When to Use Escrow for a Land Deal (LA 1018)
When to Use Escrow for a Land Deal (LA 1018)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Happy day.
Steven Butala: Welcome to The Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny southern California.
Steven Butala: Today, Jill and I celebrate Jill’s birthday with you.
Jill DeWit: Thank you.
Steven Butala: And we talk about when to use escrow for a land deal.
Jill DeWit: Yes. Well, that’s secondary.
Steven Butala: Happy birthday, Deal.
Jill DeWit: Thank you. Happy birthday, Deal? Jill.
Steven Butala: Oh, wow. That was subconscious. Happy birthday, Deal.
Jill DeWit: Yeah. What am I getting for my birthday?
Steven Butala: Happy birthday, wife deal-machine.
Jill DeWit: Oh, my gosh. You are the lucky recipient of a five-acre property.
Steven Butala: That’s exactly not what you’re going to get.
Jill DeWit: Oh, I like this.
Steven Butala: There will be large gemstones involved.
Jill DeWit: Oh, I like it even more. Thank you.
Steven Butala: As always. Before we get into it, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free.
Jill DeWit: [Armon 00:01:00] asks, “Hi, everyone. I’ve in the land business for a year, and recently the transaction volume has been picking up significantly.” Love it. “I’ve been ignoring my social media and online presence.”
Steven Butala: Uh-oh.
Jill DeWit: I understand that happens. “I personally do not enjoy using social media.”
Steven Butala: Me, either.
Jill DeWit: Right? “But I know how important it is for this business. Since I’m running this business alone, I’d rather focus all my time and attention on doing deals rather than digital marketing.”
Steven Butala: Amen, brother.
Jill DeWit: Yep. “Do you know anyone who can manage my online presence for me? Everything from customizing my website and updating it with properties I have for sale, to posting on my Instagram, Facebook, and LinkedIn every day. I want to have a hands-off approach here. Any suggestion of people I can work with or ways I can go about doing this?”
Steven Butala: Go ahead, Jill. I want to hear what you have to say about this. And then I’m going to tell a story about what happened to us in the beginning.
Jill DeWit: Oh, yeah. That’s a good story, too. All I can say is hire. Just kidding. We actually have, technically, three people working for us that do different versions of marketing and social media and such. It’s hard to do. It’s hard to find the right person, too. Took us a while to hire and get the right people, but we have them now. And even then there’s always tweaking.
Steven Butala: Right around 2010 when Jill and I … It was a little earlier than that. We realized the social media thing’s not going away. The internet is the way to do all of this stuff, but you can’t be consolidated into one tiny little operation like I had on my own. So what did we do? We looked at our phone and who our friends are, and we started to interview people that had social media jobs in our little social, personal network in Scottsdale. After about the fourth interview of people that had, “I managed Facebook for the local utility,” kind of thing, we would sit down, buy these people lunch or drinks or whatever-
Jill DeWit: It’s a good story.
Steven Butala: … and what we really found out at the end of that, even talking to our kids, is that we knew way more than we thought about social media. For whatever reason … It’s probably generation-driven for Jill and I … we went into this thinking there’s this huge concept, and it’s a very technical, difficult part about, let’s just say Facebook, for example, or even Instagram, and it turns out there’s not. What you need to do is just organically post things. Then there’s a business piece to all of these things, on the back end, that you pay for. And that’s it. And that’s it, so we went about it doing it ourselves.
Jill DeWit: For a long time.
Steven Butala: One of the things that we did ourselves, and still do ourselves, is this show.
Jill DeWit: Yeah.
Steven Butala: It was audio only for years, and years, and years, and it’s recently gone video. So do you want to outsource that? I think it’s a huge mistake. I can say the best business decision I ever made was to take Jill on as a partner, so that we, together, can work this stuff out. So it sounds like you have the front end worked out pretty well.
Jill DeWit: Well, I don’t think you can truly outsource it.
Steven Butala: I don’t, either.
Jill DeWit: Because we’ve gone down that path, too, by the way.
Steven Butala: I agree.
Jill DeWit: Before we hired in-house people, we talked to everyone from big, big companies all the way down to just little Mom and Pop kind of operations to see if they could help us with this. And we found out nobody could get it.
Steven Butala: No one got it.
Jill DeWit: Even in the last 18 months, we’re working with a well-known company, and we realized they just don’t get it.
Steven Butala: Yeah.
Jill DeWit: They couldn’t get the message across, so-
Steven Butala: It’s not even just the land part which they don’t get at all.
Jill DeWit: True.
Steven Butala: It’s just like, “Yeah. We’re going to send out five notices on Facebook for you this week,” and that’s just not enough. You have to really … This is worth spending time on.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: Now that’s said, I’m going to say this, and please take it with a grain of salt. We have people in our group who sell property on Craigslist only or on the MLS only, and that’s it. So could you spend the rest of your career doing that if buy the right property and you’re really good at … Yeah, you could.
Jill DeWit: And not focus on this part of it, yeah.
Steven Butala: You do need a website.
Jill DeWit: Yeah, you do need that.
Steven Butala: You really need a website. That will dramatically increase the yield on your mailer.
Jill DeWit: It’s true.
Steven Butala: People, the first thing they do when you get an offer is to look you up and see if you’re okay.
Jill DeWit: Right.
Steven Butala: That’s where you’re really losing here. It’s not so much the sales part, but if they can’t find you on LinkedIn or at some credible place-
Jill DeWit: Even the buy side or the sell side.
Steven Butala: Yeah.
Jill DeWit: Yeah.
Steven Butala: They’re looking you up. They’re getting your offer. They’re saying, “All right. You know what? I do want to sell the property. Is this guy for real?” And then they can’t find you online at all. Well, there’s no millennial that I’ve ever met that would ever pick up the phone then and call you.
Jill DeWit: Right.
Steven Butala: It’s different with the older age group.
Jill DeWit: It’s true.
Steven Butala: So some version of this, you got to get it going. That’s just all there is to it.
Jill DeWit: And it’s a bit of work. I hate to tell you this.
Steven Butala: And it hurts me, actually, to say that, because I don’t like it either.
Jill DeWit: I feel like we’re having to tell you what’s coming, like when you meet someone that has a baby, and you look at them and they’re all excited. You’re like, “Oh, just wait.” And they go-
Steven Butala: That’s exactly what this is like.
Jill DeWit: “Those teen years are going to be rough, let me tell you.” And they’re like, “Uh-oh,” and I feel like I’m having that same discussion right now, like, “Well, congratulations. You’re in it now. Boy, you’re going to through the same growing pains we went through. Sorry.”
Steven Butala: God, that’s exactly what this is like.
Jill DeWit: Exactly. I wish I had better news for you, but no, it’s going to be some work.
Steven Butala: And in the end, it’s rewarding as hell to have children.
Jill DeWit: Right.
Steven Butala: But it’s just when you’re-
Jill DeWit: And to have a big company.
Steven Butala: When you’re in it, it’s like you look around sometimes, and you’re going “This isn’t worth it at all.”
Jill DeWit: “What was I thinking? They made it look so easy. What’s the deal?” You know?
Steven Butala: Yeah.
Jill DeWit: Yeah.
Steven Butala: Sorry, man.
Jill DeWit: You’