Epic Real Estate Investing - How Does a Novation Agreement Work? | Eric Brewer | 1257

Episode Date: February 23, 2023

Are you curious about how a novation agreement works in real estate? In this episode, Matt is joined by an expert in the real estate business, Eric Brewer, to explain the basics of a novation agreement and how it can be used in a real estate transaction. They will discuss its purpose, the different parties involved, and how it can be beneficial to all the parties concerned. You will also hear some real-life examples to help you better understand how a novation agreement works in real estate. So, if you’re looking for an in-depth look at novation agreements and how they work in real estate, this episode is for you! Are you ready? Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Welcome everybody to the Ethic Real Estate Investing Show, where we show people how to invest in real estate so they can retirely. Got a great show today for you with a great guest. There's a million ways, as I always say, a million ways to make a million bucks in real estate. And I've got another way for you today. So if you're curious about how innovation agreement works in real estate,

you're in the right place. Today, my guest will explain the basics of innovation agreement and how it can be used in a real estate. transaction. We'll discuss its purpose, the different parties involved, and how it can be beneficial to all the parties that are concerned. And we'll also provide some real life examples to help you better understand how an ovation agreement works in real estate. So if you're looking for an in-depth look at innovation agreements and how they work in real estate, this is for you. Welcome to the epic real estate investing show where we talk about the housing market,

creative financing strategies, and everything else you need to retire early. And if you're ready to get to the next level in your real estate game and get there fast, go to r-e-i-a-a-a-a-a-com, where most training programs end, ours begins at r-ei-a-a-a-com. Enjoy the show. All righty, so let's get on with the real reason you're here today. That's to talk about innovation agreements. It's cut to the chase, and I've got a great guest. He's done, I think the last I read, over a thousand of them. He's been doing them for a very long time, so I consider him an expert, and he's here to answer your questions and we're here to get to know him. And let's welcome him to the epic family.

Eric, welcome to the show. Thanks, ma'am. Good to see it. Likewise. Let's just start by, I know you've done a bunch of these deals. We have a lot of mutual friends. I want to get to know you better. I want to know more about these innovation agreements.

But let's start what got you involved in real estate in the first place and bringing up to where you are today. Yeah. I spent a few years after high school. I joined the U.S. Army. did my time in the U.S. Army came home, ended up getting a job at a local car dealership, and slowly but surely worked my way up through the car business

from a lot attendant to a service manager, to a salesperson, to a finance manager, and eventually to a general sales manager. And after eight years, I had a little burned out of the car business. I had recently just had my first child and knew that I had to make a choice between the demands of being a good car guy or the demands of being a good dad and made the decision to get out of the car business and started searching for a new career and actually figured real estate would be a good fit in alignment with the skill set that I felt that I had.

I had sold some cars to real estate agents that remember filled out their credit applications and how much money they had made and knew how much I worked and what I thought, knew that they were working and seemed to be a good bit less and had a pretty good background in finance in the car business and it gave me a pretty good advantage over other dealerships, other salespeople, understanding leases and special finance and creative finance. And so when I decided to get into real estate, I thought finance would be an appropriate place to kind of cut my teeth. So I interviewed at a few mortgage companies and took a job with comfort home mortgage. was a local place here back in 2005.

And basically it was doing cold calling pitching refies in 2005. And like my fourth phone call, I locked up a loan, made like five, six grand. And I was like, whoa. A glorious day. Yeah, like what in the world? That was way easier than I expected. So I got pretty good at that. And after doing it for about six months, the owner of the dealership who had been my mentor,

for my eight years in the car business was exiting selling the car auto dealership. It was a Toyota franchise and was experimenting in real estate and wanted to build a real estate company and thought of me and we went to lunch and I'd left the mortgage company and him and I opened up a house flipping company. So that was 2006. We bought a couple of properties. I think it was by flipping houses. It was a wild ride for the first two years. years. I can tell you that it was really cool that in 2006, like it was hard to buy something, but once you got a deal and fixed it up, it would sell pretty quick for full price. And we did about, I think, our first full year, like 70-some flips.

