Terminations Sucks

Terminations suck and can be crippling for a real estate wholesaling business.

But the thing is, they are inevitable. It's just part of being a wholesaler. Some properties are just not going to make it to the closing table. In this video, I go through how to learn from terminations, how to avoid them in the future and what your ideal KPI for terminated contracts should be.

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Transcript

Speaker 1: 0:01

terminations suck. You know what else sucks? Taxes. Taxes suck. You know what else sucks? Death. Death sucks Guess what. We're all going to die. It's inevitable. And guess what? Some of our deals are going to die as well.

Speaker 1: 0:23

If you're going to be a virtual wholesaler and you're going to do volume, you're going to have terminations inside of your business. It's inevitable, it's part of the business and it's going to have to be something that you're both going to have to financially and mentally overcome. Now here's the thing when terminations happen, what I've seen is people allow this to mentally cripple them. It becomes one of those things where they focus so much on that termination that it keeps them from moving forward and getting deals closed. Cash checks that's not what we want to happen. Okay, do not allow this to be crippling to you in your business. So when we are talking about terminations, normally this is because you don't have enough deal flow going on and so you were counting on the anticipated revenue coming in that was going to move the needle for you. So instead of focusing on that one termination, what you should be focusing on is why do we not have more contracts to where that wasn't as crippling of a thing inside of our business. See, I don't focus on terminations, I focus on closed contracts. I focus on the revenue that we're able to generate, not the quote unquote lost revenue due to terminations. Now, I'm not saying you shouldn't look at terminations and learn from them. I absolutely think you should be looking at them and learning from them.

Speaker 1: 2:10

There are times where terminations happen because you weren't good at your job after getting a signed contract. That is specifically something that you have to focus on fixing. So, for example, say, you get a property under contract and you have to terminate it because you couldn't find a buyer. Now, was that because you locked up a deal in a location where buyers don't exist? Did you lock up a deal too high and the numbers didn't work and you didn't know how to renegotiate the price or set that expectation with the seller? Or is it because you have a problem inside of your dispo process and you didn't turn the lights on and you didn't do a good enough job marketing that contract, so you couldn't dispo the property? That's where you need to sit down and say if it was one of those problems, we have to fix those problems. Now there's gonna be terminations that happen that are just strictly outside of your control and there's nothing that you could have done.

Speaker 1: 3:12

For example, we just had a termination in our business. That was, the seller had a $25,000 past due water bill as well as $13,000 in back taxes, so that brings up their liens to $38,000. I think our purchase price on the property was like 20,000. So our purchase price wasn't even high enough to cover those liens and the seller didn't have any cash to bring to the table and the numbers wouldn't work if we increased our purchase price. So it killed the deal. That's a termination that is outside of our control. Those are inevitable. They're going to happen, happen.

Speaker 1: 4:06

We're reaching out to motivated sellers that, quite frankly, have either a financial motivation or a physical motivation, like the property is distressed and that's why they need to sell. In this case it was both A great seller for a wholesaler to come in and help. But the problem was is the numbers didn't work. There's nothing that we can really do in that circumstance. So it leads to a termination. We can't sit down and like mentally, become exhausted and stop marketing and stop talking to other sellers and stop getting properties under contract because we're so wrapped up in the fact that we just had a termination. Yeah, it sucks, but it's just part of being a virtual wholesale.

Speaker 1: 4:49

Now, other things that you can learn throughout this process is hey, do we have a problem with transaction coordination? Figuring out how to handle certain situations like a foreclosure, probate tax, delinquency judgments, liens, things like that? If that's the case, go to titaniumtccom, hire Easy REI Closings and let them handle that for you Costs on average around $325 per transaction and that is well worth the investment to make if it eliminates you having terminations due to the fact that you're struggling with transaction coordination. If you're struggling with dispositions, then I would, first and foremost, a quick fix right there to get money in the table is do a joint venture with someone that is successful in that market. You can joint venture with us at jvtitaniuminvestments, or you can JV with another wholesaler that's local to that market, that has a proven track record, that has proven buyers and that has proven buyers, and that way you're eliminating terminations due to the fact that you're just not ready to dispo your own deals. That's one of the worst reasons why a termination happens is because you weren't good enough. Okay, don't let that happen, because there's plenty of help in this industry to eliminate that from happening. Okay.

Speaker 1: 6:17

Now, when terminations happen, it is vitally important for you to not become deflated by them, okay, mentally just worn out or feel like maybe this industry is not for me. I had this conversation with someone inside of our community the other day where they were literally like I don't know if I should do wholesaling because I went and locked up five contracts and I had to send five terminations. Well, what were the reasons for those terminations? One of the fixes that I had for them was is the inside of the acquisition space having the appropriate conversation with the seller. If you are going to be buying properties sight unseen, you need to set the expectation with the seller as to what that process looks like. So let me walk you through that scenario.

