A Case Study: The Closing From Hell!

A Case Study: The Closing From Hell!

5 min read
Chris Feltus Read More

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A few months ago I had one of my most unique deals ever, and I figured I would share with the story with the Bigger Pockets Community.

Case studies are on my favorite ways to learn in real estate because this is actual work in the trenches, not just some theories you hear being discussed. Especially with this particular subject property, things really started to fall apart towards closing and now more than ever I have a great appreciation for my escrow officer.

Lead Generation:

This particular lead actually came through online PPC.

Related: Online Real Estate Marketing: Making it Happen with PPC and SEO!

In addition to direct mail, I also include a PPC budget that I utilize every month. PPC,  for those of you who are unaware,  allows you to buy space at the top of search engines.

You set a budget and every time someone clicks your websites ad it removes funds from your account. PPC can be an effective tool, but it’s important that you understand the fundamentals first.

Make sure to do good keyword research to figure out what your prospective customers are searching for. If you fail to do so, it’s very easy to quickly blow through a PPC budget and have no results to show for it.

Now that PPC has sufficiently been explained, the seller first contacted me after seeing one of my PPC ads while browsing the internet. She visited my website and sent an email that via the contact form.

Initially she was not ready to sell, but looking to explore her options. Whenever someone contacts me via email I always put their email address into a drip campaign that follows up every other month automatically. After the first drip campaign she gave me a call and told me they were ready to sell.

When we talked on the phone I could detect a large amount of urgency. As it turns out the house had generated a large amount in back taxes, so much so, they were beginning to get nervous that the city would foreclose on the property. The sister lived out of town, but one of her brothers lived in the area and we agreed to meet later on in the week.

The Meeting:

Before I meet with sellers I always try to drive the comps in advance so I can be confident once it’s time to make an offer.

To get set for the appointment I always print out the tax rolls for the subject property and bring with me a stack of comps. I always try to bring more comps than needed.

I do this because I can always filter down in the field and remove comps that are strong fit. Once I have my information I try to leave a bit early to drive the comps and get a feel for the neighborhood, assuming I am not already familiar.

I finished my due diligence and parked my car on along the curb and waited for the brother to show up. One he arrived we started to walk the property.

The biggest tip I can give on walking the property with the seller is to simply be yourself. I hardly talk about the house at all, unless its stories involving what it was like to grow up there. I am more concerned about building a rapport with the seller.

I noticed he was wearing a Dallas Cowboys hat so guess what we talked about, the Cowboys. We had a great discussion over our mutual disrespect for Jerry Jones as the owner of the team.

We were joking and, and that makes it all the easier to make the offer at the end. If you build a rapport in this manner it’s more like you are friends and someone that can solve their problem.

I can’t tell you how big of a tip this as it allows you to get houses even when your offer might not be the highest. If they like you and are confident in your ability to perform, you have a good chance of having your offer accepted even if its not the best.

Deterring Property Value:

With this particular property it was quite difficult to determine the subject properties value.

Not only was the property in what most investors would call a warzone, but there was only a single similar comp within the immediate area, everything else was simply not comparable.

The subject property was quite old (1950s construction), built on pier and beam and was a 3/1 at about 1200 sq ft. Most of the comps in the area were larger 3/2s.

As a result I had to be a bit more conservative when I estimated an ARV of 55k. In addition, the property needed extensive repairs from foundation, to cosmetics, to complete gutting of the bathroom. To help give you an idea, here is an interior shot of the bathroom below.

dallas property interior shot

 

Find and Assign:

Often times in real estate I will find properties that simply do not fit my business model, as is the case with this property.

Instead this property was a great candidate for  wholesaling. As long as you can get the property under contract for a good price, you will have no trouble finding a buyer.  The case was no different for this property. In fact, I already had a specific buyer in mind before I even put the house under contract.

A Very Hectic Closing!

Related: Our Simple Strategy for Closing More Deals Through Relationships

The siblings all decided to talk amongst themselves and decide if they wanted to move forward selling the property to me.

It actually took a few weeks for me to hear back from them. Once I was given the go ahead I faxed the papers to the sister out of town and met with the other siblings in town.

During escrow we had several issues. For example having to work through a bankruptcy with one of the siblings and proving the estate was not part of the proceeds and getting a payoff for the delinquent taxes.

Not only that, but since there was no will to be probated with the estate we had to get heirship affidavits  in order to get a clear title commitment. There ended up being 5 heirs in total, it turned into quite a mess, a few of which were not thought to have an interest in the property according to the seller.

One of the biggest problems through this transaction was one of the heirs really dragged on through the whole process. Either myself or my escrow officer were constantly having to contact this individual multiple times to get them to sign or mail in needed information.

This, without out a doubt, was one of my most hectic closings to date. But just when you think things can get any worse, they usually  do. It was on the day of closing, all the necessary paper work had finally been filed and we were set to close. However, we were still missing one signature but it was no big deal because the brother was coming in the day of closing to sign off at the title company.

It turns out the brother was arrested the DAY OF closing!

It was complete chaos, for several days we were unable to get any information in regards to the whereabouts of the brother. Once we finally did locate him the jail would not allow any visitors, which posed a problem because the other siblings could not stop by and give him the closing documents.

Instead, we had to mail papers in and out of the jail to get his signature. All in all, it took 2 weeks past the original closing date on the contract to finally close.

After the whole ordeal I am very fortunate to have a rockstar escrow officer that kept the deal together, but that’s a matter for another blog post.

I hope you learned something from this blog post. Have you had any hectic closings?

Be sure to leave them in the comments below!