Oops, I Overpaid: Now What?

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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.

Who is Titanium Investments and What Have We Accomplished?

Over 10 years in the real estate investing business
Closed deals in all 50 states
​Owned rentals in 12 states
​Flipped houses in 11 states
​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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Transcript

The Price Is Wrong

SPEAKER_00 0:03

So you just got a sign contract and you find out that the price was incorrect. Now what do you do? You were so excited. You were on this high. You finally got a seller to sign a contract and you messed up the numbers. Whether it's the after repair value, maybe it's the rehab, maybe you just didn't underwrite it correctly, and there's not enough margin in there for your end buyer and for you to make an assignment fee.

Set Expectations With Reverse Rapport

SPEAKER_00 0:34

So what do we do? Well, it all starts with how did you actually acquire the deal? Were you transparent with the seller? Did you explain what's going to happen after the signed contract? I refer to this as reverse rapport, making sure that the sellers understand our process. Where after we received the signed contract, we are going to do our due diligence to make sure that everything that we thought it was, it is. Meaning after repair value, the rehab, the profit margin that we thought we were going to make. Does that align with the price that we offered? Now, this doesn't mean that we just blindly offer and then renegotiate every single contract. We want to be correct in our numbers, but we want to land as close as possible to being inside of the web, wherein buyers buy. That's why we refer to it as the web formula. If you go through the reverse rapport and you set the stage and the expectation with the seller that we are going to reevaluate these numbers, this conversation that is now necessary with the seller should not be that difficult because you're going to be explaining to them with transparency and honesty exactly why the price now needs to change. Even if that means you have to tell them you made a mistake. We all make mistakes. I still, to this day, make mistakes comping and underwriting deals. And it's okay because we go back to the seller and we explain. It's not like we're mandating that they have to accept that number, whatever it is. It's their choice. We have a conversation, it's a part of the negotiations.

Why Post Contract Negotiation Matters

SPEAKER_00 2:35

Negotiations do not end just because you've got a signed contract. Every single real estate transaction out there has negotiations post-signed contract. But for whatever reason, it feels taboo in the wholesaling industry. Don't be one of those wholesalers that goes and renegotiates the contract or the contract price with the seller after you got it signed. Well, that's because it's been used and abused and manipulated over the years. But if you're doing it correctly and honestly with transparency, then there's nothing wrong with it at all.

Find The Real Source Of Error

SPEAKER_00 3:18

Now, the first thing that you want to do is figure out why the mistake happened. Was it because you truly misunderstood the comps and the after repair value is different? Well, that gives you the talking point that you're going to have with your seller. This is what I was seeing in the comps. Now that I've gone back and I've talked to this with either the in buyers or realtor or my team or maybe even a JV partner, this is what I'm now seeing the after repair value would be. If it's the rehab, well, if you're buying the house, sight unseen, and now you've gone out, you've seen the property, you've done an inspection, and you've received feedback, well, that's a pretty easy conversation to have. We were anticipating that the rehab was going to be $40,000. And now after we performed our due diligence, we now know it's going to be $60,000. This is where the price needs to be now.

Make The New Price The Last

SPEAKER_00 4:18

Here's one of the key factors that when you mess up and you sign a contract for the incorrect price and you need to renegotiate, I want to make sure that this is the only time that you renegotiate the contract. So in order to do that, whatever the price that you're trying to get the seller to agree to post-signed contract is the final price. So in order to do that, you need to have feedback from buyers. You need to know exactly where they would purchase this property at and why. More often than not, you need to have a firm offer from those buyers ready to sign an assignment as soon as you receive the price drop. Because the worst thing in the world that we as wholesalers could ever do to a homeowner is tell them, hey, I know that we agreed to a price of $100,000, but now I need it at $90,000. And in reality, we need it at $80,000. That's misleading. That gets us a bad reputation. And to be honest with you, more often than not, it's probably going to lead to you receiving a termination on the deal. And potentially, even going even further to bad reviews on the BBB, bad reviews on your Google business. You don't want that. So be honest and transparent and be well equipped to provide the reasoning and the logic behind the price drop, but be prepared to perform on that price once you get the price drop. So you do your analysis, you find out that the price is incorrect for whatever reason, go out and receive feedback from those buyers as to where they would purchase that property, then go to the seller.

