already which would sound more like a wholesalable offer but Mike, you had a really good point, we weren’t looking to wholesale this deal, we were looking to buy it at a discount which really means that we didn’t have to add in that wholesale fee which really ends up meaning that we can pay more for it.
Mike: Yeah, I mean even-
David: That’s it.
Mike: Even at 0.8- yeah, you’re right I didn’t calculate the fee in there so at 0.8, well, there still would have been a small margin for wholesale of 10-12 like I said if that was our offer at 180. So, again it was a solid offer, it was the best offer Bob got and yeah that’s what we did.
David: Yup and one of our competitors which I’m not going to name cuz I really like these guys and I’m not saying anything negative about them, but they offered like a 110 or 120 on this exact same property and we came in and offered a little bit more fair. If they would have got that, that would’ve been a homerun for them, but we ended up winning it because we were willing to pay the most but it still worked and that’s all I’mma say on that topic, but just some little additional information, kinda funny. Alright, so moving on, I offered 180- this is back on 4/29. He had other offers I talked about, we talked about the garage, I said I’m going to send them the offer both in the mail and via email and I’m going to see what happens, okay. Then I made a note, I added my photos to our CRM, and I said offer sent, that was also on the 29th. So then on May 6th, so now we’re on 5/6, Bob called and asked what’s up with the offer and I told him that I sent it via snail mail as well as via email. He did not seem to know where it was, he hadn’t received it. I told him that I can just deliver him one in person later this week, so on the 7th, the very next day 5/7, I drove an offer to Bob, physically took it to his house, okay. Next, on May 18th, about 11 days later, Bill and I met out at his house, Bill’s my partner- Mike and I’s partner, and we reviewed the contract for 180. Bill was going to try to get him down a little bit, but we had discussed in our meeting that there wasn’t much room but we tried and then we got a note on May 20th that we discussed via text prior the appointment, rehabbed about 30k, ARV 270 to 290 but we were kind of leaning towards the 290 and it looks like we emailed him another offer again on 5/20. Bob is old, he didn’t get the first two, the one that I delivered to him I think he lost it or misplaced it. He’s an old guy, and then we emailed it again to him on the 20th of May. On the 22nd, he signed it and got it back to us, I don’t have no towel but I would imagine he probably signed it on the 20th and put it in the mail and it arrived at our office in the 22nd two days later, my best guess here guys. So, we had this property under contract May 22nd 19- 2019 for 180 grand.
Mike: You know what’s funny too? is back then, like we knew it was a deal but we we’re paying more than everybody else and I was like uh it’s gonna be a little tight. You know, like I- you always feel that way on the by-side like again you know, you’re buying good deals, we know we’re buying good deals but it’s always- you know, it’s risk, there’s always some risk in it, you just don’t know. So, yeah it’s pretty- I just remembered that feeling back on this one.
Mike: We’re paying a little bit higher than everybody else was, like you said one of our competitors had offered 110, like are we comping this right? Are we doing this right? And yeah, so those things change. So, then Dave, I think- we got it under contract, right?
David: Yeah, that one on 5/22 basically we had received- we pushed it to the closings and we had a contract signed.
Mike: Yeah, so to keep the story moving along, so we got it under contract now and then we push it over to our closing workspace which is a little bit different in our CRM. So, now we’re in the closing process so we send the contract, our purchase contract over to title and Dave what happens next? Cuz this is where the story gets more interesting in my opinion.
David: Yeah, this is kinda gonna be a long episode but that’s alright.
Mike: Well, that’s why I was trying to move it along.
David: Yeah, now I’m moving.
Mike: No need to read every note. We got a lot of notes in our CRM.
David: Okay, I like it. Let’s sum it up here. There’s a lot of them though but this is really what’s good. So then, I called Bob, went to voicemail trying to get a good time to discuss the closing procedures and he mentioned that he might need a couple weeks so I said, okay no problem and I set up a follow-up. So, I just want to keep track of these dates though because I think it’s important to see how much follow-up went into this.
