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Real Estate Investing Problems Solved!

 

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August 2015

Marketing is how you can keep working without working.


I was in the car with my wife and we were on the way to an appointment at the doctor's office when a call came in from a potential seller. I told him I was driving and I'd get back to him shortly if he could just give me his phone number. He did so and I jotted it down. We arrived at the office and were sitting in the appropriately named waiting room... waiting. I pulled out the paper and thought it was a great time to see what this property owner was calling about so I went out into the hall and returned his call.


He said he had a house in the Los Angeles area that was rented to a low income family. He couldn't raise the rent because they couldn't afford to pay any more than they were and they were only paying $950. He also said he thought they had converted the garage to living space and people were sleeping in there. The seller claimed the condition was fair, he had rewired the house, but it did need kitchen and bath updates. I told him when I got back to my office I'd let him know what I could pay.


When I got back I ran the comps and did what I do to come up with my best offer. I called him up and said I was thinking in the range of $210-$212K. He said he would prefer the higher end of that and after pretending to do some hard calculations by hitting some random keys on my keyboard, I suggested we split it down the middle and open escrow at $211K. He then pulled the "higher authority" objection on me and said he needed to talk to his wife when she got home.


We opened escrow on the 4th at the $211K offer. I called one of my preferred buyers and offered him the property at $220K. I should have asked $225K, but I kind of slipped up and said I'm looking for $220-$225K so of course when he got back to me he said he'd take it at $220K. Out-negotiated on my own deal! He's a great buyer so I'll let this one pass.


On the 14th, I emailed escrow to find out what the status of closing was. My favorite escrow officer responded that she was still waiting on the payoff demand. Then she went on, "However, I ran an estimate for the seller on this. I am concerned because the seller will be short of funds to close.  We need to remit funds to the Franchise Tax Board for Real Estate Withholding Tax, we are short on the seller’s side. Do you want to broach the subject with the seller or do you want me to?"


I absolutely did NOT want to talk to the seller about this. I never want to talk to them again once we open escrow. Any communication can lead to them changing their mind and cancelling or me paying more. I open escrow and then I disappear! I replied that I prefer she do it. If they push back, only then I will get involved. Now, all kinds of visions of my nice $9K wholesale fee leaving me start to dance through my head and when that happens, the gears start working and I tend to figure out how to salvage the deal. On the phone, escrow told me the available equity was going to be more than $5,000 short to close this deal. What if the buyer and I split it? I'll still make around $6,000. What if I find another buyer who will pay more? Of course, these are just fears and we all know that fear is an acronym for False Evidence Appearing Real. I decided the best action was no action - I would sit back and see how it plays out.


On Aug 25th, escrow sent out the following email: I received the payoff demand from the lender this morning.  Please find attached the Seller Estimated Closing Statement, Wire Instructions and copy of the lender's demand.  As I mentioned in the voicemail message I left for you, we need funds from you to close the escrow.  Please sign the Seller Estimate and return a copy to me via fax or e-mail AND please wire in the required funds of $7,485.63 as soon as possible.  


$7,485.63 to sell a house - Ouch! But, they have owned it since 1978 and refinanced all their equity out of it over the years. Why should I participate in the cost of selling if they converted their equity into boats, flat screen TVs and automobiles? I sent an email to escrow the following day asking if she heard anything back. She replied, "Yes. They signed and returned the estimate and wired in their funds. Your buyer's loan should fund today for recording tomorrow." The lesson here is to never out negotiate yourself. You never know what a person is willing to do. Obviously, the pain of owning that property another day was more intolerable than writing a check for $7,485.63.


Patience - The capacity to accept or tolerate delay, trouble, or suffering without getting upset.


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