Deal Diary Part 2: How We Found and Negotiated Our Most Recent Deal

Starting with the methodology described in our blog Part 1, we examined a number of estate and probate cases that were filed in Kenosha County, Wisconsin, in December 2017.  Of the 20 or so new probate cases filed that month, we sent introductory letters to representatives of 7 different estates that held the most promise. We received a call from one of those representatives on January 8.

Maintaining the Communications with the Representative

In our initial conversation with the representative, we gave further details of our interest in the house that was owned by the estate. She explained that the estate was not yet ready to move forward because the court had not issued "domiciliary letters" that authorized her to sign contracts for the estate. She called only because she was doing initial research on what she could do to sell the house after the court issued the letters.

We sent a follow-up letter to her on January 15 to thank her for contacting us. Between January 15 and March 15, we made 4 separate calls to stay on the estate's radar.  In the last one of those calls, the representative remarked that she was considering listing the house with a realtor.  We asked for an opportunity to see the house before she did that, and she agreed.

We saw the interior of the house for the first time on March 22. She explained that she wanted an independent appraisal before we made our offer. That appraisal took place on April 2.  On April 7, we made a written offer to purchase the house for $61,000. She agreed to the price, as it was consistent with her appraisal, but noted that she wanted her attorney to review the offer.

Delays, Delays, Delays

After 2 weeks of no news, we finally got word from the attorney that the probate court would probably not approve our offer because it was far below the assessed value of the house. We explained that the house needs substantial repairs. He and the representative commissioned a second appraisal which put the current unrepaired value of the house at $68,000. After a bit of give and take, we split the difference and on May 1 we made a second offer of $64,500. The representative and the attorney accepted that amount and we had a countersigned contract on May 7.

Lessons Learned

First, our persistence paid off. If we had not maintained our communications with the estate representative between January 8 and March 22, we would have lost the deal.  We did not spend an inordinate amount of time on maintaining the communications. A few phone calls accomplished that purpose.

Second, although we were aware that the probate court in Kenosha is somewhat more paternalistic than other courts in the state, we were not as prepared as we should have been for the objections from the attorney regarding our offering price. In retrospect, his objections were more likely driven by a desire to get more money for his client. I believe we could have pushed back harder than we did if we had been more prepared for his negotiating style.

In Part 3: From Contract to Closing (This is Where it Gets Interesting)

We close with cash, but we still have to jump through a few hoops to satisfy our internal systems and controls to release that cash. As a result, roughly 90% of our effort on this deal came after the contract was fully signed. I will describe those efforts in the next blog post.