David: So, I do want to do that. Then Megan on our team on the 29th, that was on 5/23 so now on 5/29 Megan called and spoke to Bob talked about the closing and filled him in, all was good. Then on June 3rd, I made a note that said I hadn’t spoke to Bob in a little bit and I want to reach out today via phone or email and I wasn’t able to get ahold of him, so I left him a voicemail and I sent them an e-mail on June 3rd. Now we are under the impression that the property is under contract, we’re under the impression that Bob needs a couple weeks to get his affairs in order, so we said no problem Bob, we’ll happily do that for you. Then again on June 19th, 6/19 spoke to Bob again, he was at the Lake this time and he wanted me to call him back.
Mike: If you remember back to Dave’s comment number 1, first time you talked to him wasn’t that one of Bob’s goals? He said I wanted to go to the Lake.
David: That was his goal, so now that he had a property under contract to sell, Bob was excited cuz he want to go find that Lake condo retire- retirement life with that condo at the lake and he wanted to go there so he went there. So, I called him and he was there, okay. So now, let’s see here, then on the 21st so two more days later 6/21, Bob called he wants to close on 7/2. He found a place in the Lake and he wants to close in that place on 7/3 and he needs a week to move out after that. So, he basically said hey, I can give you guys a close date which we hadn’t really had prior or up until this time, but he asked us if he could stay for one week after we closed cuz he needed the funds from this closing to pay for the new place and then he needed to make a couple of trips back and forth. I told Bob no problem, you can have a week because when I’ve sat with Bob and talked to Bob several times, he had no intentions of staying there. I had zero risk of Bob staying there and squatting. His goal was to move to the Lake so he could go fishing every day and that’s it, that was the goal, that was the motivation. Not to let the neighbors know, that was part of it but the goal was to move to the Lake and not have or and go fishing. That’s it, that’s the goal. So, next we go- and we have let’s see here, we have a sent you possession of closing. Okay, and then on June 25th, so 6/25, I spoke to the title company and there’s title issues that erupted, so this is when the story makes a big twist, there’s title issues, there’s something to do with a bankruptcy that Bob had filed years and years back that was kind of cloudy in the title and he was going to go talk to his attorney about that. That was on the 25th of June. So, then on July 9th, Megan called Bob and spoke to him and he said he was going in on Thursday with his daughters to sign with an attorney to get this wrapped up so we could purchase. The title was clouded, we couldn’t even buy it, so that was on July 9th, so we went from the 25th to the 9th so 7/9, okay. So, then Megan talked to him again that same day another note. Okay, so then on July 22nd, now were up to 7/22, spoke with Bob and also the title company. According to the title company this file is still open, whatever he did with his lawyer didn’t work and we still can’t buy it and I have a note saying Bob calls me almost every day, let’s try to get this done. That was on the 22nd, then we moved to August 1st, 8/1, now I’mma take just a quick break and count to see how many communications I’ve had with Bob or my company or us, I’ve had with Bob to date and we haven’t even- we’re not even halfway there probably. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 different communication so far. Okay, so now we move along and we’re going to August 5th now, 8/5 and Bob has been blowing me up all weekend about the offer or about the title company and he claims that the lawyer should have done it and it should be ready to go and I need to make some calls and figure out what’s going on. That was on the 5th, then on the 7th, it looks like we made some calls to the title company and the attorneys and it looks like the title commitment came back but again, it still wasn’t ready to go, but it was getting close. That was on the 7th, so 8/7. Next, we have a note on the 20th 8/20 saying trying to work on these title issues is on the top of our list for this week. Then on the 4th, 8- Nope, this goes all the way now to- now this next one goes all the way to October 4th, so we went from 8/20 to 10/4 without talking to Bob however, we were communicating with our title company every couple days in between that time saying hey is this done yet? is this done yet? We basically were put on standstill because we were waiting on whatever he was working out with this attorney to clear the title from this bankruptcy years and years ago was filed processed and approved, right? They had filed paperwork, but it wasn’t approved, so we were waiting for it to be approved, okay? Moving on, we’re almost done here guys. Then on January 2nd, finally- now we started this process on March 4th by the- I’m sorry April 4th by the way, now we’re on January 2nd, and we got news back from the underwriter saying hey, we think we can get this closed. That was 1/2. Then January 7th, we have a note in the system still haven’t closed, what’s going on? Follow up with title company. Then January 27th, 1/27, Megan sent me an amendment and we’re going to be good to go and then we finally closed February 21st, almost a whole month later from the title company said we could do this. 2/21, so we’re talking about 10 months from the time that we talked to this guy originally and the lead came in from an AdWords campaign to when we closed on it.