And then next year we inched our way up to 100 and then 150. And then after about three years, we were doing about 200 deals a year. You know, we moved to live it back then and, you know, had some deals that went south because of the, market changes back then and started doing installment sales agreements and actually discovered innovations in and around that window between 2008 and 2010 because FHA deed seasoning became a real problem for me as a house flipper because I'd buy a house, renovate it in three weeks, put it on the market, get an offer, but they couldn't close for four months. That's how I discovered innovations and then like a year later started using them. That's sort of how I got my start in real estate.

Super. Yeah, we got started just about the same time. I think I got started as an investor about a year after you. I was an agent for a few years before that. Yeah. So, yeah, we got a lot of experience. And, you know, when I first heard of this thing, Novation, it started getting really popular. I don't know, just about a year and a half, two years ago. It was kind of moving through the internet and it was becoming a common phrase. And, you know, I've always been the creative financing guy from the very beginning. I don't really, I was totally unlendable when I got started. I had almost no cash to speak up. So I had to get creative. Right. And I heard this novation thing and everyone was talking about and people were asking me about it. I was like, oh, crap, I don't know what a nomination is. I better figure this out. And so I went and looked it up real quick and I was like, oh, that's what it is. Got it. So I think my very last listing as a real estate agent, Mercedes actually just was on the show of Flip That House, my wife, and my very last listing.

We kind of came across this type of situation where they wanted more for their house. And I was like, you're not going to get it. You fix it up. And they're like, we don't have the money to fix it up. And then that's kind of all formulated. And we had an attorney come in and just kind of drew it up with a trust type format. So I was like, oh, I know what a novation is. I've done one before.

I just didn't know what they were called. So I felt better about myself. So that is, that's an application of a novation that is very much different than the way that I'm using it. I think for the longest time, novations were used. And this is probably why it wasn't as. popular. It was used as a fix and flip method. So it required a renovation and it required some type of memorialized partnership with the seller. And if you just think about those two things, right, there's a lot of moving parts like construction's kind of hard. Partnerships are kind of

hard. Partnerships with renovations with homeowners, really hard. Right. So the way that I use innovations is no renovations. I'm not remodeling the property at all. Eric just kind of explained. what it actually is. Oh, I got you. Yeah. So innovation in its simplest terms is the replacement of an agreement or a term inside of an agreement. So if you think about in that context, the normal wholesale deal would be an assignment of your

equitable interest. You're actually, your contract is the mechanism that generates revenue. Right. When you do innovation, your contract is conditionally released because you can't have two contracts that are enforceable at the same time, right? The one that would be enforceable is the one that came first. So when you think about an assignment wholesale, you generally have to sell to a cash buyer or someone using hard money lending because that's the way an assignment works.

You can't send an assignment to an FHA, VA, USDA, Fannie Mae, Freddie Mac borrower. It's not a lendable transaction. When you do a nomination and you conditionally release your purchase agreement in exchange for a third-party agreement, it now becomes a financeable transaction. Got it. So I go to be transaction, seller and buyer, and you're going to execute the novation. Where do you come in? Are you B or are you the end buyer?

You're B. I put a contract to buy Matt's house for $200,000. Yeah. In the language of my purchase agreement, it says, I have the right to novate the property. and I won't do it now for the interest of time, but you and I talk about what that really means, right? Like a seller's not going to know what that means. Effectively, Matt, over the course of the next 60 to 90 business days,

I'm going to go out. I'm going to market the property to retail buyers to try and get someone to come in here and pay me more than what I've agreed to pay you for the property. And in exchange for that higher price, they may want appraisals, home inspections, more than likely they're going to bring a real estate agent to the transaction that I have to compensate through commissions. And I'm going to have to navigate through all of those relationships and those moving parts

and those inspections and appraisals. And I'm going to do all of that work in the hopes that I can make a couple fistful dollars in exchange for don't all of that. I'd really prefer to just buy it and close and you and I come up with a price and that works great. But it sounds like you need more money for this property than what I was able to offer you under those terms. So I'm suggesting we go this route.

