Wholesaling Real Estate – Worst Seller Ever. Part I

Me and the Worst Seller in Wholesaling History

This story can finally go online because it’s been about a year since this deal went down and I am no longer being stalked, yes stalked. You see, it all started around March or April of 2010. My buddy and I decided to join forces and do a probate campaign. We got our leads, made the cards and sent them out.

The number of calls were small, like 15 or so for over 700 pieces of mail (Under 2% response rate). None of them seemed to be getting us anywhere and we feared that our small mail campaign went bust. Since partnering was my idea, I felt TERRIBLE about the situation…

As soon as we thought the letters were a bust, my partner at the time tells me he got a call from, Joe (not his real name).  Being a good wholesaler, I called Joe and went through a standard qualification call. EUREKA! We have an ideal seller!!

• Brick SFR house in ideal neighborhood in Chicago
• Property was inherited with very little owed
• The home was almost vacant
• Seller was more then motivated to get some fast cash
• Not a gut rehab and the rough numbers we spoke of seemed to work – easy peasy…

The appointment was set and the next day me and my partner went down there.

The Meeting

Before arriving at the property, I already knew my numbers and I had my offer ready. My max offer was going to cover his mortgage, estimated bills, closing, and give him the cash he was looking for.

Once we arrive to the property, nothing was out of the ordinary. The property proudly waved a marines flag on the front lawn. As soon as we asked what the flag was about Joe proceeded to tell us that he is a trained killing machine i.e. served in a few wars, was once a national kick boxing champion, ex-MMA fighter – the works. While impressive, I thought it was pretty cool and nothing more.

We walked about the house, pointed out the work that needed to be done and came up with a rough estimate of the work necessary to fix it and sell it. A typical wholesaler at work.

My partner and I walked around the house, took pictures and did small talk. Once in the basement, Joe told us stories of his training days and his survival training certificates. Basically you could drop him in a desert with a knife and he could survive for a month – Bear Grylls like.

In any event, I presented my offer and explained ourselves. Joe laughed and started to tell us how many offers he has turned down and that he already had accepted an offer from another buyer for 30K on top of our offer.

The First Problem

At this point we just learned that Joe had another buyer in the works. Also, Joe had signed contract with another buyer who was purchasing it contingent on financing (where have we heard that before hm…). I was confused as to why he would waste our time and his, so I began to dig and it turns out the “buyer” had spent 3 months trying to get financed – aka find a buyer. Over the span of these months, Joe had become irate with this investor and wanted a new one fast, which is why he had us over.

We continued our conversation and Joe told us that there was a mortgage on the property and that it had not been paid in a few months. The bank was threatening foreclosure but he ignored that because he said nobody would foreclose on a veteran. Right. We wrapped up our meeting and I asked for some documents and got a signed Authorization so I could at least know what was going on with the mortgage. I also asked to have his attorney’s number so I can get my offer to him, just in case.

A few days pass and I call Joe’s attorney and leave a message saying I am interested in purchasing the property. Joe’s attorney calls me back. I proceeded to have the most uncomfortable conversation I’ve ever had with an attorney.

This gentleman proceeds to yell at me and tell me and goes on about how Joe is crazy and unstable.

Interesting…

I do my best to understand what is going on. I go through my talk and tell the attorney that I have cash and can close and the buyer they had was not pulling the trigger anytime soon. I explained that Joe seemed very eager to get the deal done and at my asking price.

The following is a dramatization:

Attorney: “What is your offer?”

Me: “60K”

Attorney: [laughter] click…………

Me: “Hello?… hello?….. HOW DARE YOU HANG UP ON ME!” <– not really, but I was thinking it = P

Sidenote – Ever get that feeling that something jus’ ain’t right? Yep. I had that. A lot of it actually.

Honestly after that phone call, I felt defeated and frustrated that I had a good deal and that it was gone. My partner was letting me handle the situation because I had a bit more experience and I built up rapport. Either way, I continued to try to do the deal and I was not expecting what followed.

The Second Sign of Crazy

Another few days pass, my phone rings from unknown caller and I answer. Immediately I hear rage, lots of rage, to the point where the phone sounds like static. I get the caller to calm down – it was obviously Joe – and have him explain to me what is going on.

