"Get the Deed" means "Get Control Quickly"
The “Quick-Cash™” profit process has key elements: Find the property, negotiate for control, get some evidence of your control (like “get the deed”), find buyers (the ones with the cash), then close and take your profit.
Ideally, your first step is to find the sellers who are ready to walk away from their properties. As an investor you always face the risk of “lost opportunity.” If you pause to negotiate with a seller or figure out “how to make this deal a good deal,” you could be missing that next call to a seller who is ready to walk without negotiation and/or without a conversation except: “Here’s the property! Solve the problem(s) any way to can.” While you are trying to negotiate and figure (or, be the “big time” investor), someone ELSE is making that next call – and THEY maybe the ones who find the sellers who are ready to walk. This is why you may hear, “find the motivated sellers and ‘get the deed’.” Any body with money can buy property, but eventually, if you use your money to buy property, you run out of money and can’t buy any more property. So, it is best to learn how to, and promise yourself that you will only, buy property that doesn’t cost you any money.
The Property Information Checklist is organized to help you find the motivated sellers fast.
The essence of “getting the deed” is simply a matter of getting control of the property; that is to say, you need to have enough control of the property to make your profit. There are ways to get control without having any cash.
One way to control of the property is the “get the deed” technique (sometimes this can require cash). And, another way is the “REFUNDABLE earnest money” technique. (“Refundable” is capitalized for emphasis only.) There are several other ways to get control and make a profit. (See “Get the Deed – the BIG Picture”; there are 7 techniques outlined there.)
There is more to Control
Whatever your plan, you have got to know that your ability to make a profit is dependent upon someone else who will bring “cash to the table”, so to speak, so you can make your profit. And, if you are working with motivated sellers, just how much cash you are going to need does not have to be determined till after you get control.
Even when the sellers are ready to walk away from their equity, sometimes cash is needed: 1) Cash is needed to pay you your profit, 2) Sometimes, cash is needed to fix up the property (but, if you are a beginner, let your buyer do this), and/or 3) Sometimes cash is needed to pay off any liens on the property before you can sell it. And, 4) When the sellers are NOT ready to walk away from their equity, cash is needed to pay sellers.
Even if you have unlimited amounts of cash, the lowest-risk, highest-profit plan is usually to “tie up the property” – control it – so you have the time to find buyers who use their cash to do whatever is required.
Normally, here is the timeline: 1) You find the house, 2) You use the “cycle of negation” questions with the sellers to determine that they will “give you control”, 3) You and the sellers sign some kind of documentation as “evidence” of your control, 4) Then you find your buyers (your rehabbers or tenant/buyers) who give you the price they are willing to pay and bring the cash to the closing table, 5) Finally, if the buyers price and terms give you a profit over the price and terms you have negotiated with the sellers, you close with your buyers and your sellers simultaneously and take your cash profits.
An additional step may be added if the buyers price and terms are not enough to make a profit: Take what the buyers have offered, and go back to the seller and renegotiate your purchase. (See more on this below.)
When the Sellers Want Cash
When the sellers need cash as a condition of giving (or selling) the property to you, there are ways to get control of property immediately while you are “doing your inspections” (and find the buyers who will have the cash for the sellers at the closing). As a rule, if the sellers want cash “right now” and won’t negotiate for cash later, these are sellers that are not motivated and negotiable, so you put them on the “back burner” and check back with them later. If you loose these deals, it’s OK. Remember, eventually, if you use your money to buy property, you run out of money and can’t buy any more property.
When you are buying property without cash, use the “cycle of negation questions” to find the following sellers:
Case 1 – Sellers who will walk away from the property (“give” it to you, or “sell” it to you) without any payment for their equity, or
Case 2 - Sellers who will “give” you the property (or “sell” it to you) if you will give them payment for their equity at some time in the future.
With Case 1 properties, your only concern are fix up costs and liens. With Case 2 properties, if you are required to pay the sellers some cash for their equity, the important questions are how much cash do you need? And exactly when do you need it? If you can find the right buyers, you simply time your payments from your buyers to cover the payments required to your sellers. (You can use the table on the Property Information Checklist to chart how much cash is needed and when.)
