As an Investor your exit strategy when purchasing a home is very important. As an Investor you should have more than one exit strategy for example: buy, fix and then flip or hold, wholesale during the contract inspection period or purchase and flip “as is”. Every Investor should have a formula when purchasing a property. Recently I partnered with a student on a house in Tampa, Florida. The student was in my mentor program and it was her first deal. She found the house by sending a yellow letter to the Sellers. The Yellow Letter said “Hi, I am interested in buying house for CASH at 123 Main Street. Please call me at 321-555-5555. Sincerely, Student’s name”. The Student received a call from one of the Sellers and she filled out the Seller Information Sheet. We did a conference to the Seller and built more rapport. The Student made an appointment to go to the house and take pictures of the houses. She emailed me the pictures of the house so we could look at all the repairs necessary and make an offer on the house.
During my conference call with the Seller and the Student we found out that two elderly women (sisters) inherited the property and that one of the women still lived in the house. The house was approximately 1100 square feet, built in 1920 and had a separate 340 square foot house on the lot including a one car garage. The houses and garage were all wood frames and were termite infested and had major wood damage due to termites and water. In addition, the plumbing, flooring, windows, doors, kitchen and bathrooms all needed to be updated. The houses already had updated electrical boxes and could be considered a 3 unit. The Buyer would have to confirm with zoning if a 3 unit would be allowed on the property. The driveway of the house is very narrow and the houses were right next to a commercial car lot with a solid brick wall. The neighborhood at the time of our first offer was selling in the $200,000 range. We also found out during our call that there was two houses filled with furniture and personal items that would have to be moved in addition to a one car garage stacked to the top. The Sellers were elderly and they needed help paying for the move of the personal items and additional time to move the items out of the home after the sold the property.
After reviewing all the pictures and discussing all the repairs, we made an offer on the house for $35,000, we would pay for the closing costs, give $2,000 over and above the purchase price to help with the moving of items and give them an additional 30 days after closing to move the items. This offer was made in late 2016. We found out that the sister that lived in the house was really not the Seller that would make the final decision. The Sister that didn’t live in the house was the Personal Representative (PR) of the Estate. She also received offers from other Investors which were higher than our first offer. I had not personally seen the houses nor had I driven the neighborhood. My value was based on houses that had sold no more than 6 months ago and no further than .5 miles away.
We submitted a higher offer of $66,000 to the Sellers. We found out that the PR had already met with her attorney on another Investor’s offer which was lower than our offer. I normally will not increase my offer to my best offer without personally going to the house. However, due to the fact that there was another offer that the Sellers were going to sign that day, we submitted our offer. This offer was submitted in September of 2017. We discussed with the PR all the terms and conditions of the offer. The PR liked the other Investor and the Seller who lived in the house liked my Student personally.
My Student followed up constantly with her Seller and the Seller had to follow up with her sister (PR). We had gone back and forth so many times and they had said they were going to sign our offer and send it back to us, however, we never got it. It got to the point that as a seasoned investor that I knew that the Sellers were playing games with us and shopping our offer. The PR Seller contacted me in late December of 2017 and started asking the same questions again regarding our offer. I sent her an email that stated this is our highest and best offer and they need to make a decision with the offer and quit wasting our time. My Student almost had a heart attack from my email. Every Investor should know when to do a “take away offer” and that was what my email was. We didn’t hear anything from the Sellers until February 2018.
In February of 2018, both Sellers signed the offer, made minor changes, and I signed the contract again. My contract had a 10 day inspection period. Due to the major damage on the home and termite damage, we had a home inspector and a termite inspector. I personally went to the house to do my own inspection and drive the neighborhood. The inspections on the houses and termite inspection showed all of the above damage as mentioned above. When we submitted the offer, we did not know of all the damage as I made offers based on the pictures of the house.
My Student and I drove the neighborhood and found out that there was a lake down the street, and the values of the houses were from $200,000 to $300,000. Prior to driving the neighborhood and seeing all the other houses that sold and were listed for sale; our intention was to reduce our offer based on all the damage. However, after looking at all the above information we accepted the house at $66,000 and set the house for closing. Total cost of repairs would range from $75,000 to $95,000 should we decide to retail the house.
We had to help the Sellers go through all the items in the house, pack them and delivery them to Seller’s new house which was 1 hour away. It took my student and I along with my son three times to take all her belongings to her. We set the house for closing and changed possession to the closing date.
My 3 man rehab crew was busy with two other houses in the Orlando area so we decided to list the house for $109,900 cash only with my agency. We received 7 offers and settled on an offer for $117,000. My Student had spent approximately 40 hours on this property during the 2016 to 2018 time frame. We owned the house for a total of 14 days and have made a profit of approximately $40,000.
I hope this article helps educate you on making two offers at the same time opening the doors for more deals.
Happy House Hunting!!!
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