REO Addendum Warning

We almost got taken recently and so could you if you are buying any REO’s. We have closed on hundreds of these so don’t start assuming we are novices at what I am explaining next.

We were set to send in a deposit check for an REO deal and the contract was ready to be signed. The seller’s Addendum was slow in coming to us and once we got it the listing agent seemed pushy to get it signed – nothing new here. Of course the investor who brought us the deal was very eager because we had the property pre-sold.

As we always do, we took a close look at the Addendum and in the small print it clearly stated that the buyer had to pay any and all outstanding liens and was responsible for open code issues. We asked the listing agent if there were any and she said “none that I know of”. Coincidently, we had our attorneys shadowing the deal.  They called to tell us there was a code violation in excess of $60,000 that would not be cleared at the closing by the seller (Lender’s Asset Manager).

We had been told by the listing agent that there were no liens against the property.  We couldn’t see any in the public record since the city involved is not online. In addition, the Addendum clearly stated that the deposit amount was to be $1,000, but the agent had told us it was $2,000. When she was asked why she simply stated “because she could!”

The agent admitted she knew about the amount of the violation.  This is one that should have been cured by the seller at or before the closing. What would have happened if a novice investor had gotten to the closing table and not reviewed the HUD-1 Statement in advance? They would not have seen any charge or credit for the $65,000, so all would have seemed OK. Very, very few novices review the title commitment and ask for the B-1 deletions as we do.

However, the listing agent said (now that we knew about the problem) that it was our responsibility and it came with the property. WARNING – the listing agent would not mail the Addendum before she had a cashier’s check in hand! You see, she thought we had sent in the deposit. What a surprise when she was told that it wasn’t being sent! There was a lot of hollering and shouting but the bottom line is that had we sent the deposit, we would have lost it rather than close.

Here is the point – since a number of investors have the reputation for not closing, a few listing agents have taken the approach of getting larger than necessary deposits in hand and not worrying about the investors closing. They keep the deposits (some have their own closing agents) and move on to the next investor looking to get yet another deposit. I know I’ll hear about this as to why it can’t happen but I had a very nice couple come in last week who were losing a $5,000 deposit on a deal they tried to do.

change your life mentoring click button j 300x236 1The investor who brought us this deal was not a mentor student. We have what we call a “Wall of Shame” of investors and Realtors® who have acted unprofessionally or outright tried to defraud us or our students. So we don’t get everyone suing us, we do not publish the list. This investor was using one of these Realtors®.  We warned him way ahead of time. He didn’t listen and the result was exactly as we expected. I guess we were lulled into a sense of “it’ll be OK this time” and it wasn’t!

If you intend to stay in this business, read your REO Addendums very, very carefully.  Whatever the Addendum says, it overrides your contract clauses and it will happen.  That’s why it is in writing! Do your homework because the “factory” closing agents for the REO sellers are not on your side.  They are the proverbial enemy. P.S. – These people believe that investors are the enemy, but who are the only people buying all their mistakes?

To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.

REO Addendum Warning

We almost got taken recently and so could you if you are buying any REO’s. We have closed on hundreds of these so don’t start assuming we are novices at what I am explaining next.

We were set to send in a deposit check for an REO deal and the contract was ready to be signed. The seller’s Addendum was slow in coming to us and once we got it the listing agent seemed pushy to get it signed – nothing new here. Of course the investor who brought us the deal was very eager because we had the property pre-sold.

As we always do, we took a close look at the Addendum and in the small print it clearly stated that the buyer had to pay any and all outstanding liens and was responsible for open code issues. We asked the listing agent if there were any and she said “none that I know of”. Coincidently, we had our attorneys shadowing the deal.  They called to tell us there was a code violation in excess of $60,000 that would not be cleared at the closing by the seller (Lender’s Asset Manager).

We had been told by the listing agent that there were no liens against the property.  We couldn’t see any in the public record since the city involved is not online. In addition, the Addendum clearly stated that the deposit amount was to be $1,000, but the agent had told us it was $2,000. When she was asked why she simply stated “because she could!”

The agent admitted she knew about the amount of the violation.  This is one that should have been cured by the seller at or before the closing. What would have happened if a novice investor had gotten to the closing table and not reviewed the HUD-1 Statement in advance? They would not have seen any charge or credit for the $65,000, so all would have seemed OK. Very, very few novices review the title commitment and ask for the B-1 deletions as we do.

