In and Outs of Baby Sitting a House Deal (027)
In and Outs of Baby Sitting a House Deal (027)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Bonjour.
Steven Butala: Welcome to the house academy show, entertaining real estate investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny, southern California.
Steven Butala: Today Jill and I talk about the ins and outs of babysitting a house sale. If anybody is qualified to talk about this topic, it’s Jill.
Jill DeWit: Oh, I would say it’s us.
Steven Butala: Jill is a great … I’m very good at generating these house sales economically, and jill is fantastic at putting the money back in the account after it comes in.
Jill DeWit: You know what’s funny about this? Parenting comes in. You have to set goals and boundaries and check in, and there has to be rules, and a lot of communication.
Steven Butala: It’s totally true.
Jill DeWit: Exactly. I can share more on that in a minute.
Steven Butala: If you’re considering being a parent, do a couple house sales and see how you like it.
Jill DeWit: Yeah, you might change your mind.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on thehouseacademy.com online community. It’s free.
Jill DeWit: Andrea asked, “I’ve set up my first mailer and I’m getting a lot of response back. Maybe too much response.” That’s good. “What are your average numbers for your mailers?”
Steven Butala: Okay, good. Excuse me. Great question. On the outbound, you can expect this: for every 1800 to 3500 letters that you send out on their own, you can expect to buy a house. Some of our really experienced house academy members, us included, do a little bit better than that, but I’m not comfortable telling you that sending out 800 mailers is going to get you a house, which is realistic after four or five years of doing this.
Steven Butala: In your head, if you’re new, just keep the 3000 number in your head. So you’re going to spend about $1500 on mail and data in general to generate between $10 and $80,000 in profit for yourself. Those are pretty strong numbers by anybody’s measure.
Jill DeWit: Right.
Steven Butala: So those are the outbound numbers. On the inbound numbers, what does it cost to close a deal? So a title costs, inspections is $500. Title probably costs, let’s just say $1500.
Jill DeWit: Close a deal, I’m going to say it’s about a $2000.
Steven Butala: That’s what I figure. I always put between $2 and $3000 in my head.
Jill DeWit: Right.
Steven Butala: There’s some marketing costs like fixed price MLS. So your data and mail should cost about $1500, and your closing costs should cost around $2500. So $4 to $5000 to close a house and own it.
Jill DeWit: I want to talk back about her question about the numbers. She’s asking about what are the numbers when I sent out the mailers? What should I get back?
Jill DeWit: So when you say, buy a house, that’s at the very, very bitter end. So keep in mind, I think it’s Andrea, so keep in mind, Andrea, that you’re sending out mailers. You’re going to get maybe 10-20 that you’re going to review to buy one or two.
Steven Butala: Oh, I see.
Jill DeWit: That I think is her numbers question.
Steven Butala: 20 houses?
Jill DeWit: Well, 10. Let’s just say 10. If you look … when we say all these offers, I mean, there’s a lot that come back. There’s a lot that come back that are not in our ballpark, right? So we throw those out right away. Maybe they do want to sell, but they’re like, they want retail. That’s still a response. So we take them all in. We log them all, we track them all, and keep an eye on them. Some of these people, too, it may not be right now. It may be six months from now. So I just want to point that out. It’s not that you send out, let’s just say an average of 3,000 offers. You have one person that calls you back and you buy that one house. It’s not like that.
Jill DeWit: There’s more than one that call you back or respond to you or sign it. Then you do your due diligence and you decide which you want to buy.
Steven Butala: So my summary numbers are what I said. I think … I mean, Jill is a little bit closer to it on the sale side than I am. I think it’s closer to maybe three or five to one. The five people you talk to on the phone that come back.
Jill DeWit: That’s what I mean. We’re saying the same thing.
Steven Butala: Okay, good. I thought you said ten to one.
Jill DeWit: So we’re saying the same thing. You know, we could look at the sheet again. It’s probably a good idea. We should keep a running total and we don’t keep a running percentage.
Steven Butala: Some of our members report back to the cent, like to the 841 mailers to everyone and I’ve been doing it for 18 1/2 months and I’ve sent out … I mean, the detail is amazing.
Jill DeWit: Well, what screws it all is you have a mailer from two years ago that comes in. It’s like, do I go back and redo my percentage?
Steven Butala: No, i don’t think they do.
Jill DeWit: See, that’s the thing.
Steven Butala: So there’s a lot of accumulated good will with these mailers. They never go away. They get your offer, and the way that it’s written, it’s an actual offer unlike everything else that they did. They put it in a file. Everybody who owns a home over the age of 30 has a paper file on it somewhere, and I’ll tell you the truth is, after they pass away, their kids find this file or they get the tax bill. They start digging through all this stuff.
Jill DeWit: And see an offer.
Steven Butala: They see an offer and they call you.
Jill DeWit: Right.
Steven Butala: It happens to us every week.