When No Buyer Will Touch It

SPEAKER_00 6:12

Now, the question that I always get asked when I tell people you need to receive feedback from buyers before going back to the seller to get a price drop is what if after I've gotten the signed contract, the numbers are so far off, maybe the dispo house or a JV partner won't even work with me. Or I can't get feedback because the numbers are so far off, I can't even market the property at the price point I have it under contract. Well, that's a problem, and we want to try to avoid that up front as often as possible. That being said, like I said earlier, we're all human and we've all done it. So what you want to do at that point in time is reach out to your buyers and be transparent about it. I do have this property locked up for too much, and I realize that at this point. What I'm looking for at this point is for you to tell me the exact price that you would need it at and what you would feel comfortable moving forward at. Just receive that feedback from anybody. That is what you need to go back to the seller. If you cannot get that, now you have to have an even more honest and transparent conversation with the seller. And this is a difficult one to have. Based off of my numbers originally, I messed up. We're way off base. And it's so far off base, I can't even get an offer and numbers from my buyers. And so, what I need to do at this point is I need to get a price reduction, and hopefully, that is good enough for us to close at. Now, here is the sticking point that I like to give to the seller where it makes them feel a little bit secure that you're not going to continuously come back and ask for additional price drops.

Disclose Your Assignment Fee Cap

SPEAKER_00 7:59

Here's what I'll do, Mr. and Mrs. Seller. If you will come down to this price, I will set my assignment fee at this specific dollar amount, whatever it is: $5,000, $10,000, $15,000, whatever you feel comfortable telling the seller that you are going to make on your assignment fee. I will not go above that number at all. And so if I do need to come back, it will be a very transparent conversation. Mr. and Mrs. Seller, I told you I was only going to make a $5,000 assignment fee. And the highest offer that I have from a buyer who is vetted out, has proof of funds, is using this lender, is closing this way, is $75,000. So I need you to lower the price down to $70,000. That is a very transparent conversation. But what I will tell you is it will earn you respect from a seller, especially if they are in a position and they have enough motivation and enough problems going on with this piece of real estate that they're willing to come down to that. They'll respect the fact that you're telling them that you're going to make profit and how much you're going to be making. It doesn't all need to be secret squirrel shit. Like it's okay for you to tell them the reality that's going on. The analogy that I've been using lately is when you go buy a hamburger, you know the restaurant is making profit on it. These people know for a fact that we are making profit as a wholesaler by helping move this piece of real estate. So you don't need to run away from that. Be transparent, especially considering the fact that you made a mistake on your original analysis.

Remove Emotion, Follow The Numbers

SPEAKER_00 9:50

But here's the thing that I want to give yourself a little bit of grace. It doesn't change the fact that the numbers are the numbers. Yeah, maybe you thought you could offer more originally, but the facts are the after-repair value is what it is, the rehab is what it is, and you need to make profit as a wholesaler, and the in buyer has closing costs, holding costs, and they need to make profit. So the numbers are what they are. So we have to remove emotion from the conversation and just talk about the logical facts of these are the numbers. Regardless if they want to work with us or somebody else, the numbers don't magically change because of that. So when you have that honest and transparent conversation, the facts are the seller should accept it. Otherwise, you're not telling them the correct facts. Because if somebody else could offer more, that means you're not doing a good enough job as a wholesaler. That's it. So make sure that it all starts during the acquisitions phase. Set the expectations properly with the seller as to what's going to happen because you are purchasing the property site unseen. Once the due diligence is done and the price is incorrect, if you have received buyer feedback and you know exactly what that offer is going to be, then go back with that specific reasoning and that logic as to why the number was incorrect and explain it to the seller and then ask for the price drop. If you cannot get an offer from a buyer before because the numbers are so far off, then be transparent about that and ask for some leniency and explain how much money you are going to make as a wholesaler, and you will be transparent about the offers that come back in from your buyers. That is how you navigate anytime that you contract the price too high. And the facts are it's transparency and honesty, something that every wholesaler should adopt inside their business because when you do that, you will close more deals and your sellers will be more grateful that they chose to do business with

Wrap Up And Listener Challenge

SPEAKER_00 12:21

you. All right, guys, that's our episode for today. Let me know do you agree or do you disagree in the comments? Regardless, show me some love. Like today's video. We'll see you guys tomorrow.