Epic Real Estate Investing - 5 Elements of the Transition Agreement | 727

Episode Date: July 28, 2019

This Sunday, Matt reveals the 5 elements of a transition agreement, also known as an upfront contract. Furthermore, he explains when to use it and shares the specific points you want to include when calling a seller, prior to the first meeting. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-A's dot com.

Here's Matt. Hey, Rockstar, welcome to the epic real estate investing show. Your old buddy Matt here. And thank you. Thank you for listening. Thanks for sharing this with your friends, your family, your network. I would not be here if it were not for you doing that. And if it were not for you tuning in each and every day listening to the show.

And today, I actually want to share with you one of the more powerful tools that you have available to you, that you have at your disposal, that you have available inside of your conversation. conversations with sellers. Traditionally, it's referred to as an upfront contract. But my good old buddy Jeff, Jeff Garner and St. Louis, that runs our ground and pound school, refers to it as a transition agreement. So you might hear of it. I think there's another word that I've heard floating around, but we don't need any more

words for it. I actually like transition agreement. I like that better, even though I've been born and raised listening to it as an upfront contract or hearing it as an upfront contract. But I like transition agreements. I think it actually describes it better, particularly in our situation as real estate investors. You know, it just describes exactly what it is. It's a verbal agreement to use at every transition of a real estate transaction.

You know, essentially what it is, it's an upfront agreement between the seller and the buyer of what's going to happen next in the transaction. You know, we talked about, was it just, yeah, I guess it was yesterday. We were talking about the 13 rules that I've got so far for real estate investing success. And one of those was to set the seller. expectations. It's just good manners. It's good communication. And that's what this transition agreement does is it sets expectations for both sides. And it does a lot more. You know, at our A's fulfillment summit, we spend quite a bit of time role playing these because they are so important. They're so important because this is where you make the money. You know,

you've heard the expression you make your money when you buy real estate, right? Yeah, this is where it happens. This is the highest and best use of your time. You want to be really, really, really good at these. Because if you get these wrong or fail to use them at all, you know, you really set yourself up for uncomfortable situations of miscommunication. You know, we've all been in arguments based on just miscommunication, not the merit of the conversation or the argument, but just because we both misunderstood what the other person said or meant. And so you want to avoid that. So if you get this part wrong, you find yourself in a lot of those situations that can quite honestly be unrecoverable.

You know, you turn mountains from molehills out of, from miscommunication. You also, if you get this part wrong, you end up backpedaling when things don't go as planned. And you end up building a relationship of distrust, which you certainly don't want. And, I mean, you can actually really just come off overall looking like you don't know what you are doing and ultimately kill the deal. But if you get it right, your conversation with a seller can play. out like a smoothly planned experience, like a nicely choreographed dance. That wasn't choreographed. That wasn't planned.

But because you're such a good leader, the seller can easily follow and you play in perfect harmony and get the deal done. Move that conversation toward a signed contract. All right. So what I'm going to do is I'm going to give you the five elements of a transition agreement. I'm going to give you a couple examples. And then I'll tell you when you should actually use them. So five elements.

Number one, you got to establish the purpose. of the meeting. You want to explain why you are meeting in a way that it moves the buying process forward. You're going to establish the purpose. This is why we're here. Then number two, you want to get the seller's agenda and the seller's expectations. You want to confirm that why the seller is there even meeting with you in the first place. Then you want to share your agenda and your expectations. Explain what you'll be doing during your meeting, including what information you're going to need from the seller. And then time. If to say this is over the phone and you're setting the appointment, you want to state obviously what date and time.

is that you're going to meet, but if it's not, but also you want to estimate how long it's going to take, how long this meeting is going to take. And then number five, you wanted to discuss the outcome, the decision to proceed with the transaction or stop the process entirely, or the seller's just final decision to sell or not to sell. So there's the outcome. So those are the five elements. So I don't have an example written down. I'll give you one right off the top of my head. Mr. Seller, thanks for having me over. I'm looking forward to giving you an offer. offer to purchase your house, I know that's why you had me over. Is that still the case? Great. So what I would like for you to do is just kind of show me around the house. I got a little

pad of paper here. I'm going to take some notes. And then when we are all done, after you've pointed everything out that you think may directly or indirectly impact the value of the property, I'll only need 20 minutes or so unless you think there's more that we should discuss. But it should be any of me longer than 20 minutes. And once I have all that information, then I'll go ahead and and look at what the market is doing. Do a quick, dirty math calculation on the potential repairs needed. And then I'll just carve out a small little profit for myself. And then I will present you with a fair all-cash offer.

