Epic Real Estate Investing - Why Comps Aren't That Important, Initially | Episode 161

Episode Date: June 15, 2015

If you're spending too much time on, and stressing out over, comps and value too soon in the process, you could be losing deals... and you likely are. ---------------- The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E ducation P roperties I ncome C oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

Having trouble finding motivated sellers, frustrated that nobody will buy your deals, most of whatever it is that has your business struggling can be fixed with three simple systems. Attend the epic coaching intensive live event June 18th through the 20th at Universal Studios, California, and install these three simple systems into your business. Turn your year-around and finish strong. If your business is flourishing, you already have these three systems in place. If your business is struggling, you don't. Go to Epicintensive.com to register for the epic coaching intensive live event.

June 18th through the 20th at Universal Studios, California. It's not too late for 2015 to be your best year ever. Epicintensive.com. This is Terrio Media. Podcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Hello and welcome to the Epic Real Estate Investing podcast. This is the place where I show people how to escape the rat race using real estate.

Just shift your focus from making piles of money to making streams of money. Change that one thing just one time and you are on your way to financial freedom, to financial independence. Now, it's not the most exciting path. I know it sounds exciting, but it's not. But it is the fastest path, that I promise you. And once you get there, life then becomes exciting, specifically your life. All righty. So I got a couple great questions this week.

week about the epic fast formula training, speaking of exciting, of which you can access for free at free real estate investing course.com, free real estate investing course.com, get the epic fast formula training there. And, you know, I've mentioned this here on the show several times. You know, when I talk about coming up with your initial opinion of value, you know, initially, I recommend to just get it in the ballpark and worry about the actual value later. So the questions have been like, well, what happens later? How do I deal with it later? And why not just find the actual value up front so I don't have to deal with it later? So those are great questions. So let's get into them. Okay, so let's just put your, I'm going to put yourself in the, in the scene

here. You've got your marketing going. You've got your podcast out. You've got your letters out. You've got your bandit signs out. You've got some Facebook ads running. You've got your leads are coming in. and you're talking to lots of potential motivated sellers, and you've got the suspects over here, and you've got the prospects over here, but you've got more suspects than you've got prospects, but you do have both. But in the beginning, frequently, it's tough to tell the difference,

especially right up front, right in that initial call. So you don't want to spend too much time with a suspect when you could be spending that time with a prospect. That's a better use of your time. So when you do submit your offer to the seller, and you're kind of uncertain still which category of the seller falls into, I like to just shoot for an offer that's in the ballpark.

Just put it in the ballpark. Let's get it close. And here's why. One, to find the actual value, it's time intensive. It takes too long. And that's just too much time without the guarantee that the seller will even accept your offer. There's too much work to do. And it takes up too much time and you don't even know if the seller is going to accept it.

And per the statistics, they're probably not. So you don't want to do that for every single deal. It's too much time. Then number two, you want to move fast. You've got to move fast. This is a game of speed. Real estate is all about moving quickly. You're not the only investor in town.

And you're likely not the only investor that the seller has called. You want to get a contract signed. You want to get signed as soon as possible so that the seller cannot sign with anyone else. You want to take it off the table. You want to eliminate your competition. And that's what happens when you move fast and you get that contract signed. Number three, you've actually got better things to do, believe it or not. I know you want to.

to run comparables all day long and you want to go out and find out the value of every nook and cranny of that property, but you do have better things to do. Like contacting the rest of your leads. You know, at this point in the process, determining actual value is not the best use of your time. I'd rather almost see you enjoying yourself, you know, watching the ball game than running comps all night long. Okay? So you've got better things to do. Now, that's why the ballpark offer. I mean, you're trying to get as close as possible, but you don't want to worry too much about whether you're on point or not. So if you are on point, super.

Look at all the time you saved. And you actually beat your competition to the deal. So if you're on point, fantastic moves. Now, if you're not on point, then what? Right? That's where the questions are. If you're not on point, then what? Well, it's very simple.

You renegotiate. Is it really that simple? Yes. It is. Don't overthink this. You renegotiate. But isn't that unethical to enter an agreement with someone and then change the terms? Isn't that kind of like bait and switch? No. It's not either one of those. It's none of those. You see, this is real estate. It's a business. I don't know where the ethics.

