What is a Perc Test (CFFL 475)

What is a Perc Test

Transcript: 

Jack Butala:                       Jack Butala, with Jill DeWit.

Jill DeWit:                           Hi.

Jack Butala:                       Welcome to our show today. In this episode, Jill and I talk about perc tests, and what they actually are, and why you need to know about ’em. Before we get into this incredibly, potentially boring subject, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free. I promise we’ll make it fun.

Jill DeWit:                           Okay, good.

Jack Butala:                       I promise. It’s about poop.

Jill DeWit:                           It’s about poop.

Jack Butala:                       Poop’s always fun.

Jill DeWit:                           Oh, everybody loves to talk about poop.

Alyssa asks, “If a friend asks for your help in selling his land, do you need a license to do it, whether or not you’ll receive payment for him, or a percentage of the sale? Do the laws and regulations for this vary state to state?”

Jack Butala:                       Go ahead, Jill.

Jill DeWit:                           Great question.

Jack Butala:                       I want to hear your answer to this. I think we’re gonna have a different answer.

Jill DeWit:                           Oh, really? Seriously?

Jack Butala:                       I think it’s more fun for me to have different answer.

Jill DeWit:                           You know what?

Jack Butala:                       If we just sat around and agreed with each other all the time, what fun would that be?

Jill DeWit:                           Okay. Let’s cover all the bases here. If I really wanted to cover my butt, I would have a … I could even go so far as to create a separate LLC, technically, where we’re both little investors, even though it’s a small, little percentage of properties that we’re gonna do, where we’re both owners and I’m just doing all the work. That’s how I would easily cover my rear.

Jack Butala:                       It comes down to one word. Representation. Are you representing your friend in the purchase and sale of this property? Are you negotiating on their behalf? Here’s where we see this a lot in our business. I see it with cars and stuff all the time, too. An older person wants to sell a piece of land, and they know nothing about the internet, at all. So, they call their son-in-law, who knows everything, or he thinks he does, about selling stuff on the internet. The son-in-law gets all the information, puts it on the internet. Is that guy representing the father-in-law? Because, that’s where you get in trouble. If you represent somebody in the purchase and sale of real estate, you are required to have a license, by law. Does it vary from state to state? The details do, but that concept does not vary.

What Jill’s referring to is, make the person a partner in an LLC, and now you’re owners. Jill and I own a bunch of property together, and I negotiate all the time without talking to her about it, and vice versa.

Jill DeWit:                           That’s my workaround.

Jack Butala:                       Now, we’re just business partners, and we’re owners. Neither one of us have a license by the way, and never will. That’s a different topic.

You have to ask yourself, are you representing this person in the sale of their property. People say to us, well they used to, now, since we have this show they don’t ask us anymore, “Can’t you guys just take my property and roll it into the mix of whatever you have, and just sell it for me and I’ll pay you?”

Jill DeWit:                           Right.

Jack Butala:                       No.

Jill DeWit:                           Exactly.

Jack Butala:                       That’s ridiculously illegal.

Jill DeWit:                           Yeah, and I don’t want to do that.

Jack Butala:                       I don’t either. That’s why we created LandPin, by the way, so you can go post the property by yourself. Go ahead.

Jill DeWit:                           Here’s the big picture, too. I mean, like, in the example that you just described, Jack. Someone says, “Just go sell it for me.” Great, well, I don’t want to have to go back and forth to this person. Think about this. If you’re having to go back and forth to that person ’cause you don’t have the ability to make that decision, then you need to make sure you’re doing it right.

Jack Butala:                       Now, you’re a real estate agent.

Jill DeWit:                           Yeah, and you don’t want to be in that position. I don’t want to be in that position. I’m not gonna do that. I’m not gonna call Bob up and say, “Is it okay if we accept this price?” Mm-mmm (negative).

Jack Butala:                       I get that every state has a department of real estate. ADRE is the Arizona Department of Real Estate. I’m on their email list for a lot of reasons. Every single month, I see notices in there of cease and desist notices of people that are operating without a real estate license, because of exactly what Alyssa is asking here.

Look, if there’s any question that this might be happening, just don’t do it. You don’t want to horse around. The workaround is to become a partner. So, if the son-in-law and the father-in-law have a house, they can throw the thing in an LLC in 35 seconds. Even if there’s a mortgage on it, you can transfer property. Put it in an LLC. Put the person who wants to represent it on a deed. You can do that yourself in the county in five seconds. You don’t even have to go to the county. You can electronically file it. Now, you’re not in trouble.

Jill DeWit:                           You know, I gotta tell you, Alyssa, you’re not alone. We’ve had so many people come to us and ask us to do things like this. Or they’ve asked us, “Hey, can I just give you some money and you can make it bigger for me?”, and all that good stuff. We’re just not gonna do it. I’m not gonna go there.

You don’t want to be in that position anyway, especially it’s your friend. What if you sell it, and they’re excited about the sales price today, and then, because you didn’t do everything right, what we talked about, you flipped it, made a good profit, and now they find out the next guy made an even more profit, right? Now, he comes to you, ’cause it’s your friend, and says, “Hey. You could have got eight thousand for that. You only got me six.” You know, whatever it is. You don’t want to be in that position.

