EarlToms Podcast - Wholesaling Real Estate

Wholesale the Right Houses

September 01, 2020 EarlToms Episode 19
Wholesale the Right Houses
EarlToms Podcast - Wholesaling Real Estate
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EarlToms Podcast - Wholesaling Real Estate
Wholesale the Right Houses
Sep 01, 2020 Episode 19

In this episode EarlToms discusses how to wholesale the right houses. It makes a big difference in your close rate and success of your business. EarlToms also goes over his call sheet and how he structures the conversation with sellers to find the right houses to wholesale and pass on the houses that aren't going to close.

For more information to help grow your business visit https://EarlToms.com


Show Notes Transcript

In this episode EarlToms discusses how to wholesale the right houses. It makes a big difference in your close rate and success of your business. EarlToms also goes over his call sheet and how he structures the conversation with sellers to find the right houses to wholesale and pass on the houses that aren't going to close.

For more information to help grow your business visit https://EarlToms.com


Welcome to EarlToms podcast.

Today we're gonna go over whether or not you're actually trying to wholesale the right deals. Or if you're just kind of chasing your tail. We took a break on the last one, I was actually moving so had to get that situated and didn't didn't have time, unfortunately to to get one recorded when it was expected to be produced. But we're back now. So I want to go over some things because I see this a lot of times on these on these questions. These groups that are on Facebook, people are asking, Hey, if you know if I've got this deal, the circumstances, you know, is it a deal? Well, there's a way to know whether or not it's the right deal. The first and the most obvious answer to that is if you're having to ask that question, then no, it is not the right deal. The The easiest way to understand if it's the right deal that you need to be wholesaling, is whether or not getting to that point is attainable. So, I'm not saying that it needs to be easy, because sometimes negotiating isn't easy. You know, there are certain signs that that you'll know whether or not you're going to have trouble getting that deal to the closing table, regardless of buyer. You're I'm talking more of seller. So I'll give you an example that I had a couple of weeks ago. I went and put a contract on a house under contract and thought everything was fine. The lady honestly didn't know if you know for her husband was still on it because he had passed away. It was gonna need a lot of work. But it was doable. I was just gonna buy and renovate it and put a tenant in it, it was it was one of those properties that I would have wound up holding, instead of actually turning around and selling. So I get the house under contract, and you know, think everything's fine. But there was a voice in the back of my head that said, hold off before you send it to the title company, to go ahead and start pulling the title and getting, you know, the municipal letters and getting everything situated for closing. And I had put this house under contract on a Thursday. So I told myself, you know, I'll send it over first part of next week will come Sunday, my phone is just ringing off the hook. While I'm trying to get everything moved with the movers and everything else. And after the third or fourth call, I finally just answered the phone. And the lady told me that her daughter that she had misspoken that about What she would be able to sell the house for because her daughter said that she needed $10,000 more for the contract. And I and I just told her, I said, Ma'am, if you need that much, then I can't buy it. So you can either have 100% of the contract, or you can have 100% of nothing. Because this house, it had some foundation issues. The basement was basically filling up with water every time that it rained.

So she said, you know, hey, I have to have this, this is what my daughter said. And I said, Well, I'm not gonna buy it then. So I'll send you a text after we hang up that essentially says that I'm not going to buy this, this house from you and let it let it serve as the release from the contract. Because one thing I do on all of my contracts, is I put a 21 day inspection period or what I call is a study period. So it does Unnecessarily scare your home your homeowners because they say, Oh, well, you've got to have this for 21 days just as an expect inspection, but yet you're going to close it, you know, in 30. So I just tell them, it's a study period. And I kind of let some that eases their mind a little bit. So that's one scenario to where, you know, you have this, this gut instinct that says, you know, hey, there may be something that doesn't actually allow you to buy this house. And when I was talking to the lady while I was out at the house, she had already mentioned her, you know, her, her children. So I had an idea that this was going to be the it could be the scenario to where all the kids get involved and go, Hey, this is my one chance in life to actually have some money because it wasn't a great area. I actually put the house under contract for $20,000. So for the kids to say, hey, I need 30,000 for the house. Like I said, this was that scenario to where the kids go, Hey, this is one of those chances in my life where I actually get some money when I'm not gonna have it, you know, for the rest of my life or whatnot. So that little voice was was saying hold off, don't go ahead and start wasting money on title to be able to get this closed. And sure enough, the kids decided they were going to get greedy and take their shot. And so now instead of actually having a portion of something, the kids have a portion of nothing in the end they still have to try to get this house sold. And there there's no way that they're going to get this house sold above $20,000 because of the damage on the foundation, and the water and mold and everything that's in the basement right now minute needed a good amount of foundation work and remediation for the mold. I mean, the the downstairs was pretty well just going to be a gut But that's one scenario when we all face them.