Jill DeWit: Exactly.
Steven Butala: From years ago, when we sent a letter back. Yeah, those never hit our statistics.
Jill DeWit: Exactly.
Steven Butala: So it’s good. It’s a conservative number. Base topic, the ins and outs of babysitting a house deal. This is why you’re listening.
Steven Butala: What’s the first thing that comes to your mind, or what’s the first thing that you do when a seller calls back and they say, “I got your letter and I talked to my husband, and we really are thinking about selling.” What’s the first level that the babysitting starts at that moment?
Jill DeWit: I want them to say they are ready to sell. So let’s assume it’s that. [inaudible 00:05:42] “We got your offer. We’re ready to go. What do we need to do next?” They very first thing we do is get eyes out there, get the signed purchase agreement, and get someone in that house and get some photos so we really see what we’re working with. We want to make sure it’s still standing, there wasn’t a fire on Tuesday. That’s why they’re calling us. We joke about that.
Steven Butala: [crosstalk 00:06:01]
Jill DeWit: Exactly.
Steven Butala: There’s no house there.
Jill DeWit: Exactly. It just got demolished. Who knows what happened. So we want to get out here and just get a quick idea. Make sure they weren’t using it for a lab and there was an explosion in the garage, you know?
Steven Butala: Which happened to us.
Jill DeWit: Right. So we want to get eyes out there real quick. You’re starting the process and you’re doing this because you don’t want the deal to go away. You have to keep them going because time kills deals, and if you always have a next step, a next step, and next step, it keeps them in the loop and it keeps this moving forward, and they know what’s happening.
Jill DeWit: So that’s the very first thing is get out there, take some pictures, and at the same time, while you’re sitting at the coffee table and getting the sign purchase agreement and they’re filling you in on anything they need to fill you in on about how much time they need to pack up the garage or, “Are you sure it’s okay? I don’t need to remodel the kitchen,” kind of thing. “Yeah, we want it just as it is.”
Jill DeWit: At that point, then you’re sitting at the inspection. I want to have my inspector come out and what, “Is Tuesday good? Wednesday good? What’s good for you guys?” And get that process going. It’s tons of … I was going to kind of talk higher level first, and if you want to ask me some detailed questions, I’ll bring it down to this level.
Jill DeWit: So things about babysitting a house deal is if you could afford a transaction coordinator some day, that’s the goal. It’s awesome when you can do that. So for years, we were the transaction coordinators. I was a transaction coordinator at a time, and so were you. Until we got to this level now to have a dedicated transaction coordinator, we were doing it. So I’m overseeing all these little things and there’s a lot that goes on, and I wanted to give you some tips and help you right now.
Jill DeWit: Number one, tons and tons and tons of communication, especially in the beginning. It really doesn’t stop, I got to say. You got to be in the loop. What are you doing with your communication? You’re doing two things. You’re holding the hand of your seller. With one hand, you’re holding it and you’re helping your seller, letting them know how easy this is. “Hey, do you have any questions? Yep, we’re right on time, on schedule. Did you get your movers scheduled? Great, that’s perfect. Okay, you’re good. I’ll talk to you tomorrow. Or did you turn in what the title agent needs? Great. We’re good. I’ll talk to you tomorrow.”
Jill DeWit: Then on the other hand, you’re over here talking to your title agent like, “Hurry up. Remember? We said we’re closing on the 30th. Do you have everything you need? What do you mean you didn’t hear from them? Okay, hang on. I’ll call you back.” “Hi.” That’s really what you’re doing. You’re doing a lot of … as you’re doing this, I want you to think about making it as easy and simple as possible for your seller while you’re pushing and keeping on track your title company or your attorney, whoever you’re using to close this deal, kind of thing.
Jill DeWit: What I want you to think about, too, is when you get off the phone with your escrow company and they say, “Hey, we need such and such affidavit of this form, explaining X, Y, Z,” you should be hanging up with them and quickly making it a simple, “Hi. They just need a little letter from you. Email is fine, saying you paid off that bill and you have a receipt to show it’s done.” Something like that.
Steven Butala: Better than that, even write the letter for them. Just ask them to sign it.
Jill DeWit: If you want to, you can go that, but you want to make this as simple for your seller because they don’t know the process. They don’t know the steps, and that’s why you’re here. So that’s a thing.
Jill DeWit: I wanted to make sure, too, that you’re providing anything anybody needs, you got to be on it, and you got to be quick because you don’t want to slow down your own deal, by the way. Like I was saying, too, about goals, you got to set real clear closing dates and goals. This is one of the things that I’ve learned and I’m constantly … every time I’m bringing in a new staff member, I’m telling them, “Hey, these title reps work for you. You don’t work for them.” So when you’re calling and setting up and starting the process, you’ve met with your seller and you guys have an agreement that you’re going to close in two weeks. They need that money. They’re ready to go. That’s part of why they chose you. So now your job is to pick up the phone and call … maybe it takes six until you find one title company that you connect with. Say, “We have to close in two weeks. The money is all lined up. It’s all ready to go. Nothing’s needed. There’s no contingencies. It’s cash only. Can you do this?” Get their commitment, and then stay on them.