Mike: Okay, so what happened-
David: 10 months.
Mike: What happened though with the title work?
David: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23- That’s 24 communications with the seller and our company-
Mike: That we have documented. I was gonna-
David: Documented. As I’m saying, all the in-betweens of us calling title companies and lawyers isn’t documented.
Mike: Well, and there’s also many conversations with Bob that you didn’t reach out to Bob like-
David: Yeah, calling my cell phone so on, so forth. So yeah, over 20, 24 I think, to the point to where we actually bought it. Now, you had a question what was the problem.
Mike: What was the problem though Dave, cuz we also- there was a reason why we didn’t close it and why the other people didn’t close it, there was some cloud on title.
David: There was.
Mike: That we were waiting to have cleared up and we waited the whole time.
David: Yup, so here’s what happened, so it started with a bankruptcy Mike, and it wasn’t ever closed completely so we had to get that closed, but then what had happened is in the meantime or I should say before we had even been out to meet Bob, he had a bunch of other people come out. And instead of Bob saying highest and best, let me think about this, anybody that sent him an- or that brought an offer to him, he signed it. But he didn’t understand that if you sign an offer with somebody else and then somebody else comes in with a higher offer, that you can’t just sign that other offer and go do business with them, you are locked in with that first person still. So, in an effort to get them to release their contract with Bob instead of just calling them and asking them, what we did- actually did do that and they said no we’re not going to do that. He went to his attorney while they were still dealing with the bankruptcy stuff Mike and said hey, if I don’t own the property anymore, they can’t force me to sell it, so he quit claim to the property to his daughter and his niece. Okay, so here’s where it gets a little tricky, on February 21st, the paperwork for the bankruptcy was approved and cleared title on that day and time that we closed was not clouded, it was good.
Mike: So, again so we waited this whole time because we’re very transparent with our sellers too. We want a clear title, that’s why we go through title companies so that we can resell these properties. It’s very important to us, we get title insurance on it, so we waited like Dave said and we got-
David: And we waited, and we waited.
Mike: And we waited, and we made Bob wait too. He couldn’t sell it.
David: Yeah, Bob just wanted to go fishing. I felt so bad for Bob.
Mike: That’s what Dina just said on Facebook here. She just said poor old guy just wanted to go-
David: He just wanted to go fucking fishing. That’s it, that’s all he wanted to do.
Mike: So, we get it- we finally get cleared-
David: We just solved problem after problem after problem. That’s why we got a $60,000 paycheck, which is awesome, but yeah go on Mike. I’m sorry.
Mike: Yeah, yeah, no keep going. So that’s what happened, so it closes, then we-
David: Okay, now- I want to back up real quick though. So, Bob had this attorney doing two things: one, getting the current title issue fixed which was a bankruptcy issue, but he was also, on the side he didn’t tell me this but he was also like quit claiming the property to his daughters, so that way they could sell it to me because he had signed all these other contracts around town and he didn’t know and he kind of looked like an idiot but he didn’t know any better. So, the title was clear, we closed on it.
Mike: So then we-
David: But when he did these quit claims he-
Mike: Well, let’s not get into that.
David: He had a- Well, hear me out though, it’s very important though. He had them signed, but they weren’t recorded, so what ended up happening is they get recorded after we closed. So, we closed with clean title but then three weeks later, it’s no longer clean because these quit claims got recorded-
Mike: I wanted to tell the story differently.
David: Okay, go ahead. Tell it differently, yeah.
Mike: So, my point was we’ve got clean title, we rehabbed the house, so we’ve got a loan on the property and now we spend-
David: Good point, okay. Good, good, better approach.
Mike: I think we ended up spending 60 thousand dollars on this house. So, we paid 180, we put-
David: We originally gonna- well we pivoted, let’s start there though. You’re absolutely right. We were going to buy it as a rental, we decide hey the ARVs probably even a little higher than 290 instead of putting 30 in it, we can make a good profit by rehabbing it, so our budget for rehab went up. It basically doubled but we were going to do high-end finishes, so then go ahead.
