Recent Newbie Mistakes - Posted by Nate(DC)
Posted by Nate(DC) on August 12, 2002 at 23:31:03:
BODY OF MESSAGE: This is not meant as a flame or to embarrass any particular person. Perhaps some of the people involved will read it and know who they are. Perhaps not. I’m not including any names because there is no need. This post is for everyone’s edification - regardless of experience level.
I’ve recently worked with a couple of relative newbies on deals that have fallen apart. In this post I’ll explain what happened and analyze what went wrong (IMHO) so that if you’re ever faced with this kind of situation you can head off similar problems before they start.
DEAL #1
Flipper got a house under contract and was going to flip it. House being sold by a friend of his who was relocating out of state for work. I agreed to list the home for sale for sale for the flipper. He had a contract to buy the home for $160K roughly and we were going to flip it for $190K.
I asked him up front “Do they know you’re going to make money off them, and are they okay with it?” He assured me they were. MISTAKE #1.
So we listed the house. The sellers had mostly moved out but one weekend the seller was back in town moving out some last items. An agent happened to come by with a buyer at that time. Seller, who happened to be there (MISTAKE #2), starts talking directly to Buyer about how he wants to sell house for $160K (keep in mind that Buyer and Buyer’s Agent know the house is listed for $190K - not realizing the person they just spoke to is not the contract owner).
Somehow, Buyer’s Agent convinces Buyer to write a contract for $180K, which flipper accepts.
A week before scheduled closing, Buyer’s Agent calls me to say Buyer is backing out of the deal because Seller called him directly and said they should do the deal without any agents at $160K.
Since Seller did, in fact, screw with the deal, I as Seller’s agent have no real recourse. Perhaps Flipper would have recourse against Seller, but he chooses not to pursue it.
MORALS OF THIS STORY:
- If you’re flipping a house where the Seller is still living there, make sure you are present at any showings. This would apply even if there is ANY chance the Seller would be there.
- Make sure the Seller knows to keep his big mouth shut!!
- Even if Seller assures you he knows you are making money and is okay with it, that’s not enough. I’d suggest getting it in writing (makes for a better case later in case you have to sue him). Also, don’t assume that because he says he’s okay with it up front, he will still feel that way a month down the road when he sees how much you’re actually making.
DEAL #2
Different Flipper. A woman called him off a bandit sign and said her sister had died and they needed to sell the house, and that she was the representative of the estate.
Flipper went out and signed a contract to buy the house at a very good price, then called me to see if I wanted to buy the contract. I visited property. Brother of deceased living there (rent free) with his deadbeat son. When they found out the property was being sold, they were unhappy (no place to go?)
I took an assignment of the contract and then had Flipper contact seller to arrange closing. She had changed her story - now she’s not the rep. of the estate, there are 3 siblings (one of whom is the guy living in the house) and one of them (guess which one) doesn’t want to sell, so they are not going to sell.
I tell woman that I will sue her for specific performance. She says that she can’t sell, she doesn’t have the authority, so I will lose.
I go and check probate records. She’s right!! Estate hasn’t even opened probate. I release Flipper from contract.
MORAL OF THIS STORY:
-
Before you sign a contract, make sure you’re signing it with the right person!!! Especially in a situation like this (estate), DON’T take their word for it! Do your own independent research!
Anyway, hope these were useful to someone somewhere.
NT