The Titanium Vault hosted by RJ Bates III

Oh, That's F***ing Adorable | I Lost $100,000 Assignment Fee

• RJ Bates III • Episode 479

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If you’re new to my channel my name is RJ Bates III. Myself and my partner Cassi DeHaas are the founders of Titanium Investments.

We are nationwide virtual wholesalers and on this channel we share EVERYTHING that we do inside our business. So if you’re looking to close more deals - at higher assignments - anywhere in the country… You’re in the right place.

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Over 10 years in the real estate investing business
Closed deals in all 50 states
​Owned rentals in 12 states
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​Closed on over 2,000 properties
​125 contracts in 50 days (all live on YouTube)
​Back to back Closers Olympics Champion
Trained thousands of wholesalers to close more deals

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Speaker 1:

Welcome back to oh, that's fucking adorable the series where I tell you guys about how things went poorly, horribly wrong inside of our business so you can hopefully learn from our mistakes and not duplicate the exact same results. Today we're going to be talking about a wholesale transaction that we did in McKinney, texas. Well, I say it was a wholesale transaction that we did. It was a wholesale transaction that we attempted in McKinney, texas, where we were going to make a fat six-figure assignment. Except we just wasted our time and we made $0. So let's talk about this. This was a vacant land deal in 2023. Now it was off of University Drive.

Speaker 1:

Everything seemed great, except when I talk about the four-seller buckets, there's the least common bucket that sometimes I think you guys kind of roll your eyes at the bucket of not motivated, but the price is correct, and I always talk about that and I say, guys, if there's no motivation, then we shouldn't be talking to that seller. What is the reason why they would want to sell this piece of juicy vacant land in McKinney Texas, one of the fastest growing suburbs of Dallas-Fort Worth, for a discount? We need to understand that motivation. Well, unfortunately, in 2023, during this time period, we still had some acquisitions reps that were doing SMS marketing. We hadn't fully gone in on PPL and gotten rid of the SMS marketing 100% and because of that, of the SMS marketing 100% and because of that, we were still locking deals up just purely via texting. Now, on the surface, we had done this hundreds, if not thousands, of times, so it didn't seem like there was anything wrong. But the problem with SMS marketing and just locking up a deal through text messages is that there's going to be times where you don't fully grasp whether or not the seller is motivated or what their motivation is. It can be very surface level conversation Do you want to sell? How much do you want? What is it? This was just some acreage off of University Drive in McKinney, texas, and so, yeah, all right, price is right.

Speaker 1:

We send the contract, we send it out on InvestorLift. We get a buyer. We ask for $25,000 non-refundable earnest money. Deposit Gets deposited, survey gets purchased by the buyer. Everything is trucking along. Title commitment comes back, there's a payoff from the mortgage. Okay, everything's going along, everything gets filled out. And then we get like three to four days before the closing period and our buyer comes back to us and says I'm not ready to close. I need more time Now.

Speaker 1:

If you've ever done acreage, large vacant land deals, you'll know that there is a significant amount of due diligence that needs to take place by a developer, so it's not uncommon for an extension to need to take place, but that's not the reason why our buyer needed an extension. What really threw up the first red flag on this transaction was is that there was an issue with funding. Now, when we vet out our buyers and we talk to them, we ask them how are you funding the deal In this scenario? This buyer told us that I'm going to be using private money, so it's going to be cash, and we also received proof of funds. So we had a verified proof of funds from a bank account. We were told how it was funding and it was the highest offer, so that's why we accepted it. We actually had other offers from other developers, but it wasn't as high as this one. This was at our asking price, so we accepted this one.

Speaker 1:

But right before closing, come to find out there's now going to be a lender involved and that's not how he's going to be funding the deal. Those funds have already been allocated to another deal. Is what the buyer told us. So now we're in a precarious situation because we need to get an extension. But the seller is highly motivated and we also are starting to worry on whether or not this buyer can even perform on closing on this deal. So we go back to the seller, we ask for the extension and begrudgingly accepts giving us a week-long extension. We extend the assignment with our end buyer and we tell them we need a lot more communication from you about where you are funding this deal, because if this deal falls apart, it's critical to our business. We don't want this deal to fall apart, but we need to understand where you are in the process of getting funding. So we fast forward several days, buyers kind of communicating with us, but not over the top, I mean, it's still hit and miss. We get maybe a text message at the end of the day and saying hey, everything's moving along. I'll update you once I have more information.

Speaker 1:

Then the worst thing in the world happens. The buyer calls us and says yeah, this deal is not a real deal. No, we're like what do you mean? He's like the seller is a fraud and we're like what do you mean? This seller that we've been talking to has been communicating with the title company the entire time and he says that's not the seller, the seller died. We're like what? So we start looking up information.

Speaker 1:

Now, unfortunately, the seller's name was a fairly common name. So, yes, there was an individual with that name that had passed away. There was an individual with that name that had passed away, but that wasn't the seller or the owner of this property. So now there's red flags everywhere. I'm trying to understand what's going on. We start communicating with the title company about hey, this is what the buyer's saying.

Speaker 1:

We feel like the buyer is just trying to kick the can down the road. He can't perform, he just wants to get his earnest money back. The seller is in communication with us, but the seller is also kind of weird. He'll do a lot of texting, but he's not really hopping on the phone. Going back to the original way that we acquired this deal, it was all through texting. So now it's like well, do we even have the real seller? Is our buyer a real buyer? Can he actually perform? Or is he just saying that this is a fake seller and it's a scam because he can't perform and he doesn't want to lose his 25,000 non-refundable EMD?

Speaker 1:

Now no one wants to talk about this aspect of wholesaling real estate, the part where just a time suck happens inside of your business, where we've got our acquisitions manager on the phone, we got our dispo guy, we got our transaction coordinator. Myself and cassie are involved and of course, the rest of the team now is highly interested. It's drama. Drama is going on in the office and we're all trying to figure out what's going to happen. The other part of this is on the accounts receivable. What we were looking at for a payday was significant, and so this is a pretty big deal inside of our little office and we're trying to figure out what's going to happen.

Speaker 1:

So title gets on the phone with the seller. We get on the phone with the seller and the seller's like I'm ready to close. Here comes the next red flag. But I'm out of town. I'm in New Jersey. I had to come up here for my daughter's wedding. So can I just go meet a notary? Title says you can't just go meet any notary. You would have to meet one of our notaries. No, no, no, don't worry about that. I've got a notary. Notaries no, no, no, don't worry about that, I've got a notary, all right. So maybe there's some validity to what the buyer was saying.

Speaker 1:

I'm now getting a little bit concerned that this is not a legitimate seller. Because why does this seller need to meet his notary? Why can't he just meet the title company's notary? But then on the other side the buyer's like I've almost gotten all of the funds to close. I'm like dude. So then closing date gets there. Closing date is here.

Speaker 1:

Buyer says I still don't have the funds to close. Seller says I'm ready to close, I'm not going to give you an extension. So what do we do? Listen, this seller is saying that he's ready to close, he's willing to meet the notary. I'm still skeptical whether or not he's real. But the buyer now is saying he can't perform. So I'm like fine, release your EMD to me, no, I don't think that's the real seller. Then why are you raising money for the deal?

Speaker 1:

If you don't think this is a real seller, title is not going to let this go through. If this is not a legitimate seller, there's a verification process. There's going to have to be a form of identification, he's going to have to meet with a notary and you will have title insurance. If this doesn't go through correctly, like there are safety mechanisms that would take place here, but you don't have the money. So I feel like the reason why you're saying that this is not a legitimate seller is not because you don't think that, it's because you don't have the ability to perform per the terms of the contract. I think you signed a contract you should and I actually had that exact conversation with the buyer. That exact conversation with the buyer.

Speaker 1:

Lo and behold what we did find out. I did get on the phone with the actual gentleman that owned this property. It was a fake seller and the only reason why I released the earnest money back to the buyer even though I do know for a fact that buyer was never able to perform on his contract was because I did track down the actual owner. He was a very well-spoken elderly gentleman in his 80s and he was like no, I've owned that, I'm passing it down to my children. I do not want to sell. The person that we had been speaking to had actually tried to fraudulently sell this piece of land previously. This was a scam that he was running.

Speaker 1:

This was the beginning stages of me developing the four seller buckets where it's like hey, you're talking to someone that wants to sell a piece of real estate for a discount, but yet they lack motivation. You need to run for the hills. There is a problem here, and that's what we found out here. So we thought we were going to make a six-figure assignment. We had a buyer put down $25,000 earnest money not refundable. They were never, never able to perform, but because we did our due diligence and we were able to prove that the seller that we were doing business with we actually released that earnest money back to the buyer. We let everybody walk away.

Speaker 1:

Now, the story doesn't end there, though. The title company that we were using went out of business during this transaction. We had several transactions going on with this title company during this time. They just shut the doors. Everyone's gone, and all of the money that was sitting in the escrow account got transferred to a different title company, and about two weeks after the title company closed and all these transactions fell apart, a new representative called and said I'm here to clean up the mess. I'm here to release all of this earnest money that's been sitting in these escrow accounts to the rightful parties, and so our buyer the buyer who could not actually perform was freaking out, thinking that we were doing something incorrectly with his money so he was saying to us that we wouldn't release it and we were in cahoots with the title company. What's hilarious about that is because of the amount of communication that this buyer had with this title company and the owner of this title company and everything that took place. We found out several months later that the buyer and the original owner, the title company, went out and created their own title company together.

Speaker 1:

When I say oh, that's fucking adorable with this transaction, the amount of shit that went wrong on this one is absurd Fake seller, buyer couldn't perform, title company gets shut down, takes weeks for earnest money to be released, buyer ends up like liking this failed title company owner and they go create their own title company together. Man, just one of the worst failed wholesale transactions I can ever remember. I can't honestly believe that it's taken me this long to create this episode of oh, that's fucking adorable. And I don't even know what we should have called it. I just went with lost $100,000 assignment fee because it feels like it'll be the one that gets the most amount of clicks. But there was just a lot that was adorable on this transaction. So, moral of the story one vacant land has a lot of scams going on with it.

Speaker 1:

Two, anytime you're trying to close the deal, it's okay to do it through SMS, but at some point in time you need to get on the phone with that seller and make sure that they have motivation. They're selling a piece of real estate for a discount and motivation doesn't exist. There's something fishy going on in that transaction. Last, we could have been a PLS on this and we could have taken the buyer's earnest money. But because we did enough due diligence and we found out I want to be able to sleep at night we did the right thing. We released the EMD to the buyer, even though they were not in the position before the reason why we didn't have a deal for them to even perform on. So let me know what you guys think about this episode of. Oh, that's fucking adorable. Make sure you give me a like. We'll see you guys tomorrow.