I just recently learned this lesson (AGAIN) the hard way, and I’m going to tell you what I learned (AGAIN) to hopefully prevent you from doing the same.
I had a deal in Durham, North Carolina. It was a nice little 3 bedroom 2 bath property, but was in an area that things just weren’t selling in. I took it on anyway because I know that if I can get a steep enough discount, I can get it sold. Full retail value on this one was $115,000. Counrywide was the 1st and was owed $96,000 (principle) and Litton was the 2nd and was owed $18,000 (principle). The BPO was done and it did not go well. Our initial offer was $52,543. Countrywide countered at $90,000. We had the property sold at $90,000. We countered back and forth with Countrywide a few times and eventually got the loss mitigator to send it for approval at $55,000. The numbers looked good, but I had a feeling in my gut that this deal was going to be rejected. It took Countrywide a full month before they came back with a rejection. They again countered at $90,000. Meanwhile, Litton said they would only take $5,000 and a promissory note from the homeowner for the rest. Countywide said Litton could only get $3,000. We fought with Countrywide to get them to do another BPO, they refused. The best Countrywide was willing to take was the $90,000 and they agreed to pay $7,000 in closing costs. Remember, we had the property sold at $90,000, which is the best we were going to do in this neighborhood. So what would a smart investor do at this point? He or she would let the deal go. What did I do? I fought it. I continued to fight this deal for another 3 months. I got Countrywide to postpone the sale 2 more times. I got Litton down to $3,000 and a $5,000 promissory note. My ego was feeling good, but where is the money in this one? Meanwhile, I had a few minor repairs done to the property and I was paying for the utilities. Because it took so long to get Countywide and Litton on board, my buyer walked from the deal (and rightfully so). After that happened, I decided to just let the deal go.
So what happened? You’re going to find that some deals will be smooth as silk. They will run so well and you will make so much money on it that you will be shocked. Then there will be other deals that will make you feel like you’re banging your head against the wall. The deals will go nowhere and you will feel like you’re just fighting the bank every step of the way. Unless you are only working one or two deals, let these head banging deals go! Think of all the negative energy these deals will generate. These bad deals will take up all your time, time that should be spent working other short sales or time that should be spent selling other properties.
If the deal smells bad, feels bad, or looks bad, let it go. If you feel like you’re fighting and getting nowhere, let it go. Spend your time and energy on more productive things.
CAVEAT! – If you are new to the business and are not working many deals, work the deal. You will learn a tremendous amount from it and you will learn how to identify this exact kind of deal in the future so you know how to avoid it.
Good luck!