But you have to let your intuition your gut feeling kind of lead you a lot of times in these and be able to walk away, because it's not. If you go through that, that process that says, hey, every day I have to do it, I have to do it and you start forcing things, you go back to one of the very first episodes that I ever did, where I talked about the favor, the favor will get you in trouble every single time. If you don't have the ability to walk away, then you're going to get yourself in trouble. Being able to walk away is one of the very best negotiating tools that you can have on your tool belt. Because that person that's come to you needs that money. You were essentially their only hope, their last hope, whatever it may be, of actually being able to get that money. So when you go in and all happy and oh, I can do this, and I can do that without having the, you know, hey, I can only pay this much.

What are you going to do if, you know, if I don't get it from you. If you don't go on with that scenario, you're hurting yourself, you're paying more every time. Having the ability to walk away from something and scaring them kind of using a fear tactic is one of the very best negotiating tools that you can use. You've got I see a lot of I'm gonna give some other examples, but I see a lot of these questions. You know, in these in these groups, and people ask me all the time, when they call and say, hey, I've got this, this deal this scenario. And in the back of my mind, I'm just thinking, why are you even calling me about this, I've told you thousands of times not to even try that. And then every time that they wind up trying it, then you know it goes sideways, they don't get it closed. So now they've wasted all this time, all this effort on trying to get a deal closed. It wasn't comfortable in the first place. But their mind was so in. It was so tough. It had that tunnel vision to where they couldn't see the obvious. It's, it's a, this is a business, you're here to make money, not cause stress for yourself. I mean, every business is going to have stress. But if you try to get everything under contract and don't have the ability to walk away, you might as well get out of this business because you're going to put more deals under contract than you're ever going to close. You need to have your closing rate when you put something under contract to be above 90%. If you don't have your close rate above 90% on on properties you actually put under contract, you are doing it wrong. And I want to say that again. If your close rate on things that you put under contract is not above 90%. You are doing it wrong. You're spending more time more money, more effort on things that you can't get closed. And it's clouding your judgment and you can't see. Because you're, you're so smothered by all these deals, you're trying to get closed, that it's pointless for you, you're not profitable. If you can't get if you can't close 90% of the contracts that you put under contract, you need to stop analyzer the way that you're going about your business and change it. Because you'll make more money.

You'll have less time spent on getting these deals closed then you can imagine, I mean, I honestly probably work three to four hours a day, and the rest of the time. I'm out there hunting new buyers. I'm playing on Facebook. I'm doing things with my business, marketing, SEO, you name it. I'm not 100% focused on getting deals closed.

Whenever I get a deal under contract. That's peace time for me.

And I'll give you an example. I put a house under contract last weekend, this past weekend, but the weekend before and I sent it off. I got an offer on it. Okay, I can sell it that, you know, it had a nice little profit on it, I can sell it to you. They send their inspector out there, and they wind up adding $12,000 to the contract of what they could pay for it. And I just told him, I said, That's way too much because I actually had this house under contract for $41,000. And then the next thing you know, they came back and said they could pay 77 for it. So I was sitting there thinking to myself, I'm not gonna make $36,000 on a $41,000 house because This is a regular client of mine. So I told him I said, let's just let's just split it. Let's meet in the middle because they had originally offered 65,000. So now I'm selling it to him for 71. Five. They're happy about it. But what you what you miss and what a lot of wholesalers Miss is what happened last night. I sent him five houses on Friday. And come to find out this investor put one of his houses on the market with an agent over the weekend that he wanted me to sin to get sold for him because another buyer backed out. So now he stuck with five houses that he bought, he chose to be a provider to a turnkey company. So when they call I said you know what, it's time to teach a lesson. Because you help these investors get their property sold. And they love you for a little while. And then all of a sudden, they get a little bit desperate and like I've always said, it may take a week, it may take a month, it may take a year. But eventually money brings out the full and everyone.