Mike: So, we spent $60,000 rehabbing it guys, we still think we have clean title because we bought it with a clean title. So, now we’ve got 240, 250 thousand dollars or so into this property, ton of money.
Mike: Into this property.
David: Yeah, so we didn’t know about this.
Mike: We think- we’re all high fiving, hey this looks great. Bill’s like you know what, I’m going to push the market, so we list it pretty high, listed around was at 350-
Mike: No, 309 where’s he listed it at.
David: Oh yeah, yeah, yeah.
Mike: They paid over ask.
David: They paid over asking.
Mike: So, we list it around 309 which is a little high. First day-
David: I thought he was crazy to list it at 309, I was like if the ARV’s 290, list it at 299. He said no I’mma push it.
Mike: First day on the market-
David: First day on the market he pushed- he put it at 309 and it sold for over ask.
Mike: So again, the market is just crazy, like there’s just no inventory. There’s no inventory down there so-
David: Now this happened maybe six weeks ago.
Mike: Right, so about three weeks ago-
David: So the gap between 2/27, I’m sorry 2/21 and that would be of 20 and 6 weeks ago, let’s call that, beginning of May, right? 5/1, no beginning of June. So, between 2/21 and 6/1, we were rehabbing it.
Mike: Right, so we rehabbed the house, alright?
David: We spent 60 thousand dollars ripping a wall out, redoing the kitchen, redoing two bathrooms.
Mike: Refinishing hardwood floors.
David: Refinishing hardwood floors, painting the entire house and lots of little knick-knack stuff.
Mike: Fixing some stuff outside, everything that involves lighting, plumbing, all sorts of stuff.
David: Some plumbing issues yup, lighting, fixtures of all types, yep.
Mike: So we do all that, then we get it sold first day on the market. We bring it to title company. We’re getting ready to high-five again and cash our checks and that’s when we find out-
David: That the quit claims.
Mike: Weren’t recorded like-
David: Well, they weren’t recorded prior to our closing. They were recorded just later which clouds our title again so now we are stuck with a property that we can’t sell, okay. Now the story takes another turn, this is a great case study. We’re stuck with a property that we can’t sell because it’s clouded title, we have loans for both the purchase and the rehab, so at this point we bought it for 180, we put 60 in it, what’s that equal Mike? 240-ish.
David: 220, something like that, oh its 240.
Mike: 240 yeah, yeah, yeah.
David: We’re all into this thing for 240 grand. It’s sold meaning we have a buyer that’s willing to buy it from us, but we can’t legally sell it to them.
Mike: No, we can sell it, we just- they can’t legally own it, we can’t transfer title.
David: They can’t- yeah, they can’t transfer title because of what Bob had done way back when he was trying to get all this stuff fixed. So, he thought he was helping but he ended up screwing it. Okay, so this is where the story gets kind of sad.
Mike: Yeah, this part sucks.
David: In a way but you know, this is just part of life, part of business. So, Bob moves to the lake, gets a condo and he’s fishing and I actually had communication with Bob a month or two after cuz he called me to say David like you, you know, I really just wanted to call and say thanks again for helping me with this and you know, kind of you know, was just really being real nice and he said if you ever want to come down and go fishing with me, I’d love to have you and I thought that was the sweetest thing and I you know of course was like oh Bob, you know if I’m ever in the area, I’ll look you up. Well, another two or three weeks goes by and I get a call from the daughter saying or no- we- I called the daughter cuz we don’t have the garage code, so I’m like hey, this is kind of random but like do you- I’ve been trying to reach Bob for like a week now and I can’t get ahold of him, you know, maybe you could because she lived with him when we bought it, right? Maybe you remember, like do you know the garage code? She’s like, oh yeah, of course, it’s like 7714 or whatever it was and she’s like, oh but by the way, have you not heard? and I go no, I haven’t heard. She’s like Bob ran off the road at the lake, you know how those roads are really windy and he didn’t make it, he passed away. So, I was like oh that’s so terrible. So, not only was it bad that Bob died cuz great guy, sweetest old man ever, but we needed Bob to help us fix this clouded title that he had indirectly on accident kind of done and screwed us. So, where does that leave us? We have $240,000 in loans, paying interest daily, we have a nice home that we bought at a discount and rehabbed, listed it even has a buyer. I don’t want to say sold cuz it didn’t sell but sold on paper and a buyer’s ready to close, but we can’t sell it. We need the guy to help us get the paperwork fixed, but he passed away, so now we are literally at the mercy of the people that he quit claimed it to which was the daughter and the niece.