Jack Butala:                       This is a good time to bring up this concept. Everything in real estate is complaint-driven, everywhere. There are no real estate police. They’re not looking at your transaction, and auditing you. To my knowledge, there aren’t anywhere in the country. What ends up happening in a situation like this is, the father-in-law says, “Please sell my property for ten grand.” The son-in-law sells it for eight, or ten. The father-in-law finds out it was worth a hundred and fifty, and there’s a lawsuit. All of a sudden, the son-in-law’s practicing without a license. Or, worse, the buyer who buys the property finds out that it’s not usable in the way that they wanted to use it, or they get some bad news after the deal’s done. Now, everybody’s getting sued.

Jill DeWit:                           Exactly.

Jack Butala:                       You don’t want that.

Jill DeWit:                           You don’t want to be in that position.

Jack Butala:                       It’s not worth it. It’s not worth the five percent you’re gonna make, and under, on something like that.

Jill DeWit:                           The easiest way to do that is either a., make ’em a partner and you guys are doing the transaction together, or b., say, “You know what, I won’t do that, but I’ll give you 5,000 for it.” Buy it.

Jack Butala:                       That, or you know you could probably do a specific use power of attorney, too.

Jill DeWit:                           Maybe.

Jack Butala:                       The son-in-law gets a power of attorney, then he’s no longer representing the father-in-law. He’s able to legally make the decisions.

Jill DeWit:                           That’s true. Then, no one can say anything.

Jack Butala:                       If that wasn’t boring enough, listen to this.

Jill DeWit:                           That’s awesome.

Jack Butala:                       If you have a question or you want to be on the show, reach out to either one of us on landinvestors.com. Today’s topic, what is a perc test? Or a percolation test?

Jill DeWit:                           (snore). Just kidding.

Jack Butala:                       Nice pedicure.

Jill DeWit:                           Thank you.

Jack Butala:                       You should get a manicure to match that.

Jill DeWit:                           Thank you.

Jack Butala:                       ‘Cause I know that’s what you’re gonna do while I talk about a perc test.

Jill DeWit:                           I’m gonna do that right now. Yup. Doing my nails. Just kidding.

Jack Butala:                       Jill, what’s a perc test? In 30 seconds or less. Everybody really complicates this topic, but what’s your definition of a perc test?

Jill DeWit:                           A perc test is a testing of the soil for absorbency, basically, to allow for a septic system.

Jack Butala:                       That’s it.

Jill DeWit:                           Thank you.

Jack Butala:                       You dig a little hole. Take a five gallon bucket of water. You dump the water in, and does the soil absorb the water? Yes, or no?

Jill DeWit:                           How fast does it go away?

Jack Butala:                       If it doesn’t, it’s not gonna pass a perc test. If it does, it’s gonna pass it, and based on how fast it gets absorbed, that will tell you what type of septic system, tank/field, or a combination of both, works on that soil.

Jill DeWit:                           You can test it yourself and do a few little things. If you’re standing there, and you pick up some of the soil, dig down a little bit, not far, just with your hand. Put some soil in your hand. If you can form a worm, or some kind of a shape, or something, and it kind of holds together, there’s already too much moisture in this soil. It’s not gonna work, and it’s probably gonna fail. If you can’t form it, and it’s like it’s sandy, and it just kind of drips through your hand, that’s a good indication that it will pass a perc test, ’cause it needs the moisture.

Jack Butala:                       Or, if you reach down and there’s just a bunch of rocks, and it can’t absorb and dig anything, that’s not good either.

Jill DeWit:                           Exactly.

Jack Butala:                       That’s a desert. That happens in Arizona a lot.

So, if you’re connected to a sewer system, you don’t have to worry about any of this stuff.

Jill DeWit:                           Yeah. In a big, established area.

Jack Butala:                       The waste from the house goes in, in an urban area, it goes right into the city sewer system, to a water treatment facility, and they handle it that way. With our product type, perc tests are important, if you’re gonna build on it.

Jill DeWit:                           It is. That’s very true. Is it something that you want to run out and do on all your properties, and have included in your package? No. FYI. But, you need to know what it is.

Jack Butala:                       One of the first things that you do when you get a letter back, a signed offer back. We all do. We go on a ParcelFact or wherever. Type in the APN, and you take a look at the land. The first thing I look at is, what’s adjacent to it? Is there a house adjacent to it? Well, that guy just figured out, solved all the problems for you.

Jill DeWit:                           Bingo.

Jack Butala:                       He solved the water problem. He solved the electrical problem. He solved the sewer problem, the septic, sewer/city [crosstalk 00:09:19]

Jill DeWit:                           Bingo.

Jack Butala:                       Property that has adjacent structures, or any version of that, is very attractive.

Jill DeWit:                           Yup.

Jack Butala:                       Now, if it’s in the middle of nowhere, that’s a different story. Ironically, there might be more people who want to buy that middle of nowhere … There’s a lot of people on this planet who just want to get lost.

Jill DeWit:                           It’s true. They do.

