I haven't posted about any of our deals in a while, so I thought I'd give anyone interested a brief summary of one of our recent, trickier deals :)
We had a lead come in through our website for a 4br row house that an owner just wanted to be rid of. This one excited me because 4brs are not easy to come by in Baltimore. After going out to take a look at it, we realized the property was in pretty good shape and would sell very quickly. We ran the numbers and made the owner a low offer of $10K, expecting him to counter, but to our surprise he immediately accepted!
This should have been a sign.
We located an end buyer pretty quickly, and sent all of the documents over to our title company. Just as we're gearing up to settle, we get a call from our title attorney telling us that the seller hasn't filed taxes in 6 years, and as a result his LLC was forfeited. Meaning, the state of MD didn't consider the LLC a legal entity....meaning, it couldn't conduct any business including selling property....meaning, we had no deal.
Luckily there's a process for reinstatement, and we informed the seller of the steps necessary to reinstate the LLC. To our surprise, he flat out refused to pay the fees necessary to reinstate the LLC, even if it meant letting the deal fall through. Hence, the reason for him giving us the property at such a steep discount. Sigh.
The old me would have figured the deal was dead at this point. But if there's one thing I've learned, it's that a wholesaler's job is to find solutions to problems - this is where our value lies. Yes, the owner was being unreasonable, but we needed to close on the deal. So my partner and I agreed to resolve the back filings, in advance of the settlement. Risky, yes, but we ran it by our attorney, and put the necessary addendums in place with the seller.
Long story short, we settled on the deal yesterday, and after accounting for the reinstatement costs, we made over $11K. Lessons learned:
- If an LLC owns a property, find out if the LLC is in good standing. This question could have saved us $$ up front, and we could have figured the reinstatement costs into our initial offer.
- Find a good partner and keep calm :) There were points during the process when I was extremely frustrated (with the seller...with the buyer...with our title company), and it was during those points that my partner stepped in and took over. We balance each other well, and it was his calm nature that kept the deal together when it appeared to be falling apart.
Happy wholesaling, everyone!
