{"id":10879,"date":"2010-02-10T07:06:15","date_gmt":"2010-02-10T14:06:15","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=10879"},"modified":"2024-06-08T06:03:15","modified_gmt":"2024-06-08T12:03:15","slug":"2010-02-10-controlling-your-real-estate-deals-manage-catastrophe","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2010-02-10-controlling-your-real-estate-deals-manage-catastrophe","title":{"rendered":"Controlling Your Real Estate Deals and Handling Catastrophes"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

As this is my first blog post on the BiggerPockets Blog, I thought I would take a couple sentences to introduce myself before I jump into my topic of the day\u2026<\/p>\n

My wife and I are business partners, investing in real estate passively for several years, but we have only just started to \u201cget our hands dirty\u201d these past 18 months or so.\u00a0 We currently run a business rehabbing and flipping houses; while we don’t have long-term real estate or construction experience above and beyond that 18 months, we do have some serious business experience.\u00a0 We have both spent most of our careers in management for Fortune 100 companies \u2013 managing large teams, large budgets and some wildly successful products.<\/p>\n

Coming into this industry, our lack of hands-on real estate and construction experience forced us to focus on the business aspects of real estate in order to maintain our success.\u00a0 While we\u2019re quickly learning the construction side of things, our strong focus on optimizing our business practices has given us a somewhat different perspective on real estate investing than most people have.\u00a0 My hope is that I can use some of our business experiences \u2013 both past and present \u2013 to help provide other investors with more of a \u201cbusiness perspective\u201d on investing.<\/p>\n

With that in mind, I\u2019ll jump into today\u2019s blog post topic:<\/p>\n

Controlling Your Deals<\/h2>\n

My First Catastrophe<\/h3>\n

Our trial-by-fire in this industry came the second time we got one of our houses under contract to sell.\u00a0\u00a0 My wife had just gotten her real estate license, and this was the first time she was representing our company in a transaction.\u00a0 Everything was going smoothly until about a week before the closing, when we called the buyer\u2019s mortgage broker to ask a question, and he never called us back.\u00a0 A couple days went by, and we tried again.\u00a0 Still, no response.\u00a0 We called the buyer\u2019s agent and he informed us that he was having trouble getting in touch with the broker as well.<\/p>\n

This went on until a day before the closing, when the truth finally came out \u2013 the buyers were friends with their mortgage broker, and because of a couple issues on their credit, the broker was unable to get the deal through underwriting.\u00a0 The broker was avoiding us, hoping to get the issue resolved before he had to explain to us what was going on.\u00a0 Apparently, both the buyers and the broker knew about the credit concerns from the beginning, but had assumed (or at least hoped) that everything would be cleared up by the time we were ready to close.<\/p>\n

Needless to say, the deal never closed, and while we collected the small earnest money deposit from the buyers, it didn\u2019t make up for the 6 weeks the house was off the market or the frustration we had to endure.<\/p>\n

It’s Not My Fault.\u00a0 Or is it?<\/h3>\n

Clearly, we were rightfully pissed at the buyers and the mortgage broker who lied to us.\u00a0 In fact, who knows, perhaps the buyer\u2019s agent was in on it too!\u00a0 We made a point to tell our story to everyone who would listen, appreciating all the reassurance we got, that this wasn\u2019t our fault and that there was nothing we could have done to have avoided the deceit.<\/p>\n

The following week, I was having lunch with a big-name investor in my area who had been mentoring me and who was helping me navigate the industry.\u00a0 I told him my sob story, but instead of commiserating with me and reassuring me, he said the following: \u201cYeah, you screwed up on that one\u2026\u201d<\/em><\/p>\n

Huh?\u00a0 Our fault?\u00a0 We were lied to.\u00a0 How could this possibly be our fault?!?!<\/p>\n

I then got what seemed like a 2-hour lecture about all the things we did wrong on this deal.\u00a0 And that 2-hour lecture boiled down to one basic tenet that we have since embraced, and that all investors should seriously think about:<\/p>\n

It is my responsibility to control my deals.\u00a0 If something \u2013 ANYTHING \u2013 goes wrong, it\u2019s my fault<\/strong><\/p>\n

This simple concept has completely changed our perspective on investing.\u00a0 While we\u2019ve continued to\u00a0 have our share of frustrations, we have never again felt like victims, and we have always felt a much greater sense of control over every deal we do.<\/p>\n

CONTROLLING THE UNCONTROLLABLE<\/span><\/strong><\/p>\n

I imagine at this point, you\u2019re thinking to yourself, \u201cWhy should I take responsibility for other people\u2019s incompetence?\u201d and more importantly, \u201cHow the heck can I control other people\u2019s actions?\u201d<\/p>\n

Let\u2019s start with the first question.<\/p>\n

The sole reason why you should want to take responsibility for other people\u2019s idiocy is that, in the end, more of your deals will close successfully.\u00a0 This means more money in your pocket, and ultimately, more success for your business.\u00a0 If that\u2019s not motivation enough, to be willing to take responsibility, I\u2019m not sure I have the ability to convince you.<\/p>\n

As for how you can control other people and situations that are seemingly out of your control, that all boils down to foreshadowing and preparation.\u00a0 Take my example above \u2013 how could I have avoided the situation where the mortgage broker and the buyers were lying to me about their ability to qualify for their loan?<\/p>\n

In retrospect, here are just a few of the things I could have done to mitigate the risk and potentially have avoided the problem completely:<\/p>\n