How To Spot A Fake Deal Before You Lose Money!

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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
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Chapters

• 0:06 Introduction to Wholesale Red Flags
• 0:35 When Deals Seem Too Good
• 1:42 Understanding Seller's True Motivation
• 4:02 Identifying Hidden Costs and Liabilities
• 7:11 Protecting Yourself From Scams
• 9:26 Closing Thoughts and Viewer Request

Transcript

Speaker 1: 0:06

Welcome back to Wholesale and Red Flags, the series where I talk about alarming things that could go wrong during a wholesale transaction, so you can get out in front of them before it costs you the deal. Now, today we're going to be talking about when the deal feels like it's too good to be true, it's too easy, everything's going just right, and how that can be a red flag, and how you need to jump out of it, jump out in front of it before it costs you a deal. Now here's what I mean by it's too good to be true. This is going back to the four seller buckets, and this is the least common bucket, but it's also the one that I feel like people really struggle understanding when this can get triggered. But it goes back to the fundamentals of understanding what we're trying to accomplish during the closers formula. So when we talk about the least common buckets, when the seller is not motivated but the price is correct, this is one of those situations when you ask the seller how much do you want for the property and they say $5,000. And you open up your comp software and every property in the area is going for $100,000 plus. I mean it seems like it's a straight banger of a deal, it's a no-brainer. And what happens is these newer wholesalers that get excited because they're like this is a lay down, it's the correct price and it's a motivated seller.

Speaker 1: 1:38

You still have to determine what is the seller's motivation. See, the two most important things that we're trying to determine when we're talking to a seller is price and motivation, because that dictates how we navigate the rest of the conversation. But what happens is is when we hear the correct price a great price right off the bat we then lack and we slack and we relax on determining what that seller's true motivation is. And if there is no motivation, what we have found out is over the course of time is that there was a reason why they were trying to sell you a property for $5,000 or $10,000 when it was worth well north of six figures, and it's normally something that will kill the deal, whether it's a lien or judgment or back taxes, or maybe they don't even have the ownership rights to be selling you the property. So here's what you need to do If you ask the seller early on how much do you want for the property, they give you a great price. You still have to go through the fundamentals and follow the process. Again, I say this all the time it's not about the results, it's about falling in love and following the process. So what's the next step in the closers formula? Tell me a little bit about what you got going on.

Speaker 1: 3:09

This is where you leave it open-ended and allow that seller to explain their motivation. And here's the thing If they don't just come out with it, you need to ask the seller point blank. I need to understand what is your motivation for wanting to sell this property for $5,000. Now it might scare you where it feels like RJ. So you're telling me that if I'm on the phone with a seller and they're giving me a great price, but yet I'm not understanding what the motivation is, I need to point blank, just ask them what their motivation is. Yes, I need to point blank, just ask them what their motivation is. Yes, you need to understand why they're wanting to sell this piece of real estate for a discount. Otherwise, you're going to get your feelings hurt really badly later on in the transaction. When you find out the reason why they were wanting to sell this, you find out the reason why they were wanting to sell this.

Speaker 1: 4:07

Sometimes in these real estate transactions, what happens is you ask the seller how much do you want for the property, and they will take that at face value, meaning I, the seller, want $5,000. Okay, not realizing that, really, what your ask is is how much do you need for the property to cover everything that you owe on the property as well as walk away? See, sellers are not real estate professionals. Some of them are, the majority of them are not, so they might not understand the question. So they'll think, yeah, if you give me $5,000, you can have the property and take over everything that I owe on this property, meaning the mortgage, back taxes, liens, judgments against it, everything. That has happened time and time again. Now you can go back in the course of my live seller calls, especially during the 50-50-50 when I'm calling dial after dial after dial, and you will see where, during some of these conversations, I've asked the seller how much do you want for the property? $5,000.

Speaker 1: 5:20

And then we started getting into the motivation. And then I start hearing that there's a mortgage. How much do you own the mortgage? 20. Okay, so you really need 20. No, I need five. I need to walk away. Oh, so you really need 25. Well, and then there's also back taxes. Oh, so how much do you own back taxes? Well, that's another 20. So you really need 45. Okay, so now I was looking at an after repair value of 100. I was thinking I was getting this for five. Really, I'm getting it for 45. I want to make 10 to 15. That's at 55 to 60, and it needs 40 in repairs. This is not a deal.

Speaker 1: 5:58

Now we have to come up with a different solution, if there even is a solution feasible for this property. But if we were to just look at it and say the seller told me $5,000, what's your email? And we send that off, what's going to end up happening is we're going to send that to title, title is going to come back with a title commitment and they're going to say listen, there's back taxes, there's a mortgage. Really, the payoff on this property is $40,000. The seller's going to be like, well, you didn't ask me about that. This is where we get ourselves into trouble. If it's too good to be true, it probably is.

Speaker 1: 6:40

Understand that the majority of the time when you call sellers, you will be talking to a seller who wants too much for the property. Now, it's alarming when they do not come out with any sort of motivation. So this is where that's the red flag moment, where you really need to dive deep and just point blank ask questions Do you owe anything on the property? How much money do you need in your pocket to walk away from this? These are very targeted and specific questions to protect yourself so later on in the transaction you don't waste time doing recon dispositions, embarrassing yourself by saying, hey, I'll assign this property for $15,000, $20,000, and then finding out that the property owes $40,000 on it.

Speaker 1: 7:31

Then the other thing is this will eliminate any scams that you can come across. This is specific also when you are not doing lead generation and you're doing like $0 marketing, when you're trying to go after Fizbo's and properties listed on Zillow and things like Facebook Marketplace. This is chock full of scams, people that don't have any ownership rights, people that are literally stealing people's identities and trying to sell properties. This just happened to someone inside of TU where they looked it up and it was a property in Rhode Island and they were like you know, I'm talking to this guy and he says he's the owner, but something doesn't feel right. It's not adding up. So he went skip, traced the owner, called the owner and the owner said yes, I know who this guy is. He's regularly trying to steal my identity and sell this property. He's basically just trying to scam people like you wholesalers for a really low price.

Speaker 1: 8:37

So it's very important for you guys to understand that during the closers formula it's verify that they want to sell, verify the asking price, then determine what is the seller's motivation, and you have to stay there until you truly have the motivation. So anytime someone comes to me and they say hey, rj, I've got this deal and I just want to find out if it is a deal, one of the things I always ask is what's the seller's motivation? Because that right, there is going to tell me if you did a good job of closing that deal or not. There is going to tell me if you did a good job of closing that deal or not. You should walk away with each conversation knowing this is how much the price was that the seller wanted and this was their level of motivation, whether it existed or it didn't exist. If motivation does not exist, you should not be closing that deal Bottom line.

Speaker 1: 9:32

So the red flag here is it feels too good to be true. It probably is. Let me know what you guys think in the comments. Show me some love and let me know Do you guys enjoy this new series, the Wholesale and Red Flag. Should we keep doing them or should we find something else that'll help you out more in your wholesaling business? Let me know in the comments. Appreciate you guys and we'll see you guys tomorrow.