I mean, I know there's some devious people out there that have come before us that have messed it up for us and they've laid some groundwork that we got to deal with now. But this is a legal real estate transaction using a purchase contract, using an actual agreement, a legal and binding agreement. And when it comes to real estate law, the authorities that be are very protective of the public. In my opinion, almost overprotective. And I think some of their protection is a little bit misdirected and misguided. But they're protective of the principles involved specifically. And that protection slightly favors the buyer. You know, they say, in most contracts, there's a clause in there says buyer beware, but, you know, although that's the case, you know, the law is like there to protect the buyer. They don't want the buyer getting into a bad deal. So in the contract, as part of this protection, is this clause called the due diligence. It's where you get to investigate the property. You get to conduct your due diligence. And then there's also this other clause called a contingency clause, meaning that property is contingent on a satisfactory due diligence.

So if you don't like it, the contract isn't valid. It's a contingency. The contract is contingent on a satisfactory inspection to the buyer. So why are those clauses there? They're there to protect the buyer from making a bad purchase. So you, as the buyer, don't want to make a bad purchase, do you? No, of course not. So to assure that you do not make a bad purchase, you're going to exercise your rights,

your legal rights that are written in the contract up front that the seller signed and agreed to, you're going to exercise your rights within the contract and perform your due diligence. They gave you permission to do so. So don't be hesitant or squeamish on doing it. You're going to inspect any and everything that you want that can directly or indirectly affect the value of the property. So what if you did an extensive evaluation of the property, like I recommend, prior to putting it under contract, and during your due diligence, you found through one of your inspections that the electrical panel was faulty and the roof was about to cave in. What would you do? Would you just buy the property at the agreed price because that's what you agreed to?

Or did you renegotiate? You know, if you conducted all your due diligence and determined an actual opinion of value before you got it under contract, and during that inspection, after you're in contract, you found the electrical panel had some issues and the roof was bad. What would you do? You'd renegotiate, wouldn't you? Of course. Now, would the condition of the electrical panel and the roof have changed it all

if you had submitted a ballpark figure instead? No. Would anything have changed? Would your rights have changed? Would the condition of the property change? with the value of the property changed. No, nothing. The end result would be exactly the same,

with exception that you saved yourself a bunch of time, so much that you might have gotten a second or third deal under contract with that extra time. Or maybe you got to go home a couple of nights early because you had that extra time. Whatever, you had extra time. And if you're still thinking about the unethical aspect of this ballpark figure,

read and negotiate later if I have to thing, Remember, there are two parties involved here. It's not just you. It's not the poor little seller. It's not you, the big bad wolf, versus a seller. A lot of people like to view it that way. What if the seller is being unethical

by not revealing everything to you? What if the seller is not being honest with you? What if the seller is downright lying to you? Listen, here's the deal. Motivated sellers are motivated because they have a problem. They've got issues. and they want out of that problem, they want those issues resolved.

And depending on the size of that problem, they may go, I know it's hard to believe, but they may go to great lengths to remove themselves from it, including deceiving the buyer. It happens. I know it's hard to believe,

but it happens, and it happens to varying degrees. It might be from just small little embellishments to flat out lies. The due diligence and contingency clauses they're in the contract to protect you from stuff like seller deception, from bad properties, from just making a bad purchase.

And if you choose not to use that protection and exercise your rights within that contract, then you are being an irresponsible business person. You are being reckless. If you buy that house and follow through with the purchase, you know what? their problem now becomes your problem. So how would your spouse feel if you came home and you just purchased a problem?

How would they feel about that? Would they be really happy with you? What if that problem results in a little financial stress for you and your family? And you have to make some sacrifices until you've restored yourself financially. Maybe you've got to work some extra hours or you've got to sell something to get back the money that you lost because of that problem that you took. maybe that sacrifice is telling your daughter that you can't pay for dance classes this summer or no little league for your son this season. How would that make them feel? And in result, how would that make you feel?

Per the contract, you are allowed to renegotiate. And if something comes up in your due diligence that affects, that adversely affects the value of the property, you better renegotiate. It's your duty. It's your duty to yourself. It's your duty to your business. And ultimately to your family who is counting on your success. You know, as I was browsing the threads today, hoping to find something really juicy for another episode of Shred the Threads.