You get more money. I get 90 days to get this all buttoned up. You're going to give me permission to take it to the open market. I'm going to go out and market like my life depends on it to find that one buyer that may buy it in its current condition and be willing to pay me my asking price and I'll pay the agent and handle all these appraisals and all that stuff and squeak out a couple bucks for me and make sure that you get the amount that you and I agree. So what happens is I'm A to B. When I find a retail buyer, I extinguished it.

A to B and it goes A to C. Right. And then I memorialize that A to B contract when I release it that says, hey, Matt, remember we talked about my ability to go out and find this third party buyer? Now that we have them, you're going to sign this document that says, hey, you take on all this extra responsibility. You're handling all these commissions and inspections and appraisals and contingencies. You take on all this extra responsibility in exchange.

I as the investor get all the upside. So I take on all of the liability. In exchange, I get whatever upside shakes out at the end. So I guess it's just really almost semantics between the assignment and innovation. That's a mechanical difference. Like an assignment. The end result is the same. You just don't need a cash buyer.

You can get the finance buyer. Basically what it is. Yeah. So then once you know that you can sell to finance buyers, how does that change how you evaluate a property? I don't need to use 70% minus Renau. I can look at its current condition value minus 15% that would cover, say, commissions, inspections, appraisals, profit.

If you're selling a $350,000 house and you buy it at 85% of its current condition value, that's a big spread. And commissions may cost you 5%. You give up a little bit of seller's help or something like that, which in some markets you got to do right now in the retail market, you can still net 10%. On a $150,000 property, it's $35,000 for a house you never fixed and flipped.

You never funded. You never painted. You never put new flooring in. So it's a wholesale style transaction on a property that's generally in wholesale condition. Got it. That's right. To a retail buyer.

Who can go get a loan. Yeah, they already have one when they come to you. Right now, those are the most active buyers or FHA, VA, Fannie Mae borrowers that have just enough money down. They might need sellers help because those folks couldn't buy a house the last three years with the competitive nature of the market. So now they're out in full force and they're like, hey, I'll give you a full price. You give me 5K sellers help. You let me do my inspection and appraisal, right? Now sellers are like, yeah, you can do that.

Two years ago, we go inspection. No way, Jose. you can't do an inspection of my house. We've got 12 other offers where they waived appraisals and inspections. Your deal is no good. Now those offers are being considered. So when you can take your properties that you have under contract with the proper innovation language and you expose them to the retail market to FHA, VA, Fannie Mae, Freddie Mac borrowers

that need a little bit of seller's help and have to get an appraisal, those properties are selling for full price or very close to it. And they're very successful, profitable transactions. So just to play devil's advocate because I had really had a different idea of what innovation meant. I just looked it up and I put the definition there. I said, oh, that's actually not what it means at all. So good.

We're learning something for sure. How is this different than just being a real estate agent? You're kind of taking the place of being an agent, right? About the fiduciary duty? No. I mean, a real estate agent in my experience doesn't handle inspection repairs. They don't pay for inspection repairs. They're not paying for appraisal repairs.

pairs, they're not, no, it's maybe 10% of the value that a real estate agent brings might be some overlap, but you're operating like an investor. You just don't own the property yet. All right. So you're the buyer. I'm going to, the seller's not giving me the low price that I need, but it's still a reasonable deal that I think would be a deal on the open market. So I'm going to put it under a traditional purchase agreement, right? Okay. And is it, is there have to be a clause there like the right to novate. Oh, 100%. Yeah.

So that's in your purchase agreement, the original purchase agreement. Now I go out there and I market the property and I look for the end buyer. So then I find the end buyer. They say, yes, I want it. So now you're bringing them the table and you're going to connect the seller and the new buyer. One thing you just said that kind of confused me a little bit was now you're going to go pay appraisal costs and everything like that. So that's your responsibility of the end buyers. I list all of my innovations with a license agent.