Other Cash May Be Needed
After you get control, the property is yours to do with as you wish, within the limits of your agreement and within the limits of any “prior recorded rights”, if any. There are two action plans to choose from at this point:
Action Plan #1) Believe that the people you are negotiating with are the actual sellers and have the right to sell or give away their property with no strings attached, and go find the buyers. Wait till closing to find out if there are other owners or hidden liens that will upset your selling plans.
Or, Action Plan #2) Don’t believe the sellers – find out if the sellers have the right to sell or give away their property with no strings attached, before you find the buyers. Find out what the sellers may not know, or may not have told you, before you find buyers.
In vast majority of cases, you can believe the sellers and take “Action Plan #1”. However, when a property is distressed or abandoned, or the sellers are delinquent on their mortgage(s), there can often be some “strings” attached to the property (liens, judgments, 2nd and 3rd mortgages) that the sellers don’t mention – and, all of these are cash surprises that can make your deal unprofitable and even unsellable. So, when the property or sellers are distressed or delinquent, it may be best to take “Action Plan #2”.
Here is the golden rule: Before you pay out any cash, get a “title report”, or a “title policy”1. If you are like most investors, you won’t know what strings are attached to a property unless you have gotten a “policy of title insurance” or know how to read a “title report”. Even if you have the cash to pay the sellers their equity, or to do the fix ups on the property, or to pay off any liens, I would not let one penny out of my pocket until a title search has been done and “clear title” is available (any obligations attached to the property have been identified). Doing so avoids any cash surprises. For example, there could be an IRS lien that “survived” and now you have paid to purchase a property, fixed it up, and paid off a known lien or judgment, only to find out in the title report that the IRS has a recorded right to collect another $20,000 – and they can and will foreclose if you don’t cough up the $20,000.
As soon as you find out that there are cash surprises, it may be time to give back control. At this point, you simply “give back the property”.
And, You may not Find the Buyer in Time
As soon as you get control of the property, your job is cut out for you: Find the buyers. Your buyers bring the cash to the table. Your buyers bring you your profit. If you cannot find buyers, you will need to give up control of the property. Again, it’s time to give the property back.
When to "Give it Back"
In every case, when the sellers agree to give you control, you will also agree with them on some deadlines, for example: your “closing date”. Your verbal agreement or your written letter of intent or purchase agreement will, in some way, say that on a certain date you will do a certain thing (“close”, pay the sellers a certain amount of money, or pay off a certain lien, etc.). When you have a deadline, never string this seller along to the last minute. It’s always best to give the property back sooner than they expect you have to – especially if the sellers have problems relating to the ownership of the property and need cash or they are in deeper trouble and they are depending on you to deliver the cash and/or the solution.
In the first place, you shouldn’t be making promises you can’t keep. Never promise to do something by a specific date when your ability to do it depends on someone else. Always have a “contingency” or a loop hole and disclose it to the sellers. At the time the sellers agreed to give you control of the property, your script with the sellers should be something like: “I work with a group of investors, we can often purchase the property as agreed here in the timeframe you require. But that depends on the specific investors at the specific time. I think I can make good on our agreement to pay you $xxxxx by xxxxx date. If I can’t, I won’t slow you down – I’ll give you back the property.”
There are several ways to write this up in your letter of intent or a purchase agreement:
“Buyer agrees to pay seller earnest money of $xxxxx in the form of a check not to be deposited until closing.”
And, …
“Closing shall be on or before xxxxxx date.”
And, …
“Buyer has the right to inspect the property at any time.”
The closing date is very important here. And also important, along with the right to inspect the property, the sellers should give you the keys (or if it is a true “ugly house” the property will be “open” and “ready for an inspections” at any time).
