Getting Started and having every deal fall through
Member since 2020 · 20 posts · 18 votes
Getting Started and having every deal fall through
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesSo let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
64 Replies
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Steve K.:
@Tom Vanderlinden the sellers didn’t want to negotiate purchase price at all based on the appraisal?
No Steve, there really was a lack of comps in the area that led to the poor appraisal, in my mind and the sellers. The appraised price was 20k lower than what he paid 3 years ago. So he doesn't want to budge.
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Jon Narcisi:
@Steve K. I had the same thought. Won't the sellers be concerned it will happen again with the next potential buyer? Perhaps they are hoping based on the type / condition / price that they will attract a cash buyer that will not need to obtain an appraisal. But this should at a minimum give you some leverage if you are inclined to pursue. I would be highly skeptical and risk adverse to buy something for more than the appraised value though. Especially if you are in fact buying at a discount like everyone tries to do, then even if the appraisal was high, I wouldn't expect it to come in lower than the offer price. Good luck, you got this far, ensure your numbers make sense and keep taking action!
Thanks for the encouraging words Jon. I think I'm just eager to get the ball rolling here. I told my realtor the same thing, won't they just run into this problem with the next buyer? Who knows, maybe he'll get a cash buyer. But I'm just going to keep hunting and pressing forward.
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Joe Villeneuve:
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
I probably did come across as complaining a little here Joe, but really just looking for encouraging words. Thanks for your help.
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Michael K Gallagher:
@Tom Vanderlinden don't worry about deals falling through, especially if it didn't appraise. Just stay consistent, if you are looking for deals, review deals, 1 a day, 5 a day, whatever works for you. But I'd say to start with one, and track it, and stay consistent.
At 1 a day, thats 365 deals looked at in a year. If you make an offer on 10% of those, thats 36.5 offers, and if you get 5% of those offers accepted thats 1.8 deals a year.
Thanks for your help Michael. I'll use this going forward. I guess I need to analyze more deals and make more offers to get more results. Makes sense.
- Rental Property Investor · Member since 2020 · 18 posts · 7 votes6y
@Joe Villeneuve good advice man 🙌🏽
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Twana Rasoul:
@Tom Vanderlinden it’s a good thing it fell through. You don’t want to over pay.
Also, Number of doors is meaningless. It says nothing about how much property someone has amassed. Someone with “8 doors” in a market like San Francisco, Seattle or los angeles could have the same total portfolio value as someone with “80 doors” in other markets.
Absolutely.. I was thinking about that today on a long drive I had.. sometimes less doors is far better..
I think about say a rental at 8% coc that you can buy in a higher cost market.. and to get the same gross return in a cheaper market you would need say 5 doors. while you have diversity in numbers.. you also have 5 roofs 5 of everything instead of ONE of everything. maybe in the long run everything considered less doors is more
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes6y
@Tom Vanderlinden Tough one. Did you try to contest the appraisal (perhaps based on the sale price 3 years ago, or by providing more accurate comps/price per square foot averages for the area)? Or request a second appraisal? It seems odd because whenever I’ve been in a situation with few or no comps, the appraisal usually comes in exactly at contract price. (Nothing speaks to the current market value better than what someone is willing to pay for it right now, so if you’re under contract at a certain price, that’s technically the exact current market price). If you think it’s worth the contract price, or if it’s worth that to you even knowing the appraisal was low (nobody on here knows if you’re overpaying or not without knowing the property) and you don’t want to let it go, have you considered asking the seller if they’d be willing to offer seller financing? You could do something a 5 year term with them, make improvements/wait for better comps and then refinance out into a conventional loan at a good time down the road. If they’re willing to do it interest-only (common with seller financing) that should improve your cash flow quite a bit, and they get more money out of the deal from the extra interest.
- Member since 2020 · 20 posts · 18 votes6y
Originally posted by @Shiva Bhaskar:
Originally posted by @Tom Vanderlinden:
I just had my duplex fall through, before we got to closing, because it appraised 45k short of purchase price. This was my 5th in 6 months that fell through. I've been working hard to read and do research after work and I really had my Hope's up about getting this duplex and house hacking. I feel like I'm hitting a road block at every turn and I really don't see how I can ever get to 50 or 100 doors like all these podcast guests. Any encouragement for someone getting started? I'm not sure what else to do other keep making offer on multi family and try to house hack whenever something comes up?
Tom, I have some good news for you: More deals are going to fall through. No, I'm not being sarcastic or rude. Why do I say this is good news?
A few reasons. First, some of these may not have been the right deal for you. Example, this one appraised short. Being underwater on a property as a new investor in this economy wouldn't be fun. Perhaps one of the others would have come through, and been a headache for you. So many things can happen. There are instances where the deal you did NOT do is better for you.
