I’ve Just Been Squeezed…And I Don’t Like It!

Selling REO properties in Hemet CA puts me in contact with all sorts – first time home buyers, move-up home buyers and investors.

Ideally, I want to do business with investors, as they will typically purchase additional properties during the course of the year, and even more in future years. Not to mention, they will be selling their properties as well.

But I have got to ask myself at what cost will I do business with an Investor? The successful ones are very savvy, and I have to be on the constant alert for someone trying to get into my pockets.

It is one thing to ask me to take a reduced commission if I am doing both sides of a deal. I never like it, but I can certainly understand the reasoning and motivation behind it. Yes, in the past I have occasionally conceded this point to make a deal work.

However, I have never been squeezed so hard I felt like a discarded lemon as a buyer is making his lemonade, at my expense!

I have been working with a new investor who found me through my Internet presence. He seemed very motivated to enter the Hemet market, after reading some of what I have published on the topic. We first met about 3 weeks ago. His initial visit was to investigate the community first hand. I drove him around for about an hour, showing much of what I had written about. He now knew I was for real and not misrepresenting anything.

My investor, who owns multiple properties already, asked for half a dozen selections that he could take the time to crunch the numbers on his own and perform some due diligence. At this point, hew was not interested in previewing any properties. I provided the necessary information and scheduled an appointment for the following week.

When my investor returned, he was very focused on the REO properties we have here in Hemet. Of the six listings that I provided him, two were already in escrow. So he now knows that good homes that are priced right are selling. We looked at the other four, as he now knows that I have a good eye for the deal. Each of these homes met his expectations and based on his own analysis he now knows they will all create a positive cash flow, based on prevailing local rents.

We got back to the office and wrote offers on two of the properties, for 3% less the asking price. He knew how far the banks would go on these fairly newly listed properties and he pushed the envelop to the max. Smart guy. He wrote a good faith deposit check on both offers for 3% of the purchase price and waived the appraisal contingency and the loan contingency but did keep the home inspection contingency. Good offers all the way around.

Within three days, we opened escrow on both. The banks only allowed a 5-day contingency period to perform the inspections and complete our due diligence. Escrow was scheduled to close in 21 days.

Needless to say, I was feeling pretty good with two double-ended deals in escrow scheduled to close before the end of the month.

Then the Hammer Drops

This guy really was slick. He waited until noon on day 5 to call me. This guy is a master at using other people’s money and now he wanted to use mine. First he was very nice and respectful, complementing me on my eye for real estate investment properties. He then informed me that he had a situation arise which are temporarily diverting his cash reserves and that moving forward on these two transactions are questionable.

My investor, who I wanted to believe, but just seemed to slick in his story, insisted that the only way he could close escrow on these properties was for me to take my commission in the form a note on the property, with a balloon payment due in 2 years. Of course the note would accumulate 10% interest for me, so I should be very happy with the offer.

Just as quick as my slick investor dropped this hammer, I heard a click on the phone and he apologized but said he had to take this call regarding his other personal situation and that he would call me back in an hour for my answer.

Decisions…Decisions

Now I’m on the spot. Everyone gets paid but me. He didn’t even offer me the opportunity to negotiate with him. We only have a few hours left and the ultimatum had been laid out very plainly for me to see. Yes, I had expectations for future deals with this guy, as he was interested in adding at least a dozen local properties to his portfolio of over 150 existing properties, across the country (I since did my own due diligence on who I was working with).

I really had no one in the office to discuss this with. This was going to have to be my decision. I only wish he had tried to negotiate with me at the time of the offer and not put me under the gun.

Finally I had to let my gut take over which was telling me to run. If he is going to take this type of advantage of me so early in our relationship, what would I be setting myself up to in the future? I hate it when I have to remind myself that the “Customer is Always Right”. I just can’t agree with that.

Turn The Table…

45 minutes later; I made the painful decision to drop this whole train of thought. I quickly went into my forms program and created the necessary document to pull out of escrow and email them to him with a short note that did not address his offer to me at all. All I said was that if he wants his deposit back on either of these escrows he would have to sign these forms and return them to be in time for me to get them to escrow by the end of the day. Just as I was getting ready to send the email, I went ahead and added a PS – he would actually have to get the paperwork back to me within the hour, as I have a personal obligation at 2:00 and will not be available again until the next business day, at which time his deposit would be waived and he would have to go through with the escrow of lose his money.

Did I make the right decision…I don’t know? The forms were returned by 2:00 and I closed the escrow and sent the escrow office instruction to return the money. I certainly won’t be tracking it and going the extra mile for this guy. The good news is I put one of the properties back into escrow with a first time home buyer this afternoon…on a full price offer. I’m sure the next one is right around the corner.

I suppose I could have discussed this in greater detail and tried to negotiate something – maybe keep one and drop the 2^nd…but if he was playing games, which I am convinced of, maybe in losing this round he won’t be so brash the next time he tries to do business with one of my fellow REALTORS® - cause it won't be with me!

What would you have done?

Now Have a Blessed Day,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

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I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud to be a contributing member of the ActiveRain community.