Customers You Should Avoid

[Don Konipol]

Based on 45 years in real estate, I’ve experienced these types and I believe they are the biggest time suckers to be avoided as quickly as possible 

Types of Customers to Avoid

1. The customer who places no monetary value on your time. They’ll ask you for an endless number of quotes. They’ll ask you to review a never ending merry go round of deals they’re “considering”. They’ll ask you for referrals to your best vendors. What they won’t do is agree to pay you for your work. And when they finally do a deal they’ll leave you for the lowest cost option.

2. The customer who will never do a deal. They’ll look at properties all day long. They’ll do in-depth analysis with pro forma statements projected out 20 years. They may even engage in intense, detailed negotiations. What the WON’T do however is complete a. transaction.

3. The customer who is never satisfied. This one is controversial because they will do a deal, and you may collect a fee. However, at some point you’ll come to know that when considering the time, aggravation, and damage to your reputation, it just wasn’t worth it.  You’ll know this type because they’ll call you at 7 AM to discuss an irrelevant matter. They’ll demand answers to ridiculous irrelevant questions like what’s the viscosity of the
heating oil in the tank. They’ll probe the motivation of the opposing side and NEVER belief any answer. Engage with at your risk

4. The customer who lacks authority to make the ultimate decision. Their parents need to approve the purchase. Their “silent” money partner needs to be convinced. Their wife’s trust fund is the “real” buyer.

5. The customer with “legal issues”. They’re being sued. They’re under investigation for fraud. They’re involved with money laundering. And they want to drag you into their troubled world.

[Bruce Lynn]

I think the trick is knowing how to determine those up front.  Every now and then, I'll figure it out up front, but sometimes you're in the weeds before it all comes up.

[Jay Hinrichs]

when I think back on customers to avoid.

we had a period in the SF Bay Area were a lot of folks came over from IRan after the fall of the shah and I was new or newer.. And I would get these folks calling me all saying they were cousins of the shah or some shirt tail relative  which was code for they had a lot of cash.

so I started showing one around in particular bought him lunch a few times and he always ordered the most expensive whatever .. He did write a contract on a property i owned and when i went to try to find him at work .. work said he no longer worked there and well I knew them I had been duped.. no money just wasting my time and expecting me to buy his lunchs etc.  

[Frank Chin]

@@Don Konipol

Your post is right on. My wife started her career by 1st getting a realtor's license, then got a job with a real estate agent who's a former classmate. She described the type of customers you described.

Then her mom had some money to invest, and we decided to join her to purchase rentals, mainly duplexes and triplexes. She had this theory that if you look over 80 to 100 properties, you'll find a fluke. So how do you go about it without driving real estate agents crazy. The typical agent would not waste time showing you more than a few properties. Any more than that, it's "what's wrong with you?"

What did we do? We started going to several open houses a week, got to meet a few real estate agents during the showings, and agree to see one or two properties with each of them, and no more. 

What finally happened? For the first property, we did take 10 months, looked at 60 to 70 properties, and got a triplex that should go for $210K for $150K. Long story, it was through a real estate agent, but the owner determined his price assessment of $150K is correct, and the agent wrong. Since the owner was the type of guy who believes he's always right, the agent figured why not sell it at $150K if she's going to collect a commission anyway. Turned out the ad appeared in the papers that weekend, we went over to see it right away. When we got to the house; the agent saw the owner talking to someone she bought over a day before. She found out they were trying to cut her out of the deal, the owner will delay things till the agency agreement expires. The agent, a fiery German lady going after the owner, berated the owner, threatened to sue him if he doesn't accept us as buyers, and the deal was signed off that night.

An explanation. Housing prices went up so fast in the early 80's that a property will go for $150K one year and $210K the next. The owner has a price in his head that's a year old. I met the bank appraiser during his visit, and he shook his head at my purchase price in amazement.

A year later, a duplex, now valued at $240K was advertised in the papers for $180K, also by an agent. Explanation was the agent promise the owner he'll get $180K as long as he doesn't care how much it's advertised for. Great idea. The problem was the girl who placed the ad for the agent heard it wrong, thought the property was to be sold for $180K. What happened? I spent the next 3 months following up the property, with me offering $180K. Funny thing is, the owners were 2 young guys, only allowed showings when they're there, and was away every weekend. The agent couldn't show the place, and finally, 2 weeks before her contract with the owner was to expire, offered to sell it to me for $185K so she she'll at least get a $5K commission. I had an inspection done and the house needs a new roof. So I counteroffered $182K. Her comment? I'll take it as getting $2K commission is better than nothing. I found this deal also viewing over 60 properties the second year.

This was back in the 1980's, mortgage rates were 13%, at its height 18%. We were able to plunk down $50K for the first property and over $60K for the second. We wouldn't be able to land deals at such prices, able to cash flow, without going through the number of properties we did. 

