Lessons Learned

[Brad Williams]

Even though I have been doing this a few years, I still consider myself a newbie. I just had a deal fall through and learned a new lesson. Well not a new lesson but, was reminded of a previous lesson and why I go so far with inspections.

We are in a area that very bad soil, so many, if not most, properties need foundation work which can range from minor to very expensive. In this recent deal, I had an opportunity on a pocket listing from a realtor I have worked with many times. I put in a contract and the numbers were very good, at least for our market. The home had foundation issues but, I was assured by the homeowner and the realtor that it was not an issue because the house had a lifetime warranty on the foundation.

So, I got a home inspection from a good home inspector and fellow BP member. The inspection was good overall -- some issues but, he also did some measurements of the foundation for me and confirmed the issues that I already knew. So, as part of the due diligence, I called the nationally advertised foundation repair company that had the warranty on the property. First, they were a pain to deal with and refused to set an appointment for me and refused to even talk to me about the foundation. Through the seller's realtor, they did come out after the homeowner called and set it up. The ultimate result was that the foundation company did not think any of the reparis needed were related to the "lifetime warranty" and quoted $28,000 in additional work needed. Keep in mind that seller and seller's realtor said the foundation was not an issue and that it would be covered by the warranty, they provided the warranty and all the necessary documents to confirm there assertions. BTW, I believe that they genuinely believed it to be true so, I don't blame them. Now if I had owned the property, I would argue and possibly sue the foundation company over the denial of warranty claim but, I don't own it and am not looking for that sort of issue on a flip.

So, that long story can be summed up with an important lesson -- make sure you not only do inspections but, follow through on the due diligence part of the deal before closing and include contingencies in your deals so you can walk away. Avoid problems that are going to delay your investment and, even worse, eat up your profits. I ultimately walked away from the deal after spending some of the best money ever on proper inspections. But, I wanted to share this story and lesson.

I would love to hear other investors stories and lessons learned.

[Bill Gulley]

Very good point Brad.

Obviously after this long around real estate and the folks that deal in the industry I could write a book on lessons learned.

To boil it down, I'd say I found that you can please most people most of the time but you'll never please all the people all the time so get over it.

Another to Brad's point, I never really trust what I see, much less what I hear, if I see or hear something that looks or sounds fantastic it just means I have more investigating to do.

Another lesson is that it's not so much as to what is written in the contract as it is what's meant between the lines. Intent carries more weight than what may be written.

Dealing unfairly catches up with you faster than dealing fairly.

Winning a negotiation will never happen unless the other guy thinks he beat you.

The story; A lady owned a few parcels with multiple homes on it. She had deed a joint interest in a couple of the properties to another who refused to sell. I bought the lady's half interest and contacted my new partner who declared I couldn't do that. Later I got a call from my new partner's attorney who informed me that she had just acquired her client's interest and that we were now partners, I said great, let's go see what we own.

She had been telling all the legal things she could do to force me to sell and lose my investment, putting the squeeze on. She was going to sue me and I'd lose as she had done similar cases, I'd end up paying court costs as well and how other damages could be introduced attempting to force her client into her position. I just stayed quiet while she rattled her sabre.

We went into a house that had a large window in the bedroom over looking a river just a few feet away. We were gazing at the view from the bedroom and she said "I think I'll move into this house myself" and I said "well, I hope you sleep on the left side of the bed because I sleep on the right"! She just looked at me and finally said "We have to figure this out don't we?" My reply, "Yes we do"!

We knocked off the posturing and came clean and started horse trading halves for us to get the whole to what we wanted out there and came to an agreement that afternoon.

There's much more to that story but the experience taught that a logical conclusion can be reached with an adversary when you deal in good faith, clearing the dust to reveal your true intentions and not try to intimidate or deceive the other. Actually, we came to be good friends and we passed some business back and forth after that. :)