In May this year I got a property under contract for 35,000. I thought it was going to a simple transaction. I could not have been more wrong!!!! It finally closed today, the end of September!! 4 months before I got paid. Here is the story
1. How I found the property: Starting in January this year I started direct mailing full time. I got a list of absentee owners. The list started out with 650 names in my target areas of Nashville. The first 4 mailing go by with not a single lead that seemed like it worth pursuing. This is lesson number 1: Stay persistent in your mailing and marketing. As 4 months passed, I started to get discouraged. 650 names had quickly gotten down to 400. I kept telling myself to mail 6 times before I gave up on the list. 5th mailing goes out. I receive a call from a seller in Detroit.....
2. Negotiating with the seller: I wish I had a long conversation to share with you, but I don't. I ask the standard questions 1. do you have a house you were hoping to sell? 2. Is it listed? 3. What do you think it's worth in today's market in its current condition? 4. what were you hoping to walk away with after closing? I did not get very far with her answers because she had no idea what it was worth and she just wanted me to give her an offer. So I told her I would do some more research, drive by it, and call her back. I called her back 2 hours later, and I offered her 35,000. I was a little embarrassed at the price because it was very low for the neighborhood (This is a good thing for anyone. If you're not a little embarrassed if you have to throw out a number, you're offering too much). She responded with "35,000.... I could really use 35,000...... That sounds good to me!" I was shocked to say the least and a little upset at myself for not offering less!!!!!!!
3. Finding a Buyer: I don't have a buyer's list of 200 people. I don't even have a buyer's list of 50 people. I put the deal on craigslist and in 3 hours I had a buyer and an assignment contract signed.
4. Obstacles in the deal: I ran into MULTIPLE obstacles in this deal.
a.) The seller did not have a cell phone, e-mail, social media, or a computer. This made the process very slow. I had to mail the contract (always overnight everything if you have to do this with your return address already filled out see below). I had to call when I knew she was going to be at her house during the day. It took days to get the contract back, it took days to get the HUD statements back, etc.
b.) "Tenants" were in the property: What I mean by tenants is the seller's family was living in the property for free for the past 10 YEARS!!!!!! When I went to do my inspection of the property with my buyer, I walked up to the door to one of the family members upset that I was there. They were unaware of the sale. She got in my face yelling at me for buying the property. I told her they would have to vacate (You cannot have tenants that have been living there for free for the past 10 years. They won't pay rent). I stood my ground and told her I'm sorry that you have to move, and I offered to help them find a place. The buyer accepted the house after inspecting it. The only issues were getting them out (They were hoarders, stuff everywhere), and finding them a new place. It was impossible to find them a new place because they had no income. We thankfully found another family member to take them in. They were taking a long time to get out, and the buyer wouldn't close with them in the property. I offered to help them move, whatever they wanted to leave behind I would take care of. After offering this, they were out in 3 weeks. Lesson learned here: Get that in writing to throw away their stuff. I called 1-800-gotjunk and they cleaned out the house in an hour and a half for $750.
Lesson here: put in the contract that buyer assumes anything left in the house and do not put the term VACANT in your contract. From now on the buyer will take the house as is with the stuff inside if they decide they want my deal!!!
It took 2 months to get them out, then the title company finally got the HUD statements together and made sure the tile was clean.
c.) Getting the documents we needed: Again we had to mail everything. Thankfully the attorney worked hand in hand with me to get this done. We got the HUD statements signed but that took 2 weeks. The seller had fallen and had to go to the hospital. I had to communicate through another family member. They received the HUD and took it to the hospital. Hospital did not have a notary on staff so they had to get one there. We got the HUD back but still had one thing left.... A waiver from the state's medicare department
d.) In my state if someone dies that owns a property over the age of 55, we need this waiver to ensure they did not receive any assistance from the state. This was for her Dad who previously owned the property. She was the only one who could do this. We had to walk her through a step by step process to get the waiver sent to her and get it sent to us. This whole process took A MONTH!!
This was a very challenging and testing process that I had to go through, but it finally worked out. Here are the numbers on the deal
Purchase Price: 35,000
Assignment to Buyer: 45,000
My Profit: 10,000 - 750 (got junk :( ) 9,250
ARV is 95,000 if fully rehabbed
Repairs needed 10,000-15,000
Way to stay persistent. I had one close last week that originated in april lol I feel your pain. Glad it worked out! Perfect lesson on why to have many deals in the pipeline and never depend on just one.
Good job! I'm getting ready to close my first 2 wholesales myself and have had a rough time getting to this point myself. I'll share the full story once they've both closed (next month) but suffice it to say on one I had to wrestle the Kansas Department of Revenue regarding $30k in tax liens and the other I'm waiting on the seller to get out of jail(!!). Rinse and repeat, brother!
@Jim Viens , waiting for the seller to get out of jail? I really want to hear how that one goes...
Congratulations @Devan Mcclish and way to stick with it!
Patience and persistence is how you succeed in this business.
@Devan Mcclish Perseverance!
Good job Devan!
I also want to note that the absentee owner list has not done me very well. I know this is area specific, but I hit the list 6 times and only got this 1 deal. A lot of tire kickers. I have given up on that list since then and have targeted more motivated lists. Also, use your own title company as a wholesaler when you close. I did not have too much trouble with the buyer's company, but control the transaction as much as you can
Congrats on the success @Devan Mcclish a true example of moving at the speed of instruction.
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