Okay. They're going on the open market in the MLS. So to the buyer, it looks like John and Mary Smith, who's the buyer, has their real estate agent. They're writing an offer to buy Bob and Mary Andrew's house. I'm not a visible party of the transaction. I understand. Right. So inside of the novation language and the person agreement, it has some, you know, language in there that says, hey, Matt, as a part of this,

I'm going to need you to sign a listing agreement as the licensed donor or deeded owner of the property. Only you can physically list it on the open market. I'll connect you with my real estate agent. You'll have to sign some paperwork there. Again, this is all in an effort to get you up to that $200,000 you said you had to have. Are you okay with that? And they'll go, yeah, man, whatever it takes to get me my $200. That's fine.

So when it goes in the MLS, it looks like the owner of the property, as it for sale, there's just this, you know, recorded agreement that we had. that says, hey, when this third party buyer comes along, remember, you're going to sell it directly to them and the difference between our sale price and that sale price is mine. Our contract says, as is, no commissions, no fees, no inspections. Whatever that contract has over and above that, I have to handle all that crap. And in exchange, that's how I get the difference in the month. So we explain this on the very front end of the deal, right? Because when it goes in the MLS, they're going to see it on Zillow, Redfin, their neighbor's going to bring up to them at work that

They saw their house listing for 350 grand. I thought you sold it to an investor. You got to hash all that stuff out on the front end, right? You effectively come to an agreement with them. You write a contract. It gets listed in the MLS with a licensed agent. It's for sale. It looks like every other listing.

And then when someone writes the contract, they're going to write the contract just like they would any buyer's agreement for any other property that was listed in the MLS. And before you can ratify that agreement, you have to execute the novation the addendum, it says, our original deal is now conditionally released. Now you can enter into this third party agreement. And just like we discussed, any terms or pricing over and above what you and I agreed on is 100% my responsible. Got it. One, you said that agreement, the A to B contract is recorded. So you go and record that to protect yourself? You can record the agreement. You can

record a notice of interest. Yeah, there's a number of ways that you can memorialize your interest in the property. Okay. And then kind of trying, I'm going to try and stick with those numbers in the example that we're just talking about. So say I'm going, there's a house that's worth 250 is the ARV. I'm a wholesaler. I want to get it for 150. The seller needs 200. That's a discount on the open market, but probably not good enough for us as a wholesaler or a fix and flipper. So what we do, we say we're going to get you your 200. Now you go to the open market and say you find the buyer for 225, you can list it for whatever you want to list it for, right? Okay.

So they're getting their 200, and then that 25 is yours less all the fees and everything that you're going to take care of. Yes. That's how it works. Okay. I understand. Very good. So generally what you'll see is you said ARV, right?

That's a fix and flip wholesale mechanism that we use to come up with their price. The number you're going to find that's most applicable for these deals is current condition retail. because when you look at a house that's in really good shape and you compare it to ARV, they're almost the same number, right? Like a house that's fully renovated in most markets around that 250 number versus a house that's got, say, 10-year-old renovations, but it's clean. They're definitely going to appraise for the same amount because an appraiser sees a well-kept

10-year-old renovation the exact same way. They see a brand-new renovation. They're generally both considered C2 condition. Right. Most buyers in today's market may be willing to. to pay a little bit more for that flipped inventory. But at the end of the day, they're both really going to cop for the same amount. So in your instance, if it was 250 ARV, and what I find is that the ideal properties for this are

really nice, right? I'm probably going to be able to list it for 250 because ARV and current condition retail value are about the same. So now when they're saying 200, there's 50 grand spread there. Maybe I listed for 240 because I want to make it way more appealing. than the other properties that are out there. And as an investor, I don't want to hold out for top dollar. I want quick, good money, not long, maybe money.

But that's generally the idea, right? It's like, hey, and when you think about that right, now you start, what am I talking about, homes that are in good condition? As wholesalers or investors, what do we generally go out and look for, the most messed up house we can find? That's right. Because that's normally the condition of a property that's likely for me to be able to buy at 70% minus renovations, which ends up being like 40, 50%.

And most people are going to go, no way, man, you're crazy. Like 90% of the people that you offer 40, 50% are going to tell you to go pound sand. That's right. When you're able to operate on nice properties, now you're generally wholesaling, you're looking for a needle in a haystack. It's a fixer upper owned by a distress seller that'll sell it for 50 cents on the dollar. When you start doing innovations, you go, holy moly, like literally. Literally, every house that's owned by somebody that wants to sell becomes an opportunity.