It's just the way that life works. I don't know why money does that to people, but it does. So what I told the buyer was, let's teach them a lesson. You're not going to make an offer on the one that they put on the MLS. And you're going to make low offers on everything else because I honestly don't care if I sell them or not. And they go, Okay, well, that's fine. I said, and by the way, he's got 12 more behind it. They're sitting there ready to close right now, but the other company camp can't close on. So if you get any of these, the next set of 12 come in, I want you to make him lose money. I want him to understand how you treat people, your relationships that you have to build. And if you're gonna go about it underhanded then you can move on because I'm not gonna work with you, either. anymore. And they that buyer basically just said, You know what, you're right. It's about relationships. And I'm not even worried about it. And this is a this is an actual buyer that buys over 100 houses every single month across the country. They just happen to buy my market too. So you have to get into that relationship mentality with these buyers, but, but going back to the issues that you can have, like with this investor, all he had, I mean, he had been waiting six months to close these deals that he was that the that his original buyer wouldn't able to do.

What we had to do is wait a couple of days, but he couldn't even do that. He got greedy, and now he's only got one one offer, they could possibly close out of the five of them. So he basically did it to himself, which I see a lot of other wholesalers do, because there are lessons in this business that will be taught to you one way or the other. There's investors out there, there's other wholesalers out there, they're going to teach you lessons the easy way or the hard way. So it's up to you to define how those lessons get taught to you. Are you actually worried more about the relationships? Or are you so focused on I've got to get this closed, I don't care how I do my business. I'm a used car salesman. So only thing that matters is money in my bank account. If you have that approach. Again, you might as well get out of the business now because you're not gonna last long. The lesson will be taught to you the hard way, and you will wake up one morning crime after you've cried yourself to sleep the night before.

But we go back to these these deals that I see these people post and call me about, you know, one of them. They'll they'll call and say, Hey, this is this person owes $100,000 on the house, the condition that it's in can get it sold for $75,000. How much? You know, do you think I can actually try to get it under contract with? Is it even able to do a deal when I'm sitting there to myself thinking? You can only sell it for 75,000 in the condition that it's in right now you already know that. You know, they owe $100,000 on the house. Why are you even considering trying to do something with this deal? This is where you might. It's not a fun conversation. But this is where you have to be honest. I'm sorry, Miss Mr. Mrs. seller, you owe $25,000 more than the house is even worth. I'm an investor, I have to make money on it. I don't have to get rich on everything. But I have to make money to be able to keep my doors open. So I would actually be somewhere in the neighborhood of maybe 60,000. So there's no way that you can bring $40,000 to the closing table. Unfortunately right now, I'm not going to be able to help you. Sometimes you have to have that conversation. It's it's a, it's not a fun conversation, but it's a necessary conversation.

Other times that I see, people call, and I've had this happen to me time and time again, is you'll say, This property is $100,000. They owe 65 on it, but they've got a tax lien property taxes or IRS. They owe $30,000 on it. You just told yourself right then in there, that there's no way to close this deal unless that person brings $30,000 to the closing table because that $30,000 is to spread. Why are you even considering you don't go and call somebody like me, and you don't go to Facebook groups and say, hey, how can I do this do this subject to and all this other stuff that everybody's trying to do? I mean, it works for some people. But most people in these situations, they do want out of them, they want a solution to it. But if you do those, really all you're doing is prolonging the inevitable for them, because you're gonna make $1 today, but in five years, one year, whatever it may be, something's going to happen to that property. It almost always does. Whether it be the mortgage company that draws bond realizes that that person is not living there, or you get a house fire, or something happens to the house. The new quote unquote owner has to file an insurance claim. Then they figure out that, hey, we've got a subject to there's a mortgage. There's this when that new owner has basically had to lie, because they didn't have clear title to the property to get insurance on it. There's so many things on the subject, twos that they just go wrong. But I understand some people try to do it just for that quick little buck, even though they're not really making anything. No. And in the end, what they're really doing is hurting the buyer and the seller in the long run.