Jack Butala:                       They’re gonna want to never get found again.

Jill DeWit:                           That’s true. It’s very true.

Jack Butala:                       They find us, believe me, and all of our members. They buy property from us every day.

Jill DeWit:                           Exactly.

Jack Butala:                       But, you gotta know what a perc test is.

Jill DeWit:                           ‘Cause your people might ask. They need to know. “Can I do this out there?” Well, that’s something they’ll have to test the ground for, to see if they can build out there, based on the perc test.

Jack Butala:                       So, what you’ll find, is that you really, honestly, don’t have to know … I’m gonna pull a Jill here. You don’t have to know the answers to all these technical questions. Easements, and perc tests, and all that stuff. You can really easily answer a question like I just did. “You know, I’m not sure if it passes a perc test, buyer, but the guy next door figured it out. You should call him.”

Jill DeWit:                           Exactly. That’s a good pulling a Jill. That’s a good point. You don’t want to be spending too much time getting to know all the ins and outs, ’cause if you have a portfolio of a hundred properties, this is a lot of time. Sometimes, the more you know, the worse it is.

Jack Butala:                       Our staff has mastered answering these questions like this, and in fact it used to be in all of our postings, “I’m not sure, buyer, what you’re asking me. I’m not sure. This is the reason that this property’s so inexpensive. We are in air-conditioned office in Scottsdale, Arizona, and I don’t know. We’ve never been there, but this is what we do for a living. We buy cheap property, and we sell it real cheap. So, I would encourage you to find that out yourself, and here’s my phone number. I’m happy to sign it over to you when you pay.”

Jill DeWit:                           Exactly.

Jack Butala:                       That’s how I answer all these, but, if you’re in this business for good, you really do need to know this stuff.

Jill DeWit:                           Just know what it is. You don’t have to know that your property’s, how it’s pass or fail, but you just need to know what it is.

Jack Butala:                       One of my jobs in life is to be a boring husband, so when I talk about technical stuff like this … You know, men think they’re impressing women by their knowledge, but they’re not. What they’re doing is they’re boring them to sleep.

Jill DeWit:                           It’s true.

Jack Butala:                       What women really want to talk about is themselves. So, if you say-

Jill DeWit:                           Or fun stuff.

Jack Butala:                       … “Jill, you’re beautiful,” she’ll hear that and love that all day, and I’ll get whatever I want.

Jill DeWit:                           “What kind of flowers would you like? What color flowers would you like?” We like that.

Jack Butala:                       Versus, saying, “Excuse me, Jill. I am the master of the perc test, and here’s why.”

Jill DeWit:                           “You look great in those pants.”

Jack Butala:                       Aren’t you impressed about how much I know about percolation tests?

Jill DeWit:                           That’s right. This information, you know what, most of the information from all of our shows should not be topics for dates. Ever.

Jack Butala:                       Never talk about real estate.

Jill DeWit:                           Don’t bring this up. “Hey baby, while we’re driving to this restaurant, do you mind if we listen to this podcast together?”

Jack Butala:                       Do not. Do not do that.

Jill DeWit:                           Don’t ever do that. That’ll be your last date with that girl. Oh my gosh.

Jack Butala:                       That’s exactly right.

Jill DeWit:                           Oh my goodness. On the flip side, if you’re a girl and you’re telling your guy, “Hey. Check out this podcast I listen to,” he’s gonna wonder a lot about you. You don’t want him to know you’re this smart. Don’t even go there.

Jack Butala:                       Right in the beginning, you’re right.

Jill DeWit:                           Don’t let him know that you’re this smart.

Jack Butala:                       A couple weeks in, that’s fine.

Jill DeWit:                           Yeah.

Jack Butala:                       Yeah, you’re right, Jill.

Jill DeWit:                           Don’t do that, too.

Jack Butala:                       Just smile and wave.

Jill DeWit:                           Like, “I don’t know. What is that? Perc test? Doesn’t that mean perky? How happy they are? Is that a perc test?”

Jack Butala:                       Or like, “My body parts are perky.”

Jill DeWit:                           Yeah. That’s it. Whether or not you need a boob job. That’s a perc test.

Jack Butala:                       I was wondering how long … It took us about 13 minutes for that to come up. When I wrote this title, I’m like, what’s a perc test?

 

Jill DeWit:                           Let’s talk.

Jack Butala:                       Perc test is what you do on a third date.

Jill DeWit:                           Perc test. Does that have to do with plastic surgery? No.

Jack Butala:                       Join us in another episode when Jack and Jill discuss how to use information. That’s me.

Jill DeWit:                           And inspiration. That’s me.

Jack Butala:                       To do your version of a perc test.

Jill DeWit:                           We use it every day to buy property for half of what it’s worth, and sell it immediately.

Jack Butala:                       You are not alone in your real estate ambition. I’m just joking. This is classic stuff.

Jill DeWit:                           Somebody had to say it. We’re all thinking it.

Jack Butala:                       You know what, it couldn’t be me. It should have been you.

Jill DeWit:                           Had to be me. Yup.

Jack Butala:                       Useful and useless information to buy undervalued property.

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