If I can get a 15% discount from current condition retail value on a $300,000 house, for example, that's $45K. Even after commissions and maybe I spend, we spend about $1,500 average doing FHA style repairs, where the appraiser goes out and says, hey, you're missing a handrail at the basement. We saw some peeling paint up in the attic window, and you're missing two GFCIs in the kitchen. and we'll go in and make those repairs, spend $1,200, Prazer comes out and goes, okay, it meets FHA guidelines, you can go to settlement now. You know, it's almost like, instead of saying we buy ugly houses, you can say, hey, we buy decent houses.

There's way more decent houses out there that are owned by people that might take 85% versus the houses that are really messed up and people will take 50%. Right, right. Okay, cool. So you'll go and do those small repairs. And that's where my familiarity with the novation was,

is we went and did rehabs on houses. Yeah. We put them on the market, right? But the level of work that you can do, that's up to you, whatever you think you can get on the open market. You're going to probably put in the repairs that are going to get you the best bang for your buck, but that's like the limit to it, right?

Right. All right. So tell me what is the current market conditions right now, and is it better now for innovations, or was it better this time last year? There was way, everything was better this time last year when you were selling a house. I mean, because literally from like post-COVID to like June of 2022, you could buy a house under, put it under contract for like 100% of value,

listed on the MLS and it would sell for 115%. True that, true that. So that was awesome, right? I would say so a year ago they were better. Today they're more mandatory. Like it's hard to get a wholesale deal right now because sellers still have a relative of elevated value of what their house might be worth based on a market that was a year ago. Buyers, particularly wholesale buyers, are really backing off a little bit.

They're worried about interest rates. Some of them got their teeth kicked on on a flip a year ago where they bought it and were halfway through a renovation and rates went to 7% by the time they listed it. I know guys in Las Vegas and Reno, Nevada that lost 200 grand on flips because the timing was just bad. So right now, like it's 50% of the deals I do. We'll do 35 deals this month and 16, 17 of them are novations. Because more leads that come in are properties that are in decent conditioned owned by motivated sellers versus wholesale deals that are properties in bad conditioned owned by distressed sellers. Because that's really what a wholesale deal is. We call it

motivated seller, you really need someone that's distressed to sell it for 40 cents on the dollar. Right. Relations, you just need someone that's motivated. And motivation has a lot of different levels. It's like, hey, I kind of would like to get a deal done and I want to be out here in four to six months. That's a great opportunity. If most people got that phone call today and they're like, yeah, Matt, I got your postcard. Like, okay, cool.

You're thinking about selling? They're like, yeah, three to six months, maybe. You're like, oh, okay, that's not exciting. What are you looking to get for? And they're like, yeah, I looked up Zillow. I want to get about 85% of Zillow. And you're like, dude, I can't help you. What are you crazy?

I got to make a couple bucks. And you get rid of the lead. Once you learn innovations, you go, dude, Eric, I'll be out there in an hour. That sounds like an awesome opportunity for me. Because if I can get them from I went 85% down to 80% and they'll say, yeah, I don't mind if you close in 90 days. I don't need to be out of here for four months. And I'd rather you not.

But if that's what it takes to get the deal done, I don't mind you put the lockbox on the property and bringing buyers here short. Now all of a sudden I get a $30,000. profit on a house I didn't have to fix. I didn't have to pay for. I bought it from a seller that wasn't distressed. They got more money for me than they did every other person they called. And the buyer was able to buy a house, get inspections and appraisals. And I buttoned up and did the little repairs that were needed. It's a field that's me, man. Everybody wins. What's the best form of marketing for you right now? Is anything changed?

TV. Yeah, slaying for me right now. It's always been a top lead producer and contract producer for me. Depending on the election cycle and what's going on in the world, sometimes TV commercials can get pretty expensive, and it makes it difficult to make a reasonable cost per contract. But right now, TV's stabilized a little bit now that we're through the election cycle, not competing with governors and senators for television space,

then cold calling super inexpensive. We do it in a high volume. It's kind of a grind, though. I don't love the outbound cold call cycle. It's a little bit of a grind. But TV does really well for us. Direct mails normally are top two or three lead sources, but it requires consistency.