[Chris Seveney]

@Don Konipol

Just dealt with someone on #1 last month . What was comical was I spent 20-30 minutes educating them on how to get fund sponsors. I even gave them the names of some. I could clearly tell they had no interest in my offering but were trying to make it seem that way. Which to me is fine but respect my time too

I received an email from them (not even a thank you) but letting me know where they invested and then asked for another call if I could review a ppm with them and if I could give them names of other sponsors

Let’s just say I may have “accidentally” hit delete and oops that email disappeared.

[Don Konipol]

Quote from @Chris Seveney:

@Don Konipol

Just dealt with someone on #1 last month . What was comical was I spent 20-30 minutes educating them on how to get fund sponsors. I even gave them the names of some. I could clearly tell they had no interest in my offering but were trying to make it seem that way. Which to me is fine but respect my time too

I received an email from them (not even a thank you) but letting me know where they invested and then asked for another call if I could review a ppm with them and if I could give them names of other sponsors

Let’s just say I may have “accidentally” hit delete and oops that email disappeared.

Over 20 years ago when I started a hard money fund a “potential” client asked me to evaluate a potential acquisition for him, which I did.  He then proceeded to tell me that while he appreciated my expertise, he would NEVER borrow from me because my rates were 1/2 point to 1 point higher than competitors.  The next day he called me to inform me that he had an accepted offer on the property and was going through my competitor for financing.  He further stated that he was too busy to bring a $45 check to the lenders office for the application fee, and asked if I would pay the application fee for him and he’d pay me back!  I don’t think his parents did a very good job in ensuring he wasn’t being raised with entitlement issues! 

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

Just dealt with someone on #1 last month . What was comical was I spent 20-30 minutes educating them on how to get fund sponsors. I even gave them the names of some. I could clearly tell they had no interest in my offering but were trying to make it seem that way. Which to me is fine but respect my time too

I received an email from them (not even a thank you) but letting me know where they invested and then asked for another call if I could review a ppm with them and if I could give them names of other sponsors

Let’s just say I may have “accidentally” hit delete and oops that email disappeared.

Over 20 years ago when I started a hard money fund a “potential” client asked me to evaluate a potential acquisition for him, which I did.  He then proceeded to tell me that while he appreciated my expertise, he would NEVER borrow from me because my rates were 1/2 point to 1 point higher than competitors.  The next day he called me to inform me that he had an accepted offer on the property and was going through my competitor for financing.  He further stated that he was too busy to bring a $45 check to the lenders office for the application fee, and asked if I would pay the application fee for him and he’d pay me back!  I don’t think his parents did a very good job in ensuring he wasn’t being raised with entitlement issues! 

I cut the rate shoppers off a the knees just tell them I am the most expensive but worth every extra penny..

[Stuart Udis]

How about the individual who took a social media guru course and now believes there are sellers lining up willing to accept terms seasoned real estate investors have never seen in their lifetime. 

[Don Konipol]

Quote from @Stuart Udis:

How about the individual who took a social media guru course and now believes there are sellers lining up willing to accept terms seasoned real estate investors have never seen in their lifetime. 

Good point! Stuart you bring up a point that reflects a whole subject that’s a topic onto itself.  There was a time that I (through nothing I did purposely) ended up on every guru list of hard money lenders (to be revealed only to those who purchase our platinum membership!).  Every time a guru “education” course was co pleated, I’d receive 10 -20 phone calls from either investor wannabes “building their team” in preparation for all the real estate “great” deals they were going to uncover or the same wannabes who had already identified a “great” deal (they hadn’t submitted let alone secured acceptance of an offer yet) and were lining up their financing which since they were purchasing at 50% of the value they’d end up with not only 100% financing but also walk away from the closing table with cash in their pocket.  

What is astounding to me is the ready acceptance by the people purchasing these guru programs that with only the guru training they’ll be able to make tons of cash by identifying and tying up all these 40% + discount deals that all of us with the experience, education and capital have somehow missed.  Or that they’ll be able to use a highly sophisticated technique that can really only successfully be utilized when all the stars align and in circumstances that occur irregularly and need to be recognized as such, always by an experienced real estate investor.  It would be interesting to find out what percentage of people purchasing this “training” completely abandon it after say 6 months.  My “gut” is that 90% never make a deal, and 99% never stick with it because the one or two deals they did do returned nothing like what the guru indicated. 

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @Stuart Udis:

How about the individual who took a social media guru course and now believes there are sellers lining up willing to accept terms seasoned real estate investors have never seen in their lifetime. 

Good point! Stuart you bring up a point that reflects a whole subject that’s a topic onto itself.  There was a time that I (through nothing I did purposely) ended up on every guru list of hard money lenders (to be revealed only to those who purchase our platinum membership!).  Every time a guru “education” course was co pleated, I’d receive 10 -20 phone calls from either investor wannabes “building their team” in preparation for all the real estate “great” deals they were going to uncover or the same wannabes who had already identified a “great” deal (they hadn’t submitted let alone secured acceptance of an offer yet) and were lining up their financing which since they were purchasing at 50% of the value they’d end up with not only 100% financing but also walk away from the closing table with cash in their pocket.  