I love the introduction. I'm dying to use it again. But I didn't find anything really juicy. Not worthy of that big dramatic segment introduction that I put together. But I did stumble upon a thread actually about me and this podcast. I had never seen this before, and it was written a while ago. So it just, I never saw it. So it was kind of cool to read what people had to say in an objective environment.

You know, not in front of me and not in anywhere in my properties. It was totally, you know, they were over there to speak their mind. And it was very interesting, the different points of view. Although, you know, most of what I read, most of it was very positive. So thank you for that. And a good portion of the people commented on how much great information there was. And a couple people were even scratching how I could afford to give so much away for free. And then there was another segment, a smaller segment,

but another segment of the people who are disappointed to find that my free course leads them to the Epic Pro Academy, of which is not free. And they were upset about that. And I never understand this part about people. When they get upset, when you charge for your product or service, it's a business. And you go to the grocery store and you pay for groceries. You go to the gym and you pay monthly membership to work out. And the people at the gym, they want you to be in shape.

They care about that. And they're there to help you. And the people at the grocery store, they deliver this food there because they don't want you to starve. And they know that you're going to pay them in exchange. It's a business. This is the same thing. Anyway, near the bottom, one of the people were very complimentary in most of their thread. They were very nice in most of the thread.

Yet they ended with a big butt. So this is what they wrote. But some of his tactics are marginal. His approach is to overpay to get the property under contract and get the owner to commit to moving. Once they are committed, he approaches them about pre-planned post-contract concessions. I have no doubt that this approach works,

but I view it as highly unethical. Highly unethical, even, he writes. First, never has my approach. and never have anyone has anyone ever heard me say my approach to be to overpay no he must have confused my show with someone else's show i advise you to get as close as you can to the actual price without a whole lot of exertion on your end i use the phrase get in the ballpark that does not mean overpay that means get it in the ballpark big difference now The next part, about once they are committed, he approaches them about pre-planned post-contract concessions.

Pre-planned post-contract concessions. No, Mr. Threadposter, this is not what I have ever said. I have never taught to overpay with the pre-planned intention to ask for concessions. I do not premeditate my second round of negotiating. but after 500 plus transactions in the last seven or eight years, I've come to expect more to turn up on my inspection reports than what the seller actually discloses. It happens.

It almost always happens. I always learn more through the inspection than what the seller disclosed to me. So yes, I am prepared to renegotiate, but I don't go in with the pre-planned intention too. There's a difference. I just know more times than not I'll probably have to. So I'm prepared. If my estimation of repairs up front will cover whatever the inspection reveals, then I don't renegotiate.

Now, that's not unethical. That's good business. That's being responsible. That's being diligent. There may be some shrewdness in there, but there's nothing wrong with that. That's being a good businessman. And I know Nathan, I know he's got a family at home, and I know they're counting on him to succeed. That's good business.

And then Corey, at the bottom, the bottom of the post, he responded, dude, that's how Corey talks, dude, I home inspect every property above $20,000 that I buy and hold. Awesome move. I bet if I added all of the renegotiated savings up to it would be over $150,000 worth of value. Now, that's not unethical. That's what you should do. That's good business. That's being an investor. Your job is to make money. You make money by decreasing your costs. and increasing your profits, or by increasing your sales price, of which ultimately increases your profits.

You can work it both ways. That's not unethical. All righty. So nice work, fellas. Fantastic. Y'all make me so proud. That's it for today. I'll see you next week or catch me tomorrow

on Turnkey Real Estate Investing. I'm Matt Terrio, living the dream. You know how some people want to invest in real estate, but they don't know how? Oh, yeah. And you know how some people? want to invest in real estate, but they don't have the time? Oh, yeah. And you know how some people want to invest in real estate and they simply don't want to do all that work? Oh, yeah. Do you know

someone like this? Mm-hmm. Perhaps that someone is you? Uh, yeah. If so, subscribe to the Turnkey Real Estate Investing Podcast, the show for busy people who want to invest in real estate, but don't have the time or the desire to take on the heavy lifting. Turnkey real estate investing. Subscribe today. It's free. Yeah. Turnkey, Real Estate Investing.

You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed this show, please take a minute to visit iTunes and share your thoughts. Thanks for listening. We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a minute. a part of the C-suite radio network. For more top business podcasts,

visit c-sweetradio.com.