Real Estate Investing Tips Through One of My Own Experiences

In Part 1 you got a glimpse at my buying a property will all good intentions but getting stuck with it, holding in a slowing declining real estate market and not taking immediate and appropriate action.

I had purchased the property in one of my corporations and I decided try an experiment so with the help of a broker and good friend, I had her list it as “Corporate Owned”. If you aren’t aware of it, REO’s (Real Estate Owned Properties) are often called Corporate Owned. Nothing misleading here as my property was corporate owned. In the listing I explained Handyman Special and how much work it needed.  So there was no question that the property was a fixer upper.

So she listed it on the MLS® and seemingly within a couple of minutes contracts started coming in over her fax and by email! She called me extremely excited and simply said “I sold it!”  I said “Send me the contracts to look at.”

Even as I looked at the initial contracts, more contracts kept coming in but I knew it was impossible for any of these initial perspective buyers to have seen this palatial estate.  So I knew it was investors throwing stuff on the wall to see what stuck. I forgot and left my “Corporate Owned” sign in the yard so many of the people who actually went to see the property called me. A couple of Realtors® called to complain that the condition of the property was “ugly and terrible” and it may even have had health hazards – he was talking about the electric panel. I had told them all that in the description of the property on the MLS® so what was their problem? Oh, they forgot to look at the listing info because they were blinded by their greed to get to the property, or was it just too much to read?

The calls, offers and contacts keep coming including one that was $20,000 OVER the asking price! On the highest offer I personally knew the wholesaler who was bidding on it.  I asked the broker to call him and ask if he was serious. This was simply because I wanted to close and not tie it up under contract to be flipped, or turned back if he couldn’t sell it. She called and he said through his assistant that he was only going to flip it. The range of the offering prices was from $15,000 below asking to, as I mentioned previously, $20,000 over my asking price. I reviewed the other contracts and knew all but one of the perspective buyers to be local wholesalers who had no intent of closing. Despite what you might think, the real estate industry is like a small town where everyone knows everyone – so protect your reputation.

Late the second day a contract came in that is really poorly written or very cleverly written and I am having trouble figuring it out. For example, the contract stipulates “Cash with no contingencies for financing” but also has checked “Seller Financing”. This is called an “ambiguity” and if you go to court with these problems in your contract the court usually rules in favor of the seller (homeowner). I also notice the selling price is equal to the “Cash at Closing” line so what happened to the deposit? There is a single buyer designated on the “Buyer” line but two signatures on the signature lines.

The Realtor® is mentioned and a clause has been added that the buyer must pay the Realtor® a $395 (junk) fee. It appears that the buyer is represented by the agent and the agent has signed the contract along with another unknown signatory. The buyer has stipulated that he wants the deal but I have to close before the following Friday – less than a week away. There now is an issue of a lien search coming back in time, but I suggest we escrow the closing documents and keep focused on the goal – my taking a tax loss and getting away from this toxic dump.

At this point I don’t care about the price, but the broker negotiates it higher anyway. That’s what great Realtors® should be all about. Next I ask for a $5,000 deposit.  I request a “zero” inspection period and we use my closing agent – which the buyer agrees to! The buyer gets the deposit check to my broker and it’s a personal check.  I immediately realize the buyer is the agent. Even that’s Ok despite my paying him a 3% commission which effectively is a price reduction. I am undaunted and my broker goes ahead and asks for a cashier’s check. The buyer states he will wire the funds for the full amount if I can get him a HUD-1 Closing Statement. I don’t know if you know this but to produce a HUD-1 for a cash buyer takes minutes and my closing agent is up to the challenge, so off it went for the Friday closing! I no longer care about winning the Lotto since I have found someone who is in love with this property and needs it to survive.

I hold the original personal check deposit contemplating having the Attorney General’s Office prosecute for a bad check charge, but suddenly the wired funds arrive. This is like winning the Mega Ball five weeks in a row. But as it starts to look like it is cast in stone, the buyer has an emergency and requests to close on the following Monday. The funds have already been wired so why should it matter to me? Don’t know, don’t care.  I just agree, postpone the closing and move closer to cashing my new winning Lotto ticket.

Just days ago on this past Monday I get a call from the closing agent and she says “Where are you?”  I responded “Is the buyer there already?” I ask this because he’s an hour early. So I go next door to sign and get my proceeds wired to me. The closing literally takes 10 minutes but while the closing agent is copying the closing docs I asked him some questions, like “are you buying this to live in?’ His answer is “yes” but later I ask the same question in a different format and he answers that he is going to have his Mom and Dad live there. I ask more questions and get more fuzzy answers but frankly I didn’t care. I wished him the best and said good bye and that was that.

In summary, I guess I got “Dinked” for allowing my heart to do my thinking when I bought the property – always have been a sucker for a crying woman (or man) and injured animals. To many newbie investors this transaction would have been fatal. To an experienced and “old grumpy investor” it was just something that happened and it was my fault and no one else’s. If I ever let it happen again call me stupid and slap me on the back of my head – actually Nancy will do that for you. She did tell me not to do the original purchase, but my everlasting faith in human nature was misplaced momentarily. So for the readers who endured this whole two-part article – if you are at a cross roads, been knocked down but aren’t out – get back up, get moving forward, forget blaming anyone but yourself and go on to the next one. Life is way too short to wallow in “stuff”.

To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder