Big Lessons Learned fron a Lost deal (long) - Posted by Phong

Posted by phong on July 02, 2003 at 01:58:54:

Ron,

Thank you for such great advice. I’ll make sure to go out there and find even better ones to make up for it. This Real Estate this has such great potential. I’m so glad I found this site and great gurus like you for guidance. Thank you from the bottom of my heart.

Big Lessons Learned fron a Lost deal (long) - Posted by Phong

Posted by Phong on June 30, 2003 at 18:03:16:

About two months ago, I found an abandoned house near my house. After being able to successfully able to contact the owner, she agreed to look into the possibility of selling the house. We arranged a time for her daughter to show the house. The inside and outside was a mess. It looked more like a cabin than a house and looked to me more like potential tear-down candidate than a fixer (although it is structurally sound).
Here are the figures:

?h Land value $65,000 to $75k
?h Fixing cost would be at least 40k if someone decides to fix it up. After fixing it, it would be worth around 140k (this is a very small house)
?h My plan: to buy it at around 35k cash and quickly sell it for around $55k (very reasonable because I know of people who would jump at this chance) or just tear it down and build a nice house on it for a good sized profit.

I asked the daughter what her mother wanted to sell the house at. She said she know that it¡¦s worth about 120k fixed up but she knows there¡¦s significant work to be done. I told her the fix-up cost would be way too much and the best use for this property would be to tear it down. I told her that the land value for this would be around 65k, which she agreed. Big mistake #1-I shouldn¡¦t have mentioned the value of the land. I also told her that it would cost around 20k to tear this place down. After emphasizing the value of the land and the cost to tear down, we soon departed. Big mistake #2-I should have made it clear that I did not make an offer for $65k.

The daughter contacted me a day after our first meeting and told me that her mother accepted the offer amount of 65k. I apologized and told her that I did not make that offer and that my best offer would only be $30k (65k for value of land ¡V 20k to tear down ¡V 15k for my profit). Big mistake #3 ¡V I shouldn¡¦t have stated my offer amount before she stated her asking price. Obviously the 30k offer is much more smaller than the $65k so she was kind of upset. We ended the conversation with me apologizing for the mistake and her going back to her mom to relay my offer amount.

I called her 4 days after that and asked for status update. She said her mother would be ok with paying for the tear-down cost but she doesn¡¦t want me getting that 15k in profit. I told her nobody would buy this property and take on this complicated task of tearing down the house without compensation, especially when they could buy a nice piece of land in the area for pretty much the same price. I however told her that I¡¦d be willing to increase the offer amount to $35k if she¡¦s willing to take $20k cash and $15k in 6 months. Big mistake #4 ¡V I¡¦m not sure where I learned this technique from but 15k now or 15k later wouldn¡¦t make much of a difference because I do have the cash to cover this purchase and plus my intention is to never keep it for a long time anyway. We ended the conversation again with her going back to ask the mother.

A few days a later, I called the daughter again and she said that the 35k is kind of low and that her mother would want all the cash up front, not waiting 6 months to get it. I said I should be able to scrap everything together and come up with 35k in cash if she¡¦s will to accept the 35k.

Well, the daughter called a week later (last Saturday) and said her mom would accept the offer. I, not wanting to sound too eager, told her to give me a few days to make my decision. Huge mistake #5 ¡V I should have accepted this right away and get something signed since I know I could back out or haggle later. I don¡¦t know what I was thinking. Such a dumb, dumb move. I called last Monday but she didn¡¦t pick up the phone. She called back Tuesday telling me that she was to get somebody else to look at the house. On Friday she called back and said this person had made a higher offer (she wouldn¡¦t disclose the offering amount) and her mom accepted the offer. I called her yesterday hoping she¡¦d change her mind. she basically told me I changed my mind too often and didn¡¦t seem capable of going through with the deal and that was the end of it.

I¡¦m extremely depressed now because the house is only a block from my place. It hurts every time I pass by it. I could have made an easy 20k on it for minimal effort but my plan got stopped by my stupidity. I know I¡¦d eventually have to move on but this depresses me so much. Any advice for this beginner? Any story to share?

Re: Big Lessons Learned fron a Lost deal (long) - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 02, 2003 at 01:11:48:

Phong------------------

Now, just don’t turn around and make the other bad mistake so many investors make. That is to jump in too deep too soon. Don’t move so fast that you get yourself stuck out in a terrible deal.

Good Investing**********Ron Starr**************

Re: Big Lessons Learned fron a Lost deal (long) - Posted by Matt(MI)

Posted by Matt(MI) on July 01, 2003 at 11:53:55:

Let’s get out there and do it again!

Good Job, there are thousands of people losing the opportunity because they don’t take action!

Wayne Gretzky said “You miss 100% of the shots you never take”

If it makes you feel any better… - Posted by Anne_ND

Posted by Anne_ND on July 01, 2003 at 06:51:40:

… I lost one yesterday because you can’t steal in slow motion.

This was a listed property in our favorite neighborhood. Listed at $24K, I delayed calling the agent because I’ve been feeling a bit under the weather. I called yesterday and found out it’s our favorite kind of property: full of cat pee, dead animals, no mechanicals, and hanging plaster. But some charm under all the stink. We made a verbal offer of $5K which the agent who answered the phone said would probably be accepted. We high-tailed it over there to find out the owner had accepted an offer of “close to asking price” just hours before. ARGH!!!

I am still hopeful the first offer will fall through because anyone with rehab experience would know that anything over $10K for this is way over-priced (hence, it’s not an experienced rehabber who bought it), and I can’t imagine the bank that would finance this house for close to $24K.

The only good thing is we’re bidding to buy the empty lot next door- at $1K we are pretty certain to get it. We will be able to either build a new house or flip it to the new buyer for a couple of thousand.

The lesson here: even though the listing agent has known us for years and KNOWS what we’re looking for, she never called us. No agent name was on the sign because she didn’t want anyone to know she listing such a dump. Obviously we need to be more vigilant about reminding agents of what we’re looking for.

I feel your pain.

Anne

You know what they say… - Posted by B.L.Renfrow

Posted by B.L.Renfrow on July 01, 2003 at 24:33:55:

The deal of a lifetime comes around about once a week!

The only way most of learn to negotiate effectively is by doing it – mistakes included. Unless you are a “born negotiator” apply what you have learned and use it to do better next time.

Brian (NY)

Re: Big Lessons Learned fron a Lost deal (long) - Posted by David

Posted by David on June 30, 2003 at 19:31:15:

I got one too Nice house high appraisal, low buy. GENEROUS owner willing to do anything on terms to cover his arrears. I COULDVE had a 65k-75k appraiser on a 40K assignable L/O or subject-to and only cover arrears, a few k$.
lease payment would’ve gone easily to 575$ with up front money to boot. Monthly PITI was a measly $225.
I didnt know that then. I kept driving by the place and not calling because I was a scaredy cat. When I finally called I was a week too late! The buyer moved in shortly thereafter, has now defaulted and it is in the hands of the HUD people as of today. Buyer never even offered owner a case of beer for the deal. I would’ve!
So MY butt is red from my own kicking of it and I learned too. Keep in mind this - you got a no cost lesson. A NO PROFIT lesson - but a no cost one.
By the way any ideas with working with them HUD-ocrats on this place.?
peace,
DAvid

Re: Big Lessons Learned fron a Lost deal (long) - Posted by Kristy-AZ

Posted by Kristy-AZ on June 30, 2003 at 18:52:47:

Phong,

Yes, it is a big lesson, that I would think most of us at one time or another has been through. In our case it wasn’t us telling the sellers we’de think about it, it was the sellers telling us they wanted to sleep on it. I still have a hard time figureing out what to tell them. Basically, here’s my offer, take it today or don’t expect me to come back. If I tell them that then they would just move on to the next investor. And there are plenty here.

Keep at it. you’ll get a good one again.

Best of luck,

Kristy-AZ

Ron’s right… - Posted by IB (NJ)

Posted by IB (NJ) on June 30, 2003 at 18:49:42:

One of the good things out of this is at least you know that you can negotiate a good deal. Don’t beat yourself up over this. Only do that if you continue to make the same mistakes. One way to make yourself feel better is to get another deal.

Re: Big Lessons Learned fron a Lost deal (long) - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on June 30, 2003 at 18:12:46:

Phong-------------

So, you learned a lot. One thing you did not learn: don’t put your hopes on a single property. Always have dozens or hundreds of houses in the pipeline for consideration.

Congratulations on negotiating a good deal for yourself. You can do that again in the future.

Good Investing*********Ron Starr************