BIG Reminder: Follow up, follow up, follow up is crucial for capturing real estate deals! What makes any deal is a Motivated Seller. There are 13 main Seller motivators such as a vacant home, in pre-foreclosure, loss of job, job relocation, etc. But how do we know when the “price” of the pain of home ownership becomes more than the price they want for the house? How do we know when they’ve reached that tipping point, therefore agreeing to take a discount to allow an Investor to purchase the property and make a profit? You guessed it….we follow up.
Over 1 year ago, I was tracking a pre-foreclosure vacant home and I went to the next door neighbor to find out if they knew where the sellers moved. During my conversation, I was informed that they hadn’t seen the neighbor in years and really didn’t even know them. The couple I was talking to was an elderly couple who owned their home free and clear. I asked them if they were interested in selling their house and John told me that he and his wife just might sell it at the right price; however, he and his wife were going to the doctor’s and he would call me to talk about the home and set an appointment to see inside. I also got his telephone number so I could follow up in case he didn’t call me. My first thought was whenever I hear the Seller say “at the right price,” that they always want more than what the house is worth and/or retail value. I did ask John what the “right price” was and he replied again that he will call me back.
Tip: If the Seller says “at the right price” and won’t give you a price, I will always jokingly say, “How about a $100 Dollars?” and laugh, waiting on a response. Most of them will tell me a price after that joke. I remind them “I haven’t looked at your house, I don’t know what kind of condition it’s in, I need to purchase a property to fix up and resell, so I need to make a profit. If they won’t tell me the price then I will do more research and then before I go out, I will discuss a price with them again so I am not wasting my time. The only time I make an appointment to actually go to the house is when it’s owned free and clear, because then I can structure a “terms” deal that would make sense.
I waited 24 hours and had not heard from John and I called him back. I spoke with his wife, Mary, and she and I instantly “connected.” Honestly, we had so much in common, we felt like we were related. She informed me about the condition of the house and also about both of their physical conditions. John was at the doctor’s, however, I made an appointment the next day to see the house. I called one hour before my appointment and Mary informed me that she didn’t feel well, so I rescheduled for the next day. When I arrived at the house, John and Mary showed me their home. John was very proud of the texture job that he did, which looked like old plaster, and Mary explained about all the unfinished projects that were started and never completed. I was at their house for over an hour and I really liked this couple. I felt compassion for their situation, so I wanted to make the best offer I could to create a win-win situation. I went back to my office and called them the next day with an offer. I offered $75,000 cash and would close in 30 days or less. The home needed about $30,000 in repairs and was worth $130,000 when completed. There was a large tree in the backyard that needed to be removed. It was literally growing under the house, on top of the house, and damaging the side of the house. John and I went back and forth on a figure and since I was unable to reach his number of $90,000, we did not come to an agreement. I knew that they both had medical issues and for the next couple of months, I would follow up with them to see if they changed their mind.
I received a call about 6 months later and unfortunately John was in a temporary nursing home. He wanted to know if I could give him $80,000 “net.” I informed him that I could and we agreed that we would meet once he was out of the nursing home and back at his residence. Well, this took months before John came home, but what did I do? You guessed it….I kept following up with his wife, Mary.
These Sellers had now become Motivated Sellers; however, their illnesses were getting in their way, plus they wanted to find a place to move to before signing the purchase agreement. Unknowingly, I contacted Mary less than one week after John had died, and we reached an agreement for the $80,000 “net” CASH closing. I asked for 30 days to close so I could get all of my quotes on the repairs and the cost of cutting down a large oak tree which was $3,500 just for the tree. When I approached Mary, I presented her with two offers. A CASH offer and then a “terms” offer of $10,000 down upfront and the remaining balance when the house was sold, meaning after I did my repairs and sold the property to my end-buyer. Mary really wanted a full payment at closing and did not want to delay getting her money. During our meetings, I informed her that if she accepted a terms offer we could close earlier and then asked her again for terms. I increased the down payment to $40,000 and she amended the contract and we closed. We spoke several times during the first two weeks of the contract and I was also able to negotiate for one of my Partner’s to purchase John’s truck. I am always creating WIN-WIN, which is so important.
The house has now been remodeled, which took about 3 weeks, and I am ready to sell after the tree is cut down this week. Since our original conversation, the neighborhood has increased to values in the $150,000’s. Remember, when I first met them, values were in the $130,000 range. I will hold an open house this weekend to find my buyer. When all is said and done on this transaction, there is a profit of $30,000 after all repair costs, closing costs, holding costs, and cost of the money. This number is based on having to sell to an FHA Buyer, in which I cannot sign a contract for 91 days from the date of my purchase, so I have factored in an additional 3 months of holding costs.
Remember, 80% of our business is in follow up with the Sellers that don’t initially seem like deals. Is it possible that you’ve lost $30,000 because you didn’t follow up with unmotivated Sellers? Bygones….but certainly don’t let it happen again! You never know when their circumstances change and I always teach you to follow up with the Sellers until the house is either foreclosed on or sold to another buyer.
The relationship that I have with Mary will continue, in my opinion, as she can be my private lender on future deals and has also become a good friend. I am very grateful to have met her husband, John, and look forward to helping Mary make easy money in real estate in her retired years.
You have to see the big picture when speaking to Sellers, that if you are willing to reach their number, you may be able to help them make more money by reinvesting with you.
Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!