Joe was able to reach his attorney a day or so later and speak with him regarding getting the house sold and getting him paid. From my understanding, Joe’s attorney had had enough and instructed Joe to let him do all the negotiating. For some odd reason Joe believed the attorney was out to get the property for himself and that he was waiting for a foreclosure notice so he could make the bank an offer and buy it outright.

It Just Got Weird…

Joe tells me that he fired his attorney over the phone, and told him to give him all the paper work immediately or that he will go down to his office and basically “teach him a lesson”. (No seriously, I had to talk Joe out of going downtown and man-handling his ex attorney!)

At this point I learned 3 things:

• Joe needed an attorney – fast
• Joe was willing to beat up attorneys – no joke
• I gave a crazy man my direct contact number – no bueno

To make matters more interesting, Joe called me and said, “If you can find me an attorney, the house is yours!”.

Me: Awesome? [sarcasm]

But Guru’s Never Teach About Crazies, What Do I Do Next?

I made a list of attorneys that I had met in the past and gave him their contact information. However, before I did this I called these attorneys to explain the situation. Surprisingly, most of the attorneys seemed willing to work with Joe. Once I got that clearance, I gave Joe whatever information I knew on each and let him call them and speak directly.

Guru Training in action: You see, I bought a negotiating course and it taught me to be open and do whatever it takes to give the seller what they ask for. Attorneys, contractors, etc.. all those business cards and networking events came in handy!

Joe had called and gone with an attorney I knew very well and had worked with before.

Unfortunately because of the way the conversation with his first attorney did not go so well, I was unable to get any extra information regarding the closing costs or taxes. I asked Joe and he believed all costs totaled like 30K, which didn’t bother us because he would still walk with more than what he was looking to get, no problem, right? Wrong!

With the new attorney working for him, I found out that Joe had not paid a single dollar on the note, taxes, water, or lights since the day he inherited the property. After adding up the numbers, Joe’s estimated number on the pay-off was about 20K off!

When Things Got Even Weirder

By this point, a month or so went by and I lined up a buyer at a higher price so I could get a bit more for everyone involved and still get the deal done. The only saving grace was the fact that it was in good condition. Typically, investors are looking for properties under 50K, but this one was in a great neighborhood and was very clean. My investor did not mind a higher purchase price because it could be cleaned and rented within a month for great cash flow – or flipped for a quick profit, either way he was patient.

By the time we helped with a new attorney, get payoff amounts, and schedule a closing, Joe started to get a bit… off.

When I first met him, I told Joe I would do my best to get the deal done and regardless of what I could earn, (my wholesale fee was 4K) I would look out for him. My offer was firm and based purely on what the market, property condition, and investors in the area dictated. With a new attorney and updated payoff information, we told Joe he would be able to walk away with a bit less than he expected but not by much. Joe thought that was fair, signed and gave us the thumbs up.

As the closing date got closer Joe was under the impression that we guaranteed him a specific amount of money at the closing table. Many real estate guru’s will tell you this is a common misconception by sellers. Obviously you never guarantee anything during a deal.

In any event, Joe kept trying to call off the deal and started asking for more and more money. He was told the numbers and he had agreed to them, nothing changed yet he wanted more money. I even took my fee and reduced it to 2K so the deal could get done.

We are now into month 3 since we met Joe and started working this deal. By now it was obvious that Joe was not reasonable and was making it very difficult to get the deal done in time – since there was a foreclosure auction coming up and his taxes were also going up for sale.

To make  a longer story short here is what happened for the next 2 months

• Joe called the new attorney and threatened him if he did not get him more money
• Joe called me and did the same.
• Because Joe goes in and out of town a lot, he would only call me once or so a week, mostly to cancel the deal and ask for money
• It took another 2 months to get done because water certification needed to be done and the city fired most of their water workers so that took time

Well we finally get to closing, almost 5 months after our initial phone call and appointment. I thought this was going to be the end of it.

That was until my girlfriend saw someone sitting in front of my house!

To be continued….