No matter what business any of us are in, no matter how experienced we are, no matter how smart we are – sometimes we find ourselves in a circumstance where we say “I was wrong.” My gut betrayed me.
Over the years, I have had two situations in particular where my initial feeling was way off. Let me share them with you:
- I was talking to a man who held a note on a beautiful home. It’s market value at the time was high six figures. The buyer was living in the home and had a successful business. He made a HUGE down payment. The terms were favorable for the seller. This was a very nice deal. The seller was co-operative, answered all my questions and provided the documents I requested. I looked at the home online and found a very nice, very well manicured property in a great neighborhood. Property taxes were current. We made an offer and the seller accepted. We checked the buyer’s credit and it was excellent. The property appraisal was above the sales price. The seller provided proof of payments made. The transaction is moving quickly and smoothly. I am thinking this is one of the cleanest and easiest deals I have ever worked on. Wrong! The last step before we close is to speak to the buyer. We introduce ourselves, reassure him that the note terms will not change, and just confirm that he is happy with his purchase. The noteholder provides a phone number. We call, get voicemail, leave a message. No response. We wait a few days, call again. Voicemail. Leave a message. No return call. Then, we get a letter from the buyer’s attorney. He says his client will not co-operate with the note sale. Why? The attorney claims that during the home purchase negotiations, the seller made verbal commitments to make certain improvements to the property. The buyer, trusting the seller’s promise, closed the transaction prior to the improvements being made. Now, all these months later, the seller has reneged on his promise. The next step is legal action. The noteholder never shared any of this information. When I confronted him with the attorney letter, he just shrugged it off. I was stunned by his demeanor. I never had a clue that anything was amiss. I was wrong. the note sale fell apart.
- It was during the housing recession. I was talking to a lady who sold a home in the mid six figures. She agreed to a 360 month term with a fair interest rate. She did receive a nice down payment. The property online appeared to be in okay condition. She had received only a few payments. The seller knew very little about her buyer. She agreed to sell because of the down payment. I did not feel good about this transaction. Home prices were dropping everywhere, and in this particular area, dropping like a rock. Note buyers were being cautious. If it turned out the buyer had sketchy credit or an uneven work history, this note sale would probably not happen. I shared my feelings with the seller, she understood, and said let’s see what happens. I requested her documents and proof of payments. I looked online again and services like Zillow, Redfin, etc. had the current home value 15%-20% below the sales price. My investor and I drove to the property. The neighborhood was nice, but our seller’s home was not one of the best on the street. However, my investor said that if his conversation with the buyer went well, he would buy the note and make an aggressive offer. I was stunned. In this market? We presented an offer to the seller contingent on the conversation with the buyer. That call went better than expected. We closed the transaction. Who knew? I was wrong.