Also, you've built so much experience in just the past few months, from trying to close deals, and having things fall through. I know it doesn't feel like it, but sit down and write a lesson from each deal - something you learned for the future, or would do differently. Now, there are some things you can do better in the future. You're stronger as a result of these painful experiences.
I have some more good news, this time actual good news: You're going to close a deal. If you keep taking consistent, smart action, it is going to happen. What's more, if you learn more, and keep growing as you seem to be, you'll close more.
I'll share my own story: First deal I ever tried (a duplex, with a close friend), fell through shortly after offer was accepted and we were opening escrow). Next duplex fell through after a 3 month escrow (seriously) and plenty of stress.
Took a pause for a while and got going again, and closed another one after looking at a bunch more. Thought I learned a lot. Yet, to complete my most recent deal, had another escrow fall through and a few more that wasted a lot of time and went nowhere. The point is, this is a constant in this business, but you get better at sniffing out the BS and avoiding the traps, as time goes along. I am still a pretty new investor by any standard, but I've improved, and no doubt you will too. Keep on trucking.
Thanks for sharing your experience with me. That's why I posted on the forum, hoping this wasn't uncommon and I wasn't a rare statistic. I'm hearing now how common this is, especially when you're starting out. What can I say other than I thought it would be easier, but experience is the best teacher. That's why I feel like I'm learning more through doing than I was reading. But I guess the struggles are what teaches you the most.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes6y
@Tom Vanderlinden deals fall through ALL THE TIME. Especially right now. Probably more deals are falling through right now than sticking (at least in the investment world, owner occupied we’re seeing more back on markets than usual too but not as many as in the small MF space where nearly every deal seems to be falling out of contract). Nobody knows where the market is going, sellers are still expecting pre-COVID pricing, buyers think they are smelling blood... it’s been hard to get sellers and buyers to agree on much lately. Inspection objection items has been the big issue I’ve seen lately, with buyers negotiating as if it’s a buyer’s market due to the market uncertainty, and sellers just saying whatever I don’t really need to sell anyway, so no I won’t agree to the massive punch list the buyer wrote up based on inspection. Poof, there goes the deal. It’s tough out there. Keep going, keep making offers, keep negotiating, keep learning. You can always circle back in a month or two and make a lower offer based on the appraisal if the seller hasn’t found their cash buyer by then.
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Dan Heuschele it’s good to be cautious, I can appreciate your approach there. Thanks I’ll check our that thread.
We have been spoiled and it’s been nice :)
I appreciate it. Best of luck to you as well.
Compass5122 Reviews - 6yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Twana Rasoul:
@Dan Heuschele it’s good to be cautious, I can appreciate your approach there. Thanks I’ll check our that thread.
We have been spoiled and it’s been nice :)
I appreciate it. Best of luck to you as well.
I just looked on Craigslist as a start of my rent survey. It had 2 apartments, near my duplex that will soon be available for rent, that are offering large move-in rebates. One offered a $750 move-in rebate and the other offered a $1k move-in rebate.
This does not leave me optimistic that I will be able to obtain the same rent as I would have gotten a couple/few months ago.
We have been getting $0 of our STR rents (out ~$35K in STR rent already and growing) and now I have an empty LTR unit (not yet ready to be rented but it should be ready next weekend).
Risks being realized. - 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Jay Hinrichs yep, I’m personally trading remaining cashflow doors for less doors and less initial cashflow in my own market.
Compass5122 Reviews - Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes6y
Originally posted by @Chris C.:
Originally posted by @Joe Villeneuve:
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
I cannot emphasis this enough. The appraiser saved you.
Chris,
I doubt it. After 200 plus deals, I've learned at least this; most appraisers are complete idiots.
Can't tell you the number of times I put up more cash to offset idiotic appraisals. So far score is me 100%, appraisers 0%.
Gary
- Rental Property Investor · Sarasota, FL · Member since 2020 · 154 posts · 72 votes6y
@Tom Vanderlinden Massive congrats on taking lots of action, keep your chin up! A lot has already been shared that's valuable and actionable.
In this particular case where the appraisal fell way short, BP podcast #7 may offer some insights. Take a listen, much success to you!
https://www.biggerpockets.com/blog/2013-02-28-ryan-lundquist-podcast-appraisals
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Dan H. I can't say I'm liking the sound of that. I'm curious how it plays out for you in the next couple of weeks.
Those STR losses are really piling up...the guess the bright side is you have the ability to go LTR and hold on to your property vs others who need the higher income from STR to cover expenses.
I wish you the best of luck!Compass5122 Reviews - Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes6y
Analyze 100, offer 10, buy 1 IS real estate investing (substitute your own numbers). Your closing rate is not the challenge. Work on your deal flow...your pipeline. Good luck. The market may be on your side by 2021 too.
- Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes6y
Curious --- did a similar thing happen the other 4-5x the deals fell through?
-------
Deals falling through on the selling side do suck...especially if you're trying to get your cash out.
Falling through on the buy side...honestly, it's usually for the better.
We were under contract for a house a few months ago in a hot area of Atlanta. I thought I had pegged the rehab and the ARV perfectly.
Our appraiser said the same thing..."Your ARV is like $30k off". Looking back, he was right.
That was 3 days before closing...
Fortunately, title issues didn't clear up and we were able to get out without a scratch.
If a deal is good, you will find money somewhere. If you can't, it likely means it's not a good deal.
Don't give up :)
- Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes6y
Hang in there. things happen for a reason. i had many deals fall through at the beginning and it was a blessing in disguise. My first deal helped me to continue going.
if it was easy everyone will be doing it. this is helping you gain the persistency needed in this business. keep pushing, keep grinding. you got this.
- Investor · Cincinnati, OH · Member since 2015 · 242 posts · 182 votes6y
@Tom Vanderlinden. Deals happen that aren’t publicly “up for sale”. Figure out how to get in on some of those opportunities. Network with the right real estate brokers, mortgage brokers, property managers, contractors, owners, suppliers, etc. Persistence and determination are your friends.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Gary L Wallman:
Originally posted by @Chris C.:
Originally posted by @Joe Villeneuve:
So let me get this straight. You're complaining about a deal, where you would have paid 45k more than it was worth, fell through? Did you actually read what you wrote? You also said that if it keeps up, you wouldn't get to 50-100 doors...like many other REI?
Here's your problem. Not that these deals fell through (thank God), ot's that you're so focused on getting properties that you're making bad offers. Stop focusing on how many properties you have, or want. Start focusing on how many positive dollars you will make...and make offers ONLY on properties that will generate those dollars....and always remember this.
Sometimes, the best deals you make, are the ones you don't.
I cannot emphasis this enough. The appraiser saved you.
Chris,
I doubt it. After 200 plus deals, I've learned at least this; most appraisers are complete idiots.
Can't tell you the number of times I put up more cash to offset idiotic appraisals. So far score is me 100%, appraisers 0%.
Gary
to me i find appraisal issues to very market dependent.. on the west coast I cant remember the last time we had an apprasial issue in the last 10 years every one coming in at sale price.. out in the mid west were you have tons of rentals and rehabs going on in those areas.. so you have such huge ranges of values. IE is it a house needing total rehab or a transitioning to all rental neighborhood.. thats were i see appraisals coming in WAY low IE use the comps of a non rehabbed house etc.
- Rental Property Investor · Virginia Beach, VA · Member since 2019 · 21 posts · 20 votes6y
@Tom Vanderlinden, I suggest you start doing some deal analysis in the market your interested in and do your due diligence and research. The podcast and books are teaching you how to do it, and creative ways that you might not have thought of, as far as your market and finding what’s a deal, all that research and work is up to you.
- Memphis, TN · Member since 2019 · 7 posts · 2 votes6y
@Tom Vanderlinden. In my opinion, there will be several deals out there in the coming months with the unemployment numbers. They will be probably better deals than they have been in the past year or so. Last fall, I had 5 deals to fall through including one where the landowner sold the property to his friend after we signed a contract. In the end, I found a rental with long term tenants whom take pride in their home. Best of Luck!
- Flipper/Rehabber · Seattle, WA · Member since 2020 · 8 posts · 3 votes6y
@Tom Vanderlinden I’m a newbie as well! I can’t help with advice clearly because I am on the same side as you. However I would like to extend good vibes and encouragement! Speak life, success and desires into existence. The Universe knows your heart. Stay focused and diligent my friend!! You got this!!
- Flipper/Rehabber · Seattle, WA · Member since 2020 · 8 posts · 3 votes6y
@Joe Villeneuve great advice thank you!!
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes6y
@Tom Vanderlinden I think your missing evolution from continuous education, every deal you should be getting something from it, if not a profitable acquisition than a profitable education.
A string of several falling through in such manner is a strong indicator of something, just saying "ah, it was the appraisals fault" is the failure because it's throwing market and deal education out the window. You should be reviewing it, double/triple checking your assessment, cross-referencing by appraisers, re-running yours using appraisers numbers, really digging into the data to get a better understanding of your process and possible weak points or flaws.
Look, you make money when your buy, reap when you sell, that's foundational "law" of REI, so with that in mind any acquisition you ever do should never be near full market appraisal more or less over market. So right off the bat a string of these says there is something wrong in your assessment or offering numbers.
I can't stress this enough; get something from EVERY deal, always question everything your doing with an inquisitive mind, be quick to be wrong and even faster to improve, learn from everything, fail forward, and if your lucky, often.
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