What is astounding to me is the ready acceptance by the people purchasing these guru programs that with only the guru training they’ll be able to make tons of cash by identifying and tying up all these 40% + discount deals that all of us with the experience, education and capital have somehow missed.  Or that they’ll be able to use a highly sophisticated technique that can really only successfully be utilized when all the stars align and in circumstances that occur irregularly and need to be recognized as such, always by an experienced real estate investor.  It would be interesting to find out what percentage of people purchasing this “training” completely abandon it after say 6 months.  My “gut” is that 90% never make a deal, and 99% never stick with it because the one or two deals they did do returned nothing like what the guru indicated. 

Don,  occasionally I will go to one of the guru set up meetings here in PDX which are usually a local hotel room 5 minutes from my house. The last one I went to was tax certs.. I wanted to see if anything was new.  Well of course they show a prop they bought in nowhere ville mid west for 10k and sold for 75k.. while i believe it was true . I also believe those deals are quite rare and virtually impossible for someone living in Oregon achieve.. For one thing there  are no tax cert sales on the west coast save AZ.. but people streamed back to put their CC up to take the advanced course.. nothings changed since I went to my first one of these in the 80s..

Like you or maybe not like you I was a preferred lender at Montalongo  seminars  Vertucci Seminars and Rich dad for a while.. I got business  but you waded through the dreamers and those that spent their last dime on the course and no longer had money to transact or worse put the course on their CC.. now to be fair I have also funded a few that did quite well with what they learned. But that % of students is very small kind of like the  % of folks that actually make a living trying wholesaling.

[James Hamling]

Quote from @Don Konipol:

Based on 45 years in real estate, I’ve experienced these types and I believe they are the biggest time suckers to be avoided as quickly as possible 

Types of Customers to Avoid

1. The customer who places no monetary value on your time. They’ll ask you for an endless number of quotes. They’ll ask you to review a never ending merry go round of deals they’re “considering”. They’ll ask you for referrals to your best vendors. What they won’t do is agree to pay you for your work. And when they finally do a deal they’ll leave you for the lowest cost option.

2. The customer who will never do a deal. They’ll look at properties all day long. They’ll do in-depth analysis with pro forma statements projected out 20 years. They may even engage in intense, detailed negotiations. What the WON’T do however is complete a. transaction.

3. The customer who is never satisfied. This one is controversial because they will do a deal, and you may collect a fee. However, at some point you’ll come to know that when considering the time, aggravation, and damage to your reputation, it just wasn’t worth it.  You’ll know this type because they’ll call you at 7 AM to discuss an irrelevant matter. They’ll demand answers to ridiculous irrelevant questions like what’s the viscosity of the
heating oil in the tank. They’ll probe the motivation of the opposing side and NEVER belief any answer. Engage with at your risk

4. The customer who lacks authority to make the ultimate decision. Their parents need to approve the purchase. Their “silent” money partner needs to be convinced. Their wife’s trust fund is the “real” buyer.

5. The customer with “legal issues”. They’re being sued. They’re under investigation for fraud. They’re involved with money laundering. And they want to drag you into their troubled world.

[Alan F.]

Quote from @Don Konipol:

Based on 45 years in real estate, I’ve experienced these types and I believe they are the biggest time suckers to be avoided as quickly as possible 

Types of Customers to Avoid

1. The customer who places no monetary value on your time. They’ll ask you for an endless number of quotes. They’ll ask you to review a never ending merry go round of deals they’re “considering”. They’ll ask you for referrals to your best vendors. What they won’t do is agree to pay you for your work. And when they finally do a deal they’ll leave you for the lowest cost option.

2. The customer who will never do a deal. They’ll look at properties all day long. They’ll do in-depth analysis with pro forma statements projected out 20 years. They may even engage in intense, detailed negotiations. What the WON’T do however is complete a. transaction.

3. The customer who is never satisfied. This one is controversial because they will do a deal, and you may collect a fee. However, at some point you’ll come to know that when considering the time, aggravation, and damage to your reputation, it just wasn’t worth it.  You’ll know this type because they’ll call you at 7 AM to discuss an irrelevant matter. They’ll demand answers to ridiculous irrelevant questions like what’s the viscosity of the
heating oil in the tank. They’ll probe the motivation of the opposing side and NEVER belief any answer. Engage with at your risk

4. The customer who lacks authority to make the ultimate decision. Their parents need to approve the purchase. Their “silent” money partner needs to be convinced. Their wife’s trust fund is the “real” buyer.

5. The customer with “legal issues”. They’re being sued. They’re under investigation for fraud. They’re involved with money laundering. And they want to drag you into their troubled world.

 Great post, this also applies to PM"s and Contractors. Thanks for sharing!