Speaker 1: 7:19

Anytime I'm closing a contract with a seller, I lay out okay, mr and Mrs Seller, here's what's going to happen. We've agreed to a price, I'm now going to send you the contract. Once you've signed that, we are going to come out to the property, we are going to do our walkthrough slash inspection and if everything looks and checks out exactly the way you told me today, then we're good to close on your timeline. If it's not, then we're going to have to come back and we're going to have to talk about the price or the timeline based off of whatever we uncover during our inspection or walkthrough. So I'm establishing right there that there is going to be a conversation one way or another around yes, we're good at the price and the timeline, or no, we're not. And here's where we need to be.

Speaker 1: 8:06

This is exactly what Open Door and OfferPad does when they buy properties. So we are literally mirroring their purchase process. They say here's the anticipated price that we're willing to give you. We're gonna come out, we're gonna do our inspection and then we're gonna come back say here is the final number that we're willing to give you Now as a wholesaler. The only thing that we're slightly changing there is is we're getting that number from our end buyer. Our end buyer is saying okay, I am willing to give you $100,000 for this property.

Speaker 1: 8:40

If we are locked up at $100,000, we have to go back to the seller and renegotiate, and you should get the facts from your end buyer why they need to purchase at that price. Is it because we didn't get the after repair value correctly? Is it because our rehab budget was incorrect? Is it because there's something about the property that we just didn't know what are the facts that we could go back to the seller and explain to them this is where we could purchase your property at. And here's the reasons why. Once you have those, you go back and that is how you renegotiate the contract. You're renegotiating based off of the facts, on what it's going to take to get this project done and why your end buyer needs to buy it at the number that you're needing to get it at, why your end buyer needs to buy it at the number that you're needing to get it at.

Speaker 1: 9:34

Now the other thing is is how do you move forward with terminations when they happen? What does that conversation look like? Well, the conversation should happen. If it's going to lead to a termination during this renegotiation phase, for whatever reason, you need to renegotiate. You call the seller, you speak facts, you give them their options. Your options are you can either change the price and timeline to this, or we're going to have to terminate the contract and best of luck once they've decided what they want to do. If they've decided they no longer want to move forward with you or with us, then you're going to send over a written termination to them, the same way. You send the contract and then you're going to send that signed termination to the title company and then from there you are mentally going to move on.

Speaker 1: 10:29

Move on to revenue-generating activities that move the needle for you. Do not sit down, sulk and complain about the fact that you had a termination, because we understand that's part of the business and that's part of being a virtual wholesaler. Now, one of the flip sides of this is that, even though you've got a termination, one thing that you can look at on a positive side is is that you've already done a lot more than the vast majority of people that are trying to get into wholesaling, which is you got a signed contract, you identified a discounted property from a motivated seller, your marketing worked, you went through the closers formula and you got a signed contract. These are things that a lot of people struggle with in this industry and you were able to accomplish that. Now, for whatever reason, whatever happened on the backside that led to the termination, you sit down, you analyze it, you learn from it and you move on. But you can allow this to give you momentum inside of your business to say, hey, my marketing worked, my closing process worked, I was able to get a signed contract. How do we 10x, how do we 20x what we just did there? This is a positive spin that you can put on it where it's like hey, I understand, it didn't lead to money entering your bank account and that sucks because that's what we're here for. But you can also focus on the positive side of things, which is we were able to get a signed contract and we're taking action. So many people sit in analysis, paralysis and they never take that action. So you're already ahead of the vast majority of people.

Speaker 1: 12:15

So, again, terminations suck, but they're inevitable. It's part of the game. The ideal KPI for terminations is to keep it somewhere between 30 to 35% of your signed contracts. If you're doing that, that means you're going to get a healthy margin of those are going to be things that are outside of your control, right, severe title issues, payoffs that are above what can be allotted to be paid for the property, probate issues, things like that. Sellers just flat out becoming unresponsive. That's something that happens at times. So if you could keep the vast majority in that and a small percent where it's on you, where you can truly learn from it and become better inside of your processes, maybe even once you have money, gain better systems for dispositions like InvestorLift, a better system for transaction coordination like titanium TC. Then that's where you could grow and you can get better. But that should be the small percent of that 30 to 35% of your terminated contracts.

Speaker 1: 13:23

So again, it's inevitable. Don't let it cripple you, don't let it sway you for taking the action that's needed, the momentum that you've got from getting a signed contract. Look at it and realize, hey, we're actually doing a pretty damn good job. We're actually doing what the vast majority of people say they want to do but they never actually do. So, yes, I get it. I still, to this day, get upset about terminated contracts, but we're never going to let it stop us and we're never going to stop learning from those. Now you guys want to share some stories about some of your crazy terminated contracts. Leave me a comment below. Let me know about those. Let's see what we can learn together from some of these terminations that we've had. Don't let it stop you guys. If you like this type of content, make sure you like the video. Leave me a comment below. We'll see you tomorrow.