So it's it makes you money today, but it hurts you tomorrow. So you have to decide which one is more important. Are you ever going to get a referral from this person? Are they going to tell a friend about you? Are they you know, this agent has a house that they need to sell, hey, give such and such a call. You got to figure out what's important to you today versus what whether you're going to be in the business tomorrow. It's a lot of wholesalers have the short sightedness instead of long term vision. You look at every deal is overly important when it's not every deal that comes across is something that you could potentially really close. But it has to be right for everyone. When you go to these properties there, I mean, prop stream is a good example. You can go to these programs and you can find out do they have a lien on it? Is it IRS is a tax? How much do they owe? And when you're out there talking to the sellers, whether it's on the phone or in person, you need to be asking these questions because if you're not asking these questions to them, when you're having these initial con, conversations before you put something on the contract, are you doing is hurting yourself and hurting them? ask the tough questions up front. And then when you get to putting it on the contract, you know the answers and if they lied to you, that's a limb. You don't have anything to feel guilty about if they lied to you. Most sellers law, everybody knows that. My house only needs paint and you show up and you got flooring that's been pulled up me holes in the wall. needs a new hpac new roof. I mean, every seller lies about something. It's just the way that it works. One of the ways that I overcome this is I have what I what I call a call sheet.

Every time my phone rings I go through and I write down these things and I'll give it to you in order. This is this is what my call sheet looks like from the top item to the bottom arm. I'll start with the date, because I want to know where what day it came in. Then I have the owner's name. Then I have the address. Then I have the phone number. Then I have the email, bedroom number, bathroom number number of stories. The year bill square footage, does it have a basement? Yes or no? The basement finished. Is it a partial? Is it complete or is it not finished at all? The hv AC is a central window units. Here's the parking is a garage, carport or Street, the number of spaces for parking, then I have their timeframe to sale, mortgage balance, asking price, and then some lines for notes and repairs needed. Now what are even though it's in that order, what I actually do is I go through the majority of them, I get all of the information, I basically go all the way to the garage, I do the whole list all the way to the garage.

And then when I get finished with the physical information down to the garage, I go to the the notes in the repairs needed section and I start asking them, what kind of condition is it in what needs to be done? When was the last time you did this? Whether it be electrical, plumbing, you know, whatever it is. So right before I'm fixing to get to the meat of the matter. I asked them basically to tear their house down to analyze their house, I get all of the physical information, and then I get them to tell me what's wrong with it. Once I get them to tell me what's wrong with it, I go to the mortgage balance, how much do you owe? And I always get a seller to tell me how much they owe. Once I've gotten them to tear their house down and tell me what's wrong with it. Once I get the mortgage balance, then I go to the asking price. And I don't say what's your asking price? I say how much would you like to get for the house to sell it? Then you get that. But this time because you've got all this other information, they've basically given you the full story. If you have if you've taken the the opportunity to educate yourself about your market, know how much things are going to cost. What things are selling for things like that? By the time you get to that asking price, you have one of two options, what actually one of three options? Number one, you're asking too much. Number two, this might be a deal. Or number three, I think I need to look at it before I'll make up my mind. By the time I'm finished with my call sheet. I know whether I'm eliminating that lead or if I'm fixing to pursue it, because I've gotten all the information because the notes and the repairs needed.

Told me whether or not we've got any errors told me whether or not they're late on their mortgage payment. Told me whether or not they haven't paid their taxes. Told me whether or not they've got an IRS lien. Have they done bankruptcy is it dismissed? You get that information? You tearing yourself themselves down and their house in that note some repairs needed say And so again, when we go through this again, top is date, and I've got a line next to every single one of them. The length of the line, basically, is determined on how much information I'm gonna put on there. But you can make one of these very easily in Word, print off 20 copies and every time your phone rings, you go through this, and by the time you get to ask him price, you're going to know one of those three things pursue it, eliminate it, or go look at it.

