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Saturday, February 9, 2013

How I Messed Up A Potential Great Deal

In real estate like so many other business opportunities, every once in a while a "deal" comes up and you have to jump on it faster than you can say "deal or no deal". Well, it turns out that I just learned exactly how fast that needs to be…

Saturday morning I am looking in the multiple listing service to see what potential house flipping deals I might find. I have specific target areas, at specific price points and I look for specific conditions.

For example, one of the areas that I look in is close to me, has good schools, houses are not too old and resale values are in the upper $100's - $250k range. I look for houses that are at least 3 bed/2 bath with a basement or if they don't have a basement then it has to be a 4 bedroom.

In my search I noticed a house in this area listed at $99,000. The price was attractive and I dug some more…

It turns out that the house has 5 bedrooms AND a full basement. Starting to get excited…

I look at the pictures and the house looks like a mess. More excited…

I then looked up comparable sales within a mile of this house. There had been two sales in the $150k range, both foreclosures. Everything else had sold for $220k and up!! Very excited now...

The listing description says the owner is motivated and they are looking for cash offers only. There was once a time (2010-2011) where paying cash for a property would give you an advantage but right now there is a slew of cash buyers in this city. Most good deals will receive MULTIPLE cash offers.

The owners phone number was listed. I always prefer to talk to the owner to sense their motivation and to find out what they want out of the deal. Talking through real estate agents can sometimes be frustrating.

Sure enough this was a case of inheritance and they left him a mess (and I mean a mess) of a house and he just wanted to get rid of it.

Here is the key part. He told me he had already gotten several calls but would not be accepting any offers until Monday in order to get the best offer he could.

I went and looked at the house on Saturday around 2pm. Boy what a mess! This house needed everything on top of the huge amount of left behind things that filled up every corner.

Doing some quick math and assessment of repairs needed I figured I was looking at a $50-70k rehab with a possible resale value of $220k. So with a purchase price of $100-105k I could be looking at a potential profit of $30-50K…we got a deal!

But…here's the problem…

I did not get back to a computer for the rest of Saturday. I sent in my offer first thing on Sunday morning…

Too late…

I called the owner to tell him I was sending in my offer to which he responded "I accepted another offer yesterday (Saturday)"…

Apparently his phone had been ringing all day and he just wanted it to stop so he accepted the first offer he got, even though he had told me he would not accept offers until Monday…and even though my offer was for more than the offer he had accepted...


So needless to say I spent the next 2 hours smacking my head against the wall.

But you know what?

This was a great (and painful) lesson learned.

This was a lesson I needed to learn and I will be a better investor for it. There is no second place in real estate investing.

QUESTION: What missed opportunities have you had? What did you learn?

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