Dave Dinkel Real Estate Investing – Persistence and the Right Experience
Dave: Hi, I’m Dave Dinkel. And today, I’m here with Elio. We’re going to talk about a specific deal that he did. He has done deals before but this is one that kind of qualified as a whole bunch of things coming together that we try and teach students. So, let’s talk about the deal. First of all, where did you find the deal?
Elio: I found the deal on the MLS®. It was in one of my farm areas. So when it popped up in my email inbox, I knew that it’s definitely a deal.
Dave: So you had talked to the agent or some agent beforehand and said, “Put me on an autoresponder so that if something in the ZIP code or area comes up, I’ll see it.”
Dave: And lo and behold it popped up. How many of those did you get a day? You must get a bunch of those?
Elio: I get about 30 to 40.
Dave: Yeah. So it’s not only in your area, it’s all over the county kind of.
Elio: Yeah, pretty much.
Dave: OK. So you called and talked to the agent and your goal was to do what by talking to her?
Elio: It was listed at 150,000 bucks, and at 150, it wasn’t a deal. So I went to get on the phone with the agent and find a reason. I wanted to justify my wholesale offer at 115. So I was looking for the seller’s motivation and I want to get to see if there was anything that I could offer the seller outside of the price itself to make my offer more attractive at 115.
Dave: So, you were looking for the problem that the seller had and you’re going to offer a solution because we can’t compete price-wise as you said somewhere before.
Dave: OK. So, you talked to the agent, found out that the seller was motivated.
Elio: Yeah, the seller was – she was motivated. She just moved into an assisted living facility and her son had no money to pay for it. They had to sell yesterday.
Dave: OK. And he had also been injured in some way, right?
Elio: Right. So the agent let me know that the seller had got into a car accident a few weeks back and he was struggling. So took care of the property out with all the furniture in and takes a big hit.
Dave: So what they needed is a cash buyer which was what you were. They didn’t want to wait for FHA financing that would take 45 or 90 days and then not happen to be selling.
Dave: So you were there with the solution with of being a cash buyer and a quick closing. And what did you say to somebody about cleaning out the house? Did you go into details about that?
Elio: Yeah. I let the agent know to tell the seller’s son that all he basically had to do was just pick and choose the items that he wanted.
Dave: Personal items.
Elio: Personal items. And that we either donate the rest or we’ll just trash it out. And if he needed help moving those – his personal items as well, we’d assist him with that.
Dave: Yeah. It’s a very powerful solution because a lot of the sellers only ever sell their home maybe once or twice and they have this idea that it has to be cleaned out and ready for the end buyer to do it. And that – taking that burden away from them I’m going to say about, “You have to clean out the house. It has to be broom-swept and so on and so forth,” is worth a lot of money to them. They don’t care so much about the money. They care about solving the problem.
So what did you get it in under contract for?
Elio: It was listed at 149 and I got it under contract for 115.
Dave: OK. So when you hear about every property I sell at or about the list price when you talk to agents not necessarily true, it depends on the situation and how long it has been on the market so on and so forth. This happened to be a reverse situation. You just got it as it went on the market. You knew what it was. But they accepted your offer at 115 and you put it under contract. Now, after you had it under contract, what happened? Some other people came out of the woodwork sort of.
Elio: Oh yeah. Throughout that weekend, I spoke to the agent on Friday evening and over the course of the weekend, she received three or four other cash offers at 130, 135, much higher than my offer was. But I had a verbal commitment. My contract didn’t get executed until well into the next week.
Dave: OK. One thing to say to you is verbal means nothing in the contract law. So get it under contract and signed ASAP. But you’re fortunate in that the agent has stuck by you so to speak when higher offers came in. Typically they’re only concerned about is getting a higher commission.
So you got it under contract the following week. And then you started to market it.
Elio: I started to market it.
Dave: And did you sell it through our wholesale list and yours or just yours or what?
Elio: I sold it to a contact that I had met at one of the REIA meetings.
Elio: A few months back.
Dave: So at somebody you knew.
Dave: And what you decided to do is to do an assignment of contract which was another point I want to bring up. The first point was you need to be able to talk to the agents. Although they are not on your side typically, they’re not enemies either. And they can help you in an enormous way if you really talk to them. And what we do is we make these ridiculously low offers but in fact, it’s the opportunity to be able to talk to the agent about what else they have and so on.
But was that your first offer at 115 by the way?
Elio: My offer was 110.
Elio: They countered at 115.
Dave: Oh my gosh! They negotiated you out at $5,000. Terrible thing, terrible thing. So, what condition was the property in when you got to see it?
Elio: It was – it needed a full rehab. It was really just outdated and they had a dog living with there that there was somewhat of an odor in the property. But it wasn’t terrible.
Dave: Yeah, it wasn’t fecal material inside and some of the things that we see sometimes.
Dave: All right. So now, you had it under contract. You’ve found a friend of yours in effect to buy it. And you said to him I want to do an assigment of contract.
Dave: And his first words were, “How much are you making?” probably.
Elio: Yeah. I was actually going to double close on it because there was $15,000 spread at the price they offered and they want to add.
