Seller Upset With Me - Am I Doing Business Unethically/Wrong?

Question

I have a BRRR under contract to buy. Somewhat distressed Landlord. Here's the timeline, and I'd love to hear feedback on whether or not I should change some of the things about how I do business. Quick skim will give you the gist.

Seller calls from a town outside of Nashville, TN, I send contract via email (60 day close, 30 days due diligence), and her husband is out of town on business but he signs quickly to keep us on schedule for the appt for me to see the house. I tell Wife that I'm pretty much good to go, I'll buy it. A few days later, she asks who mows the lawn as she's never sold a house, but bought several. I reminder her she still owns the house.

I immediately promote the deal to potential buyers, including posting on Craigslist.

A little later, I take a GC in, she meets us to unlock the house. She refers me to another GC. I make another appointment with that GC and another GC (without realizing it was Good Friday), and ask Wife for access to house for contractors. I didn't tell her a third person would be there as a potential buyer. Everyone leaves, Wife and I chat for a bit. Decent rapport.

Few days later, I ask about getting access for another contractor (i forget who it was), and she calls and proceeds to tell me that my way of buying houses is unusual and they would never do it that way. They look at a house once, estimate repairs, and buy it a month or so later. I explain that I need to hammer out the rehab budget, need competitive bids from GCs to hit the ground running when I buy, blah blah. (My contract even says seller will allow showings for buyer representatives.) She doesn't get it, but I tell her I will do what I can to not need access until closing. I apologize for not communicating better on the front end. I personally think they are crazy for flying blind and buying houses like that, but I certainly don't say that.

A little later, a friend tells her her house is for sale on craigslist. I explain that sometimes I flip houses so I throw that up on CL, but I intend on buying it (truth). Ruffled feathers. I apologize.

Yesterday, about 3 weeks into the deal, I text wife that I'm surprised they don't have electricity or plumbing on. Not good for house if sump pump isn't running with all this rain. I explain they still own the house up until closing, God forbid I don't buy it. Turns out, she was coming out of the hospital and was upset by my text.

Husband calls today and says he'll still honor the agreement but he didn't read it very thoroughly and thinks 60 days is a long time and that basically my due diligence period is sketchy. I apologize for not communicating better on the front end. Needless to say, my rapport and trust with the seller is on thin ice.

Did I do something wrong? What could I have done better?

Eric F. · Answer

You did a lot wrong. 1) You can't keep going to the house with a bunch of people if it in any way bothers or inconveniences the seller. If it is vacant get a key, or else do it all in one shot. 2) You have no right to tell them to keep utilities on. If you want them on so you can sneak buyers in disguised as contractors then pay for it yourself.3) Your trust should be on thin ice. You were dishonest and got caught. You did not tell them you might flip it before the close until you got caught. Your contract can say whatever it wants, but put yourself in the seller's shoes. You have given all indication you are going to fix it up yourself, even making them drive there THREE TIMES to let contractors in, then they see it on craigslist listed as is. You lied and wasted their time.4) You tell the wife "you're good to go, and ready to buy it" then have multiple contractors come out, sellers come out, and put it on craigslist. You don't sound good to go to me.It is all small stuff but it adds up. The main problem is inconveniencing the seller so much and telling a bunch of little lies. In the future:If it is vacant see if you can get a key or put a lockbox on it. Note: Until you own it do not give the code out to anyone unless you have done a lot of business with them and would trust them in your own house.If the seller is involved in any way when you need to get in the house (they have to let you in, they live there, whatever) go there as few times as possible and certainly do not parade people in and out.Stop wasting GC's time. You have had 3 contractors drive to this house and you do not even intend on buying it yourself. That is disrespectful to them.Be prepared to pay for utilities before you close. Should you have to? No. Should you? If they are off when you sign the deal, yes.Be more honest in general. I have a feeling you told a lot of "little lies." There are quit a few in your summary.You say your contract says "seller can show to buyers" but "she doesn't get it." I will tell you what she gets. She gets that you said you were good to go yet you have had 3 GCs out there (causing her to drive there each time), are posting it on craigslist clearly trying to sell it before buying it, are waiting 60 days to close after you are "good to go." And now you are giving her a hard time because she is not giving you a 2 month freeroll on utilities in a vacant house! What do you expect the seller to think at this point? And on top of all of that, you even say "god forbid I don't buy it!" You said you were good to go! Get a few serious buyers and advertise to them directly. Forget craigslist unless you own it.The bottom line is who cares what your contract says, who still owns the house, etc. When you build trust with the seller, tell them you are going to buy the house, etc. in their minds it is already sold. If that means you pay for the utilities then so be it.

Eric F. · Answer

By the way, I don't want to give the impression I am attacking you. I am glad you shared a potential failure to learn from. At first most of us feel the need to be dishonest with the seller because that is how wholesaling is taught. When I first started, I went to my REIA, as Biggerpockets recommended, and the guy in charge of the beginner group taught us about weasel clauses, posting on craigslist, bringing in buyers as inspectors, etc. How would I know any better? Biggerpockets told me to go to my REIA and the guy there is supposedly an expert. He was not even a guru. He was just a local guy who did business here. You learned a valuable lesson. This entire business is built on trust. The seller has to trust you that you will close. I could have 2 million in the bank to buy a house, but if the seller does not believe me then it does not matter.