Steven Butala: In some cases, it’s better to even do it with a real estate specific closing attorney.
Jill DeWit: Right.
Steven Butala: They can get it done really fast.
Jill DeWit: They might be faster and easier.
Steven Butala: Yeah.
Jill DeWit: Exactly.
Steven Butala: Nothing holds up a deal like a title agent. So you’re going to have to go through a lot of them to find one in the market that you’re in, and then use that person over and over again. You can just communicate with them.
Jill DeWit: That’s it.
Steven Butala: You should have a home inspector out there within a day, maybe two days. The title agent should have everything done, depending on the market, in twelve to fifteen days. When people own houses for a really long time, like 60-70 years, the title plan ironically is harder to get because it’s hard to go back that far.
Jill DeWit: You’d think it would be easier because you’re like, “It didn’t change hands. So what’s the problem everybody?”
Steven Butala: So if they’ve owned it for five years, a young couple and they’re just moving up or something, somebody did a title report five years ago on it, and it’s easy to pick that up and find out what happened.
Jill DeWit: That’s true, in the last five years. Yeah.
Steven Butala: It’s ironic.
Jill DeWit: Yep. You’re right. My last point is, when you find a good one, like a good title agent, because that’s what a lot of this is about.
Steven Butala: Oh, I stole your thunder.
Jill DeWit: No, it’s okay. Treat them. Treat them well. I have sent them treats. I sent them $150 worth of Rocky Mountain Chocolate Factory apples.
Steven Butala: Did you?
Jill DeWit: I did.
Steven Butala: That’s great.
Jill DeWit: I did.
Steven Butala: This one we like [crosstalk 00:11:57]
Jill DeWit: Yes. I told her I want to hire her and I would hire her, but she’s out there. I need her out here. So yeah. She’s good.
Steven Butala: All these real estate deals, every single house deal that there ever was, not so much land, but every house deal, something goes wrong and your goal in babysitting your seller is to kind of plan for that one thing that goes wrong where they start to get a doubt and they’re like, “What? What do you mean X, Y, Z?”
Jill DeWit: Right.
Steven Butala: If you’ve done your job as a babysitter up front, you’re going to be able to solve that. They’re going to be able to trust you and they’re going to pick up the phone. You’re going to sooth that concern they have. It might be something as silly as, “You know, I really do … I talked to my sister and I need to keep the appliances. I told you guys we were going to include the appliances but …” So you just need to be prepared for that and not be an adversary. You really need to be on their team.
Jill DeWit: Exactly. Make it known that you are. Then they’ll call you. I’ve had this, too. I’ve had title agents … or not title agents. Sellers call me, literally on a Friday afternoon saying, “The title agent said something that made me concerned that we’re not going to close on Monday. Are we okay?” I’m like, “Of course we’re okay. Don’t worry about it.” We had that relationship that she was comfortable to call me and make sure. I’m the buyer. I’m really the buyer.
Steven Butala: Exactly.
Jill DeWit: She’s like, “Okay, we’re good.”
Steven Butala: You know, if you do this perfectly, money is not the first concern. It’s just being treated right and not being disappointed. There’s so many … consumers have so many disappointments throughout their regular day. An idiot clerk at Walmart, just getting double charged on a gas bill, on and on and on. So you don’t want to be that kind of person. You want to be on their team and win some stuff because a little bit sideways. Let’s not make it about money. Let’s say, “Yep, you know what? You didn’t tell me there was a bunch of back taxes on this property, and I didn’t catch it. What are we going to do here?”
Jill DeWit: Exactly. Work together.
Steven Butala: Yeah, work together.
Jill DeWit: Mm-hmm (affirmative)
Steven Butala: Hey, I know your time is valuable. Thanks for spending some of it with us today. Join us next time for the episode called our in house title escrow companies, coming soon.
Jill DeWit: And we answer your questions posted on our online community, found at houseacademy.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: This is one of those topics that I could really go on and on and on.
In and Outs of Baby Sitting a House Deal (027)
Steven Butala: I know. I noticed.
Jill DeWit: Oh. You said take notes. I did.
Steven Butala: You know what, Jill? You’re an expert at it. You’re an expert. You could teach a whole class and have a whole thing on how to close a real estate deal.
Jill DeWit: Thank you.
Steven Butala: You know, you probably should.
Jill DeWit: In my spare time. No problem. Wherever you’re watching, wherever you’re listening, please rate us there. We are Steve and Jill.
Steven Butala: We are Steve and Jill. Information.
Jill DeWit: And inspiration.
Steven Butala: To buy undervalued property.
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