Mike: Yeah, I mean that’s the-
David: I can’t go any shorter.
Mike: Yeah, that’s the short version of it. I mean, that’s the-
David: That’s the shortest version.
Mike: And again, it’s way more complicated and convoluted than that.
David: So, I know we’re 33 minutes. I’mma try and wrap this up guys. So, long story short, title company- we have a policy with them, whenever we buy any property or sell, we try to go always go through a title companies so you get an insurance policy, so when this does happen, this is what title insurance is for if you’re not aware, but if this does happen, just exist- scenarios just like this, you have a policy that will cover you against this happening and you can file a claim on this policy and they will go to work with their lawyers to fix it, but the problem with that is it takes about six months. You don’t have to pay anything, you’ve already paid for the insurance policy, but that process takes 6 months, and they do what’s called- and maybe longer. It’s called quieting the title and they basically reach out to any parties that are involved to make sure that they’re not, you know vested at this point. They basically just long story short, clean it up so you can sell it again. Well, that was a really shitty option for us because we still have these loans and our buyer said if you can’t sell it to me in the next one to two weeks, like I maybe give you a little bit more time, I’m walking.
Mike: Yeah, they want to live- they wanna move into the house, it’s understandable.
David: Yeah, understandable.
Mike: They’re not trying to- yeah, they thought they were moving in last week and now they’re-
David: Now they’re like well, you told us you could sell it, you listed it for sale, we offered to buy, we paid over asking and know you’re telling us you can’t sell it to us?
Mike: I mean, think about it from-
David: They were threatening to sue us.
Mike: Think about it from their perspective, somebody who’s moving. So, they’ve either sold their house or they’ve notified their landlord that they’re moving out.
David: It’s a $300,000 house.
Mike: Like, they don’t have- well, I’m talking about where they lived before.
David: That too though, all of it.
Mike: They’re moving so again, they don’t have anywhere to stay. So, they’re planning on moving into this house, it’s a big deal. So, this stuff is- yeah, it has real life consequences.
David: So, to wrap this whole thing up guys. We didn’t want to lose our buyer, we didn’t want to not get 5 grand over asking when we pushed that number like 10 or 15 grand already, so we’re like okay, option one, file a claim, wait 6 to 8 months and then go try to find a new buyer or option two, track down the daughter and the niece who had been quitclaimed on the property via recording after we bought it to sign quit claims back to house sold easy properties who had should have owned it, and then the problem would have been solved that day or within a couple days, we wouldn’t have to wait 6 to 8 months. So, we contact these two women, we had their information from the lawyer and the whole process prior and just say hey, this is like kind of screwed up, you know, like, you know, Bob did all the stuff. They were aware that their dad was doing all this stuff too cuz they were involved, but what happened was is they kind of started to resent the fact that we were going to be flipping this property making a lot of money. They knew the whole time that was our intention, we never wanted to move into it, we were going to rent it out or flip it. They knew that Bob had sold it for 180 cuz Bob has passed away at this point so now all of Bob’s assets were theirs, they were the recipients of his will, and they also go on Zillow and see that it’s listed for sale for 309, so they don’t realize that there’s sixty grand of repairs. They probably thought there was something obviously, but what they see is the two numbers that are the most far apart and to see that big spread. They see 309 and then they know that we sold it to- or bought it from 180. They’re thinking we’re making just tons and tons of money.
Mike: Yeah, 130 thousand dollars.
David: That’s what they think we’re making.
Mike: Well, there’s one, is the repair cost, two, the holding cost, three, then you got your agent fees on the 309.
David: Oh yeah, That’s a ton. That’s 25 grand.
Mike: So 309- right. I mean it’s- again, there’s so much mouths to feed.
David: Yeah, so they’re basically thinking that were making six figures though. That’s- cuz they don’t know all this. They don’t do this every day like we do, handle the business, right. So, we call them up and just say hey, you know, so sorry, we’ll come to you. We got this paperwork that your father’s attorney screwed up, most incompetent human I’ve ever met. I hope he listens to this podcast too, truly the most incompetent human I’ve ever met.