Account Closed · Answer

And some wonder why wholesalers get a bad name.

Mike Cumbie · Answer

Hi Allan Smith,First you seem to be receptive to criticism so I applaud you for that. A point to consider form an agents perspective. If a house is listed and the due diligence calls for a home inspector, we set it up happily. If the buyer comes back after and asks to come in to "measure for curtains", "have a cousin come check the pool filter", "sleep in a tent in the back yard for a night" the answer is "NO". There is nothing at all good that can come out of letting a buyer in more than contractually obligated. They always seem to find "That ripped carpet they didn't notice", "The broken trim by the door", "The discolored patch of wall in the basement". Of course that always comes with a price change or a request for repairs. So if your sellers had someone representing them in the transaction (looking out for their best interest), then your contract would most likely never made it through. If it did, someone would have stopped you along the way. So I would not say you were "unethical". Would I say you were working in the best interest of the seller? Of course not. Would I say you were not treating them "fairly"..... possibly (but not how I would personally) . They did not understand your objectives or your plans and they all hinged on their asset. They held the risk the entire time believing that you were purchasing their house. If you were then you would not need 3 other buyers to come in. I guess the best gauge is if someone did to your grandmother exactly what you did to them, would you stand back and say "That was fair and honest"... "I'm glad they went into business with that person". Then you are golden. If not then reevaluate and adjust.Good luck and keep learning!

Eric F. · Answer

For the GCs, learn to budget yourself and maybe just get 1 out to double check. And if you buy it use the GC. Or you can pay them to give you an estimate if you want. Personally, through rehabbing experience I am pretty comfortable estimating costs myself, and I have my main guy give me a double check, but since I hire him all the time he is more than happy to come out to a property and walk through it with me. What I do is come up with my own number first, then have him come up with an independent one, then we share and decide where our differences are. Being able to estimate costs comes from experience of course and my guy wouldn't drive out to give me an estimate if I did not have a track record of hiring him (and paying FAST)First of all, I usually close myself. Usually at some point the seller asks what you want to do with the property. If you might wholesale it say something like "I plan on buying it, but a guy I work with might close instead, is that OK?" The seller will almost never care. This one sentence can save a lot of trouble down the road. Anyways, short answer, I basically tell them I might wholesale it but I put it in terms they understand. If you start explaining wholesaling, assigning contracts etc you will just confuse them. Note: I do plan on buying it myself so I am not lying. I understand most wholesalers do not intend to close themselves. Occasionally I might wholesale/assign a deal but I never sign a deal I wouldn't close on. To be honest, I think every wholesaler should inform the seller they might flip the contract. 1) It is usually true and 2) If you are going to post it on craigslist or whatever you should assume the seller will find out. 3) The seller will almost never care.The way wholesaling is taught by gurus includes a lot of lying just to lie. Almost none of the lies they tell you to use are necessary. "I work with a large group of investors blablabla." No you don't...you have a single member LLC if that! "I pay cash and close quickly." Most don't (I actually do quite often but I still don't say this usually). Bottom line the seller cares about 2 things. 1) You close. 2) They get paid what you said they would.

Jeff Filali · Answer

Allan Smith Treat every homeowner how you would want your mother or grandmother treated, and you'll never have a problem.

Jeff Filali · Answer

Just be honest. I tell every homeowner on homes I contract that sometimes I buy them myself, sometimes one of my partners will buy them, and sometimes we flip them to other investors in the area who will pay us for locating the deal. If its a vacant house, ask for a key/keybox and let them know you will need to get access to have an inspector and your contractor inspect the property before closing, and may need to show it to your partners or other investors, but you will try to coordinate them all the same day. Reassure them that as long as the inspector or your GC doesn't find anything crazy that you aren't seeing, you will be ready to move forward and close as soon as it clears title.Always remember that most homeowners only buy/sell 1-3 homes in their lifetime, and most go through a realtor and bank when they do, who handles everything for them. They don't understand the system like we do as investors. I've had sellers who wanted to just meet and trade deed for cash and didn't understand why we had to go through title co. Be honest, and educate them. There's no reason to try to cover up your intentions.Another thing I do when I have a seller who seems unsure about everything, I always give them the title co contact info and my point of contact, and tell them to feel free to call the title co with any questions. Some will call, and once the title co assures them that you buy properties all the time, they're usually more at peace with who you are.

Russell Brazil · Answer

Well one quick thing to note is both the husband and wife own it, and only the wife signed the contract, you do not have a valid contract.

John Thedford · Answer

From your post it appears you may be brokering. Are you licensed or playing the assignment game? 30 days due diligence is a sign of frauds trying to broker than being a real buyer. How about the old "subject to my partners approval" garbage? Do you use that one?

David Zheng · Answer

@Mike Cumbie you should have seen the emails and calls. I never realized someone could drop so many f bombs in one sentence. Honestly I worked this seller from 330k to 258k on a great cashflowing duplex, so I'm just keeping my mouth shut.