Others stealing your deal
Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
One of the many gurus who regularly emails me, is offering "deal protection insurance" for a price. In other words, magic words to insert into your deal offers/contracts, so someone else does not up your accepted offer by $500 and take your deal.
What wording/clauses do YOU put into your offer letters/deals to prevent other investors taking or the seller from stealing your deals?
Isn't there a saying that goes something like:
Fool me once shame on you fool me twice shame on me.
Personally. The only thing I need is my mind frame of beating someones *** who tries to steal my deal. Everything else is just talk and words on paper.
I am in a weird situation right now as an end buyer. The wholesaler in question is definitely taking advantage of the seller. To keep the story short, seller has wholesaler contract with MJ to sell his house for $95k, signed on 7/31 and good through 9/10. I learned about the property because of daisychaining by 2 separate people, with one of those people even listing the property on Zillow FSBO without the owner's consent. Anyway, i was supposed to meet with the Zillow lister at the property and he went MIA. I was in the owner's driveway, and the owner opened his garage door. Turns out, he thought he was meeting MJ there at noon, and Zillow guy told me to come at 1. So weird. I am totally new to all this. MJ never showed up at noon or that day.
Anyway, I ask if I can see his house. Love it. He shows me his contract with MJ, and I read it quickly and thought it was only good for 5 days (when in actuality he had 5 days to sign).
So I offer him $97.5k. I go back the next day to give him a deposit and sign the contract and he is standing in the garage with none other than MJ, whom I've never met. So I told MJ about the Zillow guy and the original daisychain wholesaler and he was like well you're dealing with unethical people, but I don't have time to coach you. Umm thanks? i realize that - I'm just letting you know what is going on with your property, like people listing on Zillow that you don't know about.
So MJ informs me that the contract runs til 9/10. Fine. I respect that totally. I turn to MJ and say look, I offered the homeowner $97.5k for his house yesterday because i didn't realize your contract was still live. Can I just buy the house from you for $98k? He flat out says no. I said, ok, so what are you looking to get for the property? He replies he doesn't know. He is being very rude to me, and I was like fine, I'm leaving, good luck with him Mr. Homeowner.
So I go around the corner and call a mentor and decided to go back to the house 10 minutes later to just at least get MJ's phone #. MJ already left. Homeowner and I chat again. Homeowner thought MJ was very rude to me and it was weird that he didn't not only flat out reject my offer, but wouldn't negotiate, and only has 3 weeks left to find a buyer for the property for this 6-week long contract.
Also, I looked more closely at the contract, and it said that MJ should have given a $500 escrow to x&x law firm within 3 days of signing. I emailed the law firm and they have no record of receiving the escrow after 3 weeks.
I'm not trying to steal a deal here, but I have no ties to MJ, the owner feels MJ hasn't done his job well since he doesn't even know a price 3 weeks into it, and also the escrow wasn't paid. What do you think?
Sounds like MJ is a bad wholesaler. The seller could potentially get out of the contract because of the lack of EMD, but that is going to be the seller's fight if MJ comes back after him. If the seller gets word from the law firm that escrow was never dropped off, he would have a very strong case, but personally I wouldn't advise the seller one way or another; most seller's don't want to deal with a lawsuit, they just want to sell their property.
Either way you should put a backup contract on it right now. If the seller wants to get out of his contract with MJ it sounds like he has grounds to do so, but that's his choice to fight it or not. If that happens you're in great shape, or worst case when the contract runs out on 9/10 you'll be there to clean up MJ's mess.
Thank you @Nick C.! I was planning on being there to clean up the mess on 9/10. Hopefully MJ doesn't strong arm him to sell before then.
One concern though, is the post above mine from 6 years ago by @Ryan Webber with the lis pendens. Even though MJ didn't file the escrow, could he still file this to make the owner sell th ehouse?
Also, I haven't heard about a backup contract before this. If MJ finds out one is in place, might he be more motivated to go to court? If not, then where can i get a template for a backup contract like this? Would a simple Google search produce one, you think?
Yes, MJ could still file the Lis Pendens. But to make the seller sell it would take a couple of years and potentially tens of thousands of dollars if the seller fought it to the end. And if he really didn't deliver escrow that would be a bad move. He would be opening himself up for a counter suit from the seller.
I'm not a lawyer and I don't know all the details, but it sounds like the seller would prevail, it just depends on if he had the patience and money to fight it out. Unless this was a huge spread, it's very unlikely MJ would stick this thing out either.
Going to court is awful and costly, a backup contract wouldn't motivate anyone to do that. He may posture like he will though, if he thinks the seller will cave.
The backup contract could be just a normal contract with verbiage in there about being in backup position.
None of this is legal advise btw, just my personal experience.
Well he is now closing with the terrible wholesaler. Oh well :(
HERE ARE A FEW TIPS TO KEEP THE SELLER AND BUYER FROM DISCUSSING PRICING INFO DURING A SHOWING:
1. Don’t tell the buyer the sales price
The most effective way to prevent sellers and buyers from comparing what price you agreed upon with the seller and the other price with the buyer is not to get yourself in that predicament in the first place. Do not disclose the asking price to the buyer until they’ve seen the property. If they ask you how much, say “ I don’t discuss pricing until the buyers have seen the property first.” This saves you the stress when you show the property because even if for some reason the price was brought up, you won’t look like you were trying to make a killing on the deal because you didn’t disclose the price to the buyer to began with. Besides, discussing the price before the buyer sees the property isn’t effective anyway because people change their minds when they see it in person and not want to give you what they originally said they would. Or someone may even offer you more for the property after they see it. So there’s two sides to benefit from not disclosing the price with the buyer until they see the property.
2. Bring a friend with you to the showing and say that is an agent.
Tell the seller “ hey my agent will be with me during the showing. Please do not mention the property is actually being sold. I told him/her that you and I agreed to do a rental so I’ll be just paying a rental commission fee. Disclosing purchase prices will increase my agents commission.” Then tell the buyer “ hey there will be an agent involved in this showing. Don’t mention anything about buying the property. The agent believes this is a rental showing and that you are just future tenants.” This strategy will keep both buyer and seller quiet about the sale which also keeps them quiet about the purchase prices.
3. Use the tenant excuses.
tell the buyer that the tenants do not know the property is being sold so please do not mention anything about the sale of this home.
4. not the owner strategy
tell the buyer you don’t believe the owner will be showing the property. This eliminates the buyer from asking prices because they think the seller is not present and that the person showing the home is an agent or a friend of the seller. If it comes up that the owner is the one showing the house, you can save yourself and say, oh I must have confused this home with a different seller. Oops.
5. Nervous partner excuses
tell the seller that you have not disclosed the agreed upon price with your partners yet because you want them to fall in love with the house first. Mention that the asking price is a bit higher than we like but if I can get them to fall in love with the property first, then I’ll disclose the price. First impressions are everything. If the partners think the home is overpriced, they will have a negative experience during the showing because all they will be thinking about is the deal not being worth it.this strategy keeps the seller quiet.