So once again, date, owner's name, address, phone number, email, bedroom number, bathroom number, number of stories, your built square footage, basement Yes or no? basement finish, partial complete or none hbic Central window units, wall heater, parking garage, carport, Street, number of spaces timeframe to sell, mortgage balance, asking price notes and repairs needed. If you take that approach with your call sheet, and you get in the habit of doing it, just the way that I explained, you get all the information.

That's that's where you start the conversation. That's easy. Then you go to the to the notes, finding out the personal information, then you get the repairs needed. One of the easiest things to get them to tell you what kind of repairs needed, as I phrase it this way. If, if you were going to update something, or if you were going to change something, what would that be?

When you say it that way, they'll go, Well, I needed to update my VC but I didn't have the money. Or two years ago. I had a roof leak. I just patched it but you know, it could use it. A new, a new roof. And it might have stain so I would paint the house. Yeah, that's where they start telling you the story when you phrase it in an easy question like that a relatable question.

That's when they're going to start telling you. So once they've given you their story, their personal story and the story of their house, that's when you go back to the mortgage balance. Once I tell you how much they owe, then you say what would you like to get to sell it? You don't say what's your asking price?

What would you like to get to sell it? And as a direct question, I'm here for it. What's it going to take? Don't say what are you asking? That's basically saying, I'm gonna throw a number out there. And hope I get it. No, no. What do you need to sell the house period need not won't. You have to get to that mentality. And if you go through that call sheet that that way, all of these questions that you have that people call me on, or I see in these groups, you're gonna stop, you're gonna stop pursuing them. Because you know, there's not a deal there, you're gonna stop chasing the rabbit hole, and be able to make more educated, better financial decisions for you and your business. Because one thing that you can't do, and it's something that everybody needs to understand is money does not pay for peace of mind. Peace of mind is valuable. When you stress yourself out, you make bad decisions. So remember that money does not pay for peace of mind. Stop chasing these deals because it's forcing you into more bad decisions, more financial hardship and you cannot get ahead but cuz of the stress that you're putting yourself under, trying to get all of these deals that can't close, no matter how hard you try, no matter how creative you get, they can't close.

Stop chasing them, get that peace of mind. And when you get that peace of mind, go back and look at your bank account, you will see it. A lot has changed in your overall mental state and on your bank statement. And you got to flip the script, to be able to have clarity of mind and the only thing that's going to bring clarity of mind so you make good decisions is peace of mind. Once you get that your bank account will take care of itself. Now, like I said, I apologize for missing the episode a couple of weeks ago, but we're back now so we'll be back on our normal schedule. If you've got you know any questions or anything like that head over to EarlToms.com if you want to look at some little cheap things you can do go over there to EarlToms.com because everything over there is geared to help your business. I mean one thing that I mean I kind of laugh about but my sister has an amazing ability when it comes to pastries, cakes, things like that. But she has zero business sense. So I had I designed her website years ago, had it bill gutter a Google My Business listing. You know, I'm an administrator on a Facebook page up but she has zero business sense whatsoever. So I sent her an email, or actually I sent her a text last night with a screenshot because I've made a post on her Google My Business listing last Friday. And I got an email from Google basically telling me good job 788 people had seen that post in three days. So when I tell you to get a Google My Business I mean get a Google My Business there's an episode that we did on it a little while back. You may go back and find it. There's actually an article on EarlToms.com about the Google My Business. It's free, doesn't cost you anything. If it makes no sense whatsoever, why you don't have one. I believe the episode was called a free lead generation tool or something. But like I said, there's a there's a there's a article Earl Toms to that will do kind of describe it for you. But 788 hours in three days. Awesome. Count of people searching for cakes.

How many people are out there searching for houses? I mean, I go in my market, I'll legitimately go through over 2000 hours every single month on my Google My Business listing, but you got to maintain it treat it like a social media thing. That'll help you get some leads. But I've rambled long enough on that Google My Business. Go check out that episode on it. Like I said, I think it was a lead generation tool, or go read the article on EarlToms.com. But I appreciate you listening to this episode. Go after the deals that you can get closed. Stop wasting time on the ones you can. If you have to ask yourself a question. It's not as simple as that. No other reason to go after wait tell them to call you if anything changes. leave it at that put them in the automation system and if something changes, they Give me a call. We will draw that to a close and see you again in a couple of weeks.

Thanks for listening