I've been mailing 60,000 postcards every month for as long as I can remember. Right. Yeah, so those are TV cold calling texting. I would lump into the same category in direct mails, probably jockeys for second and third. Got it. So is your marketing message the same as a traditional real estate investor? And then the novacion is just something that you have in your pocket or you actually

kind of insinuate that, hey, I got something special that everybody else doesn't have? You know, that's a good question because I started doing innovations mailing out the same postcard I did before I knew how to do them, you know, yellow letters, black, you know, we'll buy as is cash. Now that I say it out loud, TV does so well for me because it doesn't have a focus on distress. You can't run commercials on a frustrated landlord channel. You can't run commercials on a pre-foreclosure channel. So the reason TV does so well for me is because I get my largest profit deals on ovations from there because it's generally a higher priced property from a non-distressed

seller that's seeking maybe a alternative to what their experience has been on the open market, but they don't have to sell. They just kind of would like it if they could get their number and they don't want to deal with whatever their perceived hassle is of dealing with a real estate agent. So I water down the message a little bit and I make it less about as is cash, distress and it's more of like, hey, would you like to sell your house a convenient, more predictable way than what generally is out there and available? If that's the case, why don't you call us and we'll talk about whether or not we're a good fit.

So we've softened up the message. It wasn't specific innovations. I just realized after 15 years of doing this, people started to tune out a little. little bit like the bold like cash as is closing seven days a lot of our sellers want to close in seven months like they're like yeah I'd like to get it buttoned up right now but I don't know where the heck I'm moving and I need three or four months to figure that out and we want to make sure that they know that we can work around those timelines so we just go ahead and put it in our marketing right you know I'm here in Vegas and I was over at Ryan Paneda's office I don't know two or three months

ago and I'd ask him this question, what is he doing for marketing? He says he only does TV. He has done TV forever and he doesn't do anything. It brings in more business than he can handle. And I was at my cousin's house in Flagstaff for Super Bowl weekend. And these were obviously local commercials, but there were four different I buy houses commercials during the Super Bowl. And you'd mention that your cost per contract. So is TV just so much more accessible right now? I mean, you've got a thousand channels on your cable. So now you've got to all this dispersed energy and attention. So is it cheaper now?

Yes. And it's, I think Ryan and I use the same guy. And that guy is one of the more prominent dudes in that Scottsdale, Phoenix, Arizona area. His name's Doug Hopkins. And he's kind of the pioneer that was doing TV 25 years ago in Arizona. He's got a, you know, kickbutt business out there. He does, I don't know, something like thousand deals a year between Phoenix and L.A. He's in two different markets.

they do is TV. It's always ever done. And he figured it out. I'm finding this out with radio now. I tried radio 10 times over the last 15 years and I always stunk at. And I came across a person that figured out radio. And I paid them enough money where they gave me the plan of how they do it. And they said, you got to call 10 radio stations. You ask for these type of spots. They're the ones they're going to tell you they don't sell. They're free to people that do, but you can buy them for $15 for a 60 second spot. And the first radio people I called said, no way, we'll never sell it for that. They called me back two weeks later, just like the guy told me they would and said, hey, we've been thinking about it. If you spend five grand, we'll give you that. I started running radio ads

three weeks ago, like clockwork and 15 leads a week off a thousand dollars spent. But I hadn't figured it out. I was doing radio, but I was doing it the wrong way. TV's the same thing. Get someone that understands real estate and TV and how they work together, you got to run the right type of ad on the right demographic, the right amount of frequency. And if you hit that tipping point, just like mail and PPC and texting, cold calling, if you do it long enough and do it the right way, you'll get results. Fantastic. Think back when your first few novations and how many you've done now. Well, if someone was thinking about getting into novations and want to take this on what is like the big lesson that you wish you would have known before you took on your

first one? How many people actually say yes to it in comparison to what we think? Every time I talk to, well, why wouldn't they just list it? I don't know. Why don't you ask them? What? Hey, Matt, just curious. Any reason why you wouldn't just list this yourself?

They'll tell you. Yeah, I think real estate agents are crooks or you wouldn't believe how many people just think real estate agents make too much money. They'll let you as an investor make 30. before they pay a real estate agent 10 to get them the additional money. It's unfortunate for real estate agents, I think they're drastically undervalued by most people in the marketplace because they don't understand all the crap that happens behind the scenes

that your real estate agent does for you that keeps you able to, you know, just kind of cruise along and think everything that's okay and show up in settlement. But that's the biggest thing. I would get in my own way. Well, they probably won't do it. They're not going to say yes. Why wouldn't they just list it? Their house is in perfect shape.

And then I just got in a habit. The number one thing you have to do to be successful at novations and really anything is the consistency and the discipline to do it every single time. You make a cash offer. They say no, go, Matt, I'm not sure I can get you qualified for this, but we have an equity protection program that allows us to sometimes pay 20, 30% more for houses. If I could get you qualified for that with my underwriter, any chance you'd want to hear more about it, and they'll go, well, yeah, how's that work?

2030, you mean you can maybe get me 80 grand more? Maybe I'd have to ask, but if you want to hear more, I'd be happy to talk you through it and they'll go, well, yeah, how's that work? Right. And if you're just disciplined enough to make the offer to every single person that says no to your wholesale offer, you will be amazed at how many people will go, yeah, man, that sounds good. Let's do it. Right. Because I mean, at this point, you've been with someone 45 minutes, an hour, an hour and a half. When you walk out and they haven't sold their house, you got to try and put yourself in their shoes. They are disappointed. I thought I could maybe sell my house today.

I was optimistic. I could get enough money for it. I really like Matt. I trust him. He just wouldn't come up enough to make the deal work. I guess I got to go interview another 37 people. Who the heck wants to do that? No way.

You really want people down when you don't, you don't. You don't help them solve their problem. And too many investors try and fit it in this fix and flip 70% box. There's a thousand different ways or a million different ways to make a million bucks, like you said. There's a thousand different ways to make a deal work with a seller. This is just another one that most people aren't paying attention to. Awesome. You know, you said something that I started smiling because, you know, these deals, they're not found.

They're created. And it's all in the presentation. It's all in the conversation. And I just heard a couple of your ninja words right there that are our equity preservation program. You know, it's just like, who doesn't want a piece of that, right? Yeah, I tell them a little story. It's like, you know what, Matt, eight out of ten people I would make this type of offer to, they said, no way, get out of my house. You're a scam artist.

And it's like, it's really hard for me as a salesperson to go every day, I'm going to talk to 10 people and eight of them are going to kick me out of their house because they don't like the number. So I went back to my boss and I said, boss, you've got to help me here. They go, what? And I go, we got to figure out a way to pay people more money for their houses. He goes, you're crazy. And he kicked me out of his office. I got kicked out of a house that day and I got kicked out of his office. And I said, no, really, if we could pay them more money for their house and still be a smart investor,

why wouldn't we do that? And he goes, well, what do you mean? And I said, there's got to be a way where I could pay somebody maybe $20, $40,000, more for their house. And if we can squeak out a couple bucks profit, but we didn't have to fix it up. Maybe I didn't have to pay for it and go borrow money and all that crap. And if we could make less than what we like to make on a flip, maybe half, but I did half of the work, wouldn't that be a smart investor?

Sometimes less is more, right? And he said, I don't know, you might be on to something. So we invested a lot of time. We spent a ton of time with our real estate agent, our real estate broker, buyers and sellers in the marketplace. We spent a ton of money with our attorneys making sure that the paperwork was 100% transparent and 100% legal. And that's how we rolled out this equity protection program.

But I'm getting ahead of myself, you probably don't even want anything. thing to do with you. You don't want to hear about that. That's yeah. Yeah. You go, no, you know, the rest of that story, right? But yeah, it's fun to actually, you know, say that, hey, I care about people. I want to help more customers because selfishly, we look at it and say, well, we're doing more deals and making more money, but you really have to look at it from these people reach out to you because they want help. And every time you don't solve their problem, you've turned away somebody that asks you for help. And for me, I don't like that feeling. When someone asks for help, I try and do my damnness to help them.

And if I can make some money while I'm doing it, why the heck wouldn't I do it? There's a friend of my Matt Andrews says, the only reason you wouldn't do novations is because you don't know how. Yeah. That's it. Yeah. I'm sitting there thinking the same thing of how many people I said no to these weeks. Sorry. Here's what I'll tell you, Matt.

When you know they're a good fit, they're going, Matt, this sounds pretty good, but I don't want to give it away. There should be an alarm that goes off in your head that goes, oh. this might be a good innovation. Although say, this sounds really good, man, but I'm just not in any hurry. You hear those two things, which I hear a lot. You should go, well, now that you mention it, this might be a good fit for our equity protection program. And then you just go in to say, here's how it works. You give me reasonable access, permission to take it to the open market.

Mr. Seller, you give me those two things. I feel like I might be able to get you the additional money you're looking for. You want to make a trade? You mentioned the wholesaling quick and dirty math formula, right? The ARV 70% minus repairs. Do you have a quick and dirty math formula for your innovations? So I actually, if you can go to Brewer Method.com, I have an ovation calculator there. Get out of here, really?

Yeah, yeah, it's free. Effectively, really, you just take, so forget about ARV, M-A-O, ABC, EFG, all that crap. CCRV current condition retail value times 85%. Anything north of 250, you'll make over 20 grand, not have to paint it, not have to side it, not have to pay for it. You can make over $20,000 on a wholesale style transaction on a property that's in wholesale condition. CCRV, 85%.

Nice, nice. Yeah, so if you're looking forward to adding this to your real estate investing toolbox, Go to brewer method.com. I've never heard anyone explain it in the way that Eric has explained it. It's obvious that he's done it many times before. And I can tell right off the bat just from his conversation, because I know what those conversations sound like. So, dude, I'm glad we got to meet.

And I want to go check it out myself. Right now, with all of my conversations, I always go for the low ball price first. And if that doesn't work, it's great. I can give you a higher price. The market might allow me to give you a higher price. If I can give you some money now and the rest later, right? So I'm going for the seller financing option.

And then the third one's like, well, you're only one other option. You can go over the retail market and I can go ahead and coordinate a listing appointment with my real estate agent. So which one would you like to do? But now I'm going to throw down out the window. And let's do this innovation agreement. Yeah, because how many times do you refer to an agent? They told you they'd take 200.

You couldn't make the deal work on your first two options. A agent listed for 239. It sells in three days. Agent pockets good money. They might kick you a little referral, which is, It's a great way to monetize leads. And like I said, at the end of the day, you help the seller, which is the most important thing, right? You got their home soul, which is what they contacted you for.

But every one of those were, and here's the great news, the listing agent's still going to get the listing. You're still going to get it. Yes, you're still going to make the friend. I get it. Yeah, right? Half of them can't close anyway. That's what I'm just. I'm having dinner right now.

I can't come over and take it right now. I'll do it for you. Yeah. You can list it for me. Yeah. Yes. You can list it for me. It's a great option.

I love it. All right. So if you want to know more about novations and Mr. Eric Brewer, go to brewer method.com. It's right there on your screen. If you're listening on the podcast, that's brewer method. That's brewer. method.com. Any party more is anything I should have asked that I forgot to, Eric? I don't think so, man.

This was a good dialogue. You have some really good questions. It's helpful for me to go back. I love the question that you asked about what would you do differently or what piece of advice would you have if you started over? and that was the thing that got in my way was I had these limiting beliefs that no one will ever go for this. It turns out way more people will accept that offer

than they will 70% of ARV minus Renno. You'll start doing more of these deals than you do wholesale deals. Yeah, no kidding. You don't have to convince me. That's perfect. And that wraps up the epic show. If you found this episode valuable,

who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings, and success to you.

I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. Okay, only 10 more presents to wrap. You're almost at the finish line. But first, there, the last one.

Enjoy a Coca-Cola for a pause. that refreshes.