Mike: Yeah, that attorney.
David: He’s a retard, yeah. Anyway, we call them up and say hey, you know do you guys mind helping us out and they’re not really wanting to work with us, cuz they’re seeing this huge number and now they have leverage, so they’re thinking well if I don’t sign yeah, these guys are still going to be able to solve this problem but it’s going to take them 6 to 8 months but if I sign, their problem is solved right away so I’m going to make them pay me to sign. Well, that started out at like a hundred bucks and then it went to like three hundred bucks and then we thought we were settled at five hundred bucks. Turns out they would say that and then the next day when we would try to meet them, they wouldn’t answer the phone and we finally were like listen, we are going to lose our buyer, give us a number that you need and we will get a cashier’s check and send you a picture of it to meet us but you can’t- you got to stop with this back-and-forth, what is it? And it ended up being 4 grand per person, there’s two people, we had to pay $8,000. It is the definition of extortion. They extorted us, but we didn’t really care because we either had option a) 6–8-month quiet title, pay all that interest in the meantime and then go find a new buyer, by that time it’s gonna be winter. Terrible option.
Mike: Right, and we’re paying that interest.
David: Terrible option.
Mike: Holding cost, who knows what’s going to happen.
David: Terrible option.
Mike: Yeah, it’s not good.
David: Terrible option. Option two, pay them eight grand, which I think I’m going to still try to file a claim to try to get that paid back to us, but for 8 grand, we were able to get two signatures, quiet title or I’m sorry, quit claiming it back from- we owned it, but the title was so cloudy that we had to prove it and that’s basically the docs to show that we proved it to where we could close on it. So, we did that, what was that? That was Saturday of last- over the weekend, and we finally sold it today, the date- today’s date is July 17th if this doesn’t come out right away, 2020, we sold it today. Now the net- the gross proceeds from this deal were 80 grand however, we had about 20 thousand from you know, from rehab that we had put in that we got back. So, basically the net profit was 60 thousand bucks on this deal, that even includes the 8K.
Mike: That we had to pay back.
David: Yeah, cuz it was 80 total, I guess we had about 12 grand of overages from rehab and 8k from-
Mike: I have to go print checks.
David: Yeah, go ahead. I’ll wrap it up.
Mike: So, I’ll go ahead and wrap this- we’re live and I’m gonna move the camera if I walk out of here.
David: No, just leave it right there, you’re good. I’m gonna wrap it up, just give me 3 minutes, that’s it.
David: But we got it done, that’s the most important part and we had to pay them. So we had about 8 grand in fees to them. We had about 12 grand in overages so 80 turned into 60. That’s okay, we still made 60 grand on this deal. So, the lessons that I want to talk about on this case study are a couple things: one, I had 24 follow-ups recorded in my CRM, touches, I drove to this guy’s house with offers. I sent them in the email, I snail mailed him even after he got the offer, he lost it. I had to email it again to him, he was signing contracts all over town. I didn’t give up, I am very persistent.
Mike: Make offers.
David: You got to be persistent, you gotta make those offers.
Mike: Follow up.
David: Yep. Lesson number two that I would love to talk about just real quick is it all starts with getting a deal, we couldn’t have flipped this or rented this without gotten the deal, so we got a good deal on it and we were persistent the entire time, but it ended up being one of our better deals.
Mike: Yeah, it was a good one.
David: Not the best by any means, but it was a really good one. I mean 60 grand is- that’s a ton of money guys, 60 grand and that’s after all the fees and commissions and everything else that we ended up pulling in on it. So, be persistent, follow up with your leads, pre-contract or offer, post-offer. The whole way, you got to be consistent with these people and if you’re consistent with them, you’re going to win the deal every time. That’s really the lesson, so started on 4/4 ended on 7/17. 5, 6, 7, that’s what? 15 months?
Mike: 15 months.
David: But we made 60 thousand dollars guys. That’s it, that’s the case study. I don’t want to keep going too long.
Mike: I just told you I gotta leave. Signing off.
David: So that’s it, we’re signing off but 24 follow ups in 15 months, we made 60 grand. Thanks guys.
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