Dave: And what’s critical about that is that’s kind of a threshold. We talk about it that it’s going to be more than $10,000 consider doing a double closing because you never know for sure what the seller is going to say because after all, you’re going to make a $15,000 profit. You’re going to own it for an hour and a half technically on paper and the seller can say to themselves, “I sold it too quickly at too low a price.” The end buyer can say, “You’ve made too much money on it.” And too much money for one person is way too much for somebody else or it doesn’t matter. You don’t know when you get in there.
So, you talked to the end buyer and you told them, “This is how much I make.” And you said, “It doesn’t matter.” And how did you breach the subject with the original seller, with the agent?
Elio: The seller was just so motivated to sell the property and close that she didn’t care. It never did come up.
Dave: OK. All right. Good. So you went ahead. And how long did it take to close?
Elio: So, we had the closing set for early like on Monday and we ended up closing on Friday. There was a …
Dave: Got a lien?
Elio: Yeah, there was a lien on the property. It was a home equity line of credit for up to $80,000 and the seller and her son, they had no recollection of ever taking that loan out. And it took – they were on the phone daily with Wells Fargo to try to find out the account number and the payoff amount, if there was a payoff amount. And it turned to be $283 owed on that home equity line of credit.
Dave: Oh, great. OK. Yeah, home equity line of credits are like a landmine when you go to closing because the homeowner typically gets a checkbook and he can write checks against the equity line. And what you’ll see sometimes is the equity line shows that there’s $70,000 due out of $80,000 and then when you get to closing, the homeowner writes a check for 10 grand, cashes it that day. You close. You have to come back and collect it from the homeowner. He always says, “I didn’t know that happened.” They’re very difficult to close out sometimes.
It’s not easy to just get off the payoff and do them because when the banks put them in force, they do them at almost no cost. They don’t charge you for the survey. They don’t charge you for an appraisal. And typically, the closing is done by one of the bank employees in the bank office. So it’s very simple. But they paid for the other parts of it. So they have like a $500 or more investment on it so they don’t like to give up very quickly.
In one situation I had, I literally had to take the seller to the bank and put him in front of the teller at the window and went, “Give me somebody who can close out my equity line of credit. I need a receipt that it has been closed, so on and so forth.” So always be wary of those.
So, any other highlights in this beauty?
Elio: Highlights, well, after I started marketing it, I think some of my buyers that were on my list, they came by. They tried to go around me. They were knocking on the homeowners’ door offering ridiculous amounts of money, 130, 140, all cash, no contingencies.
Dave: Yeah. Go ahead.
Elio: But we were under contract anyways. So they technically couldn’t sell the property to any of those people. But the seller’s son called me up immediately and let me know about it.
Dave: Go ahead. I’m sorry.
Elio: I was just going to say that my buyer’s list is getting pretty large and it’s kind of hard to vet everyone who signs up for it.
Dave: And you can’t really vet them. I mean we love to but except for blacklisting somebody that does that. There are investors who do that on a regular basis. They wait for you to get it under contract. They go to the homeowner and say, “Did he give you the deposit directly? Technically it’s not a valid contract. Sign with me. I’m going to give you an extra $5,000 or $10,000 or more.” And typically, what happens, let’s say in this case, he says, “I’ll give you $140,000. No contingencies.” Before he gets to closing, he says, “Sorry, but it wasn’t in the condition I thought. The best I can do is $110,000 at closing.”
And I’ve seen it happen time and time again where the actual homeowner gets less money than you had it under contract for. One of the ways to overcome that somewhat is the final notice of interest or memorandum of interest in the public record. They’ve been abused in the state of Florida, where we are. It has sort of taken them off as a valid contract in public record.
However, by changing the name, you can put it back in the public record. And I’ve been seeing lately many of them have been coming back. One was from an actual Fannie Mae purchase. It was supposed to have taken place a year ago and the student called me and said, “A year ago, I put this notice of interest in the public record. And now, this Fannie Mae attorney is calling me and wants a release of lien.” That’s what it’s called, a release of notice of interest.
And she said, “What do I do?” And I said, “Go back to him and tell him you had a doc prep fee and that you’re willing to do it for him.” And she did and he – before she went, I said, “Tell him it’s $500. Throw him a number. It’s cheaper than going to court.” And she did and he paid her $500 to sign a release lien that really he didn’t need. But that’s irrelevant.
So, when any of these things happen, one of the things we tell the students to do is go down and file it because you have a valid contract whether or not it works out. Now, the most we’ve had that has been paid for notice of interest a number of times had been $7,000 and $7,500. So it depends on how much the end buyer wants to close, how much his attorney needs your release of lien, so on and so forth.
So, any other last comments on your $15,000 profit?
Elio: No. I think that’s just about sums it.
Dave: OK. What would you say to somebody else who’s thinking about becoming an investor?
Elio: I would say go for it. It’s definitely not easy but it’s well worth it. It’s well worth it. The money, the freedom, it’s worth it. Go for it.
Dave: You also have to be persistent. What I say and you’ve heard me say it a lot is the losers quit and the winners never quit. And you persisted in doing this so …
Elio: Persistent, resourceful, that’s something we should mention.
Dave: I call it all the time, the most successful students become very, very resourceful and it’s because they hit roadblocks all the time. But they either come to us and we give them a solution or they come up with a solution themselves. There’s always a solution. So OK, thank you very much.
Elio: Thanks, Dave.
To learn more about my Dave Dinkel real estate investing mentoring program, click here https://davedinkel.com/mentoring-program/ or click below.