Is that okay? Great. So at any time, if I feel like this isn't going to work out for me, I'll go ahead and I will let you know I really want to be respectful of your time. I certainly don't want to waste it. And I'll just ask as a favor back if at any point this doesn't feel like it's going to work out for you. Is it okay if you just tell me that this is not going to work out for you as well?

okay great all right so now both the buyer and the seller know exactly what is going to happen particularly you want to know that the seller knows exactly what's going to happen and what you've done there is you've also given them the permission to say no and that was one of our other rules of real estate investing from yesterday the permission to say no is is incorporated in there and I guess I kind of do that instinctively but I guess we can kind of say that's part of the the outcome right so that's the fifth element is covering the outcome the decision should be to proceed with the transaction or stop the process or the seller just has their final decision to sell or not to sell. And either way is 100% okay with you. You know why it's 100% okay

with you? Because although you need discounted real estate to build your business, you don't need any one deal. And then you know it's better to miss out on a good one than it is to buy a bad one. So it's 100% okay with you. All righty. So those are your five elements. There's your example. Now when should you use these transition agreements? I'd say always. particularly or specifically at every transition at least, but specifically the points you want to really make sure that you cover it and don't forget is one on the phone with the seller prior to your first meeting. And you say, hey, I'm about to come over and this is what we're going to do.

And you can say this, that's okay with me. And I might say this as long as that's okay with you and da-da-da-da-da-da. Okay? So on the phone setting the appointment. Then any subsequent meeting you're going to have with a seller, right? maybe it's a two-part meeting or a three-part meeting, any subsequent meeting that you're going to always begin with, you're always going to always end with the conclusion of every meeting, you're going to do another one there.

And then any time that you are beginning a new phase of the transition or the transaction, right? So, for example, you get through the whole property and you present your offer, the seller signs the agreement, you shake hands, you've got a deal, right? So that's closed as one phase of that transaction. It's time to start a new phase. That new phase would be due diligence, right? Or you're going to go out and market the property.

So that could sound like, okay, Mr. Sell, I think I got everything I needed. I'm going to go ahead and start my due diligence. I think this is going to be a really nice property for myself. And I don't foresee anything going wrong, but in the event that it doesn't turn out to be a good property for me, based on what, you know, what the market says or what the repair say, what the inspection says. I am going to have that crack down in the basement. I am going to have that looked at. I don't think it's much, but I'm going to have it looked at just in case.

But as long as everything checks out, we'll go ahead and we'll close as time is promised, and we'll both be on our way, both going to get what we want out of this property. But in the event, though, something comes up. Don't worry, I've got a network of other investors that would be more than happy to purchase this property. What's probably most important, I guess, Mr. Sell is that you needed your money at the end of the month on the 30th, and that's what's going to happen, whether it's me or one of my partners at purchase the property. We're going to make sure that that happens.

Is that okay? Great. And then you move on. Okay? So we just said, hey, this is what's going to happen. And these are some of the things that could happen. It could go this way. Could go that way.

But after all, what's most important is you are going to get your money when it was promised. That is the most important thing to you, right, Mr. Seller? Yes, it is. Very good. All right. So those are your five elements. There's some couple examples, and those are when you want to use them. And if you fail to use these transition agreements, you really just, you run the danger of having conflicting expectations.

And those things can flare up and get really ugly if you're not careful. Or you may be forced into a situation of a very nice, comfortable conversation. Now you're sitting there providing free consulting, and you don't get the deal. They extract this information from you and use it as negotiating power against your competition. And so even if your competition goes through the ringer with that information, it doesn't matter. You didn't get the deal. And that's not what you want. Okay.

So this is the highest and best use of your time. This is where you make your money. This is the skill. This is how you beat your competition. Everyone can generate leads. Everyone can flip a house. Everyone can hold a house. Everyone can do that.

It's the part in between that separates the pros from the amateurs, the men from the boys, the women from the girls. Got it? So you want to practice, practice, practice this. You want to practice these in the same way you would practice your golf swing, in the same way that you'd practice playing the guitar, in the same way that you'd practice juggling three tennis balls, right? You'd practice over and over. In the same way, you'd practice jump rope or a pogo stick or driving a stick shift.

Some of you might not even know what a stick shift is. Do you know that cars used to have manual transmissions? you had to move a stick around to shift it from first to second to third to fourth gear. Yes, you want to practice, practice, practice. Just the same way you practice tie in your shoe. I know you can do it. There's something that you're really, really good at, and you didn't get really, really good at it without practicing.

And if you want to make a lot of money in real estate, practice this. Got it? All righty, so if you found anything here useful and know someone else that might find it useful as well, feel free to share it. I'd really appreciate it. I wouldn't be here without you sharing it. and spreading the good word. All righty so thanks for listening.

God bless to your success. I'm Matt Terrio, living the dream. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know, home for us, we got the cash flow. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.