However, the listing agent said (now that we knew about the problem) that it was our responsibility and it came with the property. WARNING – the listing agent would not mail the Addendum before she had a cashier’s check in hand! You see, she thought we had sent in the deposit. What a surprise when she was told that it wasn’t being sent! There was a lot of hollering and shouting but the bottom line is that had we sent the deposit, we would have lost it rather than close.

Here is the point – since a number of investors have the reputation for not closing, a few listing agents have taken the approach of getting larger than necessary deposits in hand and not worrying about the investors closing. They keep the deposits (some have their own closing agents) and move on to the next investor looking to get yet another deposit. I know I’ll hear about this as to why it can’t happen but I had a very nice couple come in last week who were losing a $5,000 deposit on a deal they tried to do.

change your life mentoring click button j 300x236 1The investor who brought us this deal was not a mentor student. We have what we call a “Wall of Shame” of investors and Realtors® who have acted unprofessionally or outright tried to defraud us or our students. So we don’t get everyone suing us, we do not publish the list. This investor was using one of these Realtors®.  We warned him way ahead of time. He didn’t listen and the result was exactly as we expected. I guess we were lulled into a sense of “it’ll be OK this time” and it wasn’t!

If you intend to stay in this business, read your REO Addendums very, very carefully.  Whatever the Addendum says, it overrides your contract clauses and it will happen.  That’s why it is in writing! Do your homework because the “factory” closing agents for the REO sellers are not on your side.  They are the proverbial enemy. P.S. – These people believe that investors are the enemy, but who are the only people buying all their mistakes?

To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Frequently Asked Questions

1. What Should I Do If a Seller Ghosts Me?

If you feel you have been ghosted, act decisively and quickly. If you have tried texting and calling, it’s time to drive by the seller’s location. I always take the recorded Notice of Interest or Memorandum of Contract to leave, so the seller knows it exists. Go by at a time when you know they will be there and don’t be confrontational, just get the facts.

In our experience with new investors, the chances of losing a deal with no contract is likely over 85%. Verbal commitments do not apply in contract law; get everything in writing, especially contract changes.

Different ‘gurus’ have different opinions, but our experience is finding motivated sellers and then a buyer for your deal. Ideally, you should be finding motivated buyers from day one, so you are ready when you find a seller. Buyers are easier to find as you can see at https://davedinkel.com/products/

Prevention only comes about by thinking a Black Hat wholesaler will be coming after your deal. First, educate the seller that an unscrupulous investor may come by and illegally offer more money, have the seller sign your “Notice to Homeowner,” stating that he understands he cannot accept another offer.

There is nothing illegal about changing their mind, it is called seller remorse and occurs about 25% of the time. However, if they have signed your contract, it can’t be cancelled for any reason unless acceptable to the investor/buyer.

If price is an objection, you need to find out how important it is to sell fast and for cash. If the seller isn’t under a time constraint, has a money issue, or has a personal dilemma, he may not agree to the price you need. Offer to help move and build it into your price before you make your offer. However, never give the seller money; only pay the moving company, and only after closing (escrow with a closing agent). If fear is the seller’s issue, break it down into what the real problem is and answer their objections one at a time.

You can get to the root of motivation for a seller by asking a few questions. First, “Why are you selling?”, “How soon can you close?”, and Are you ready to sign an AGREEMENT today, if not, what do I have to do to make you comfortable?’. The answers to these questions will determine the truth about your seller’s motivations.

The best times to involve your attorney in your deals are to have him review your contracting, review the signed contracts from the seller and end buyer, have him open escrow and start the title work, negotiate with city or counties for lien reductions or mortgage payoffs with lenders, and to close the transactions.” Your attorney is not the adversary; it’s the opposing party’s attorney who is a deal killer, and having your attorney allows him to help overcome this obstacle.

The key to successful prospecting and bringing back deals that didn’t close is to follow up until the property is transferred in the public record. Some of our deals have been where the seller came back to us months and years later because they felt comfortable with us and not the other “pushy” investors who contacted them.

Your contract’s most important clauses are inspection period (as long as possible), when the EMD must be deposited if at all, your ability to access the property, any added clauses specific to the property that will protect you against seller claims later that were verbal only.

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.