Regarding the date of closing, you can make things easy on both you and the sellers by getting your buyers in place in ONE-HALF (or so) of the time you have to close – not less than 2/3rds of the time! So, if you have 60 days to complete your promises and close with the sellers, get to work: Show the property and get rehabbers or tenant/buyers to give you their best price.
(If you think you want to do the fix ups, you get your bids – but remember, the “less work you do, the more money you make.” And you may need to have special clauses in your paperwork to facilitate your getting the bids.)
If you can’t get the price you need from a buyer in the 30 days (1/2 of the closing time in this example), you go back to the sellers and say: I’ve done my inspections on this property, and brought in several investors. There is a chance that if I had more time, I could put this deal together. However, as I put my pencil to it, I just don’t think it will work. I notice that I have another 30 days to work on this, but I don’t think THAT will be enough time – the numbers just aren’t right in terms of our deadlines. So, rather than cause you any stress or strain, I’ll just say “uncle” and give you back the property now and call the whole thing off. You probably don’t want to extent this closing, or sharpen your pencil and reconsider a price that is more in line with the market, do you?”
If the sellers are negotiable and motivated, ask them: “Well, then. What is the best you can do?” And let them reset the price and terms. Otherwise, now is the time to give the property back and go on to the next deal. Doing so now will actually build good will with these sellers and your reputation in the business.
Remember, don’t you tell them what price you need or how much time you need, unless you have buyers who have signed non-refundable earnest money to the same agreement. And, then, disclose that your completing your part of the bargain is dependent on someone else. And be sure that you have less at risk with your sellers, than your buyers have at risk with you. If YOU tell the sellers a price or time period and you can’t perform, you destroy your own credibility. Let the sellers tell you what they want. If what the sellers want create a profit with you buyers, say “yes”. If you don’t have buyers, say: “I’ll see what I can do. I hope that’s good enough.”
Otherwise, unless the sellers are motivated and want you to stay in there for the balance of your agreement, and/or are willing to drop the price, and/or extend the time, walk away – give the property back. Now, use your experience to find another deal and make it work by giving yourself more time, or waiting for a better price from the sellers.
How to "Give it Back"
Whatever hopes and dreams you might have for profits, you need to know under what circumstances you should give up your plan and give the property back to the seller.
In other words, if you used the “get the deed” technique, you will “give back the deed” or when you use the refundable earnest money technique, you will “void the offer” or “cancel the offer” or “let the offer expire”, depending on what clauses you use in your refundable earnest money agreement. When you void, cancel or let your offer expire, what documents you use depends on what documents used to get control in the first place.
If you used the “get the deed” technique: If the sellers were willing to walk away from their property and have given you a deed, and you have determined you don’t want to go ahead with the deal, you have a couple of choices:
1) If you have not recorded a deed from the sellers, you simply don’t record the deed. It is best to give the sellers “notice” you are not going to complete your deal and that you are giving back the property by not recording the deed. A phone call, a note, a letter, etc. will do the job. This is a common courtesy and can avoid upset and complaints later and law suits later.
2) If you have recorded a deed, you need to record a new deed back to the sellers. This time you sign as the grantors (where the sellers signed when they gave it to you). So, whatever form of deed the sellers gave you, you can use the same form. Simply record your new deed and give the sellers notice as described above..
If you used the “Refundable Earnest Money” technique: If the sellers gave you control by accepting “refundable earnest money”, either with a letter of intent or a purchase agreement, your document should have some deadlines as to when you were going to close, a “closing date” for example. (See the sample “Letter of Intent”.) Once you have determined that you don’t want to go ahead with the deal, you will need to follow the rules set up in your purchase agreement. In other words, give back the property within the time limits or deadlines specified in the agreement.
If you used other documentation to get control: If you recorded some other documentation to get control, go back to source of our documents, or go to your title company or attorney, and have them reverse everything out.
(In either case, for tax purposes, you may choose to have a written paper signed by both of you that neither of you made a profit and that the transaction is “void”.)
The bottom line is: NO matter how complicated you think this can get, keep it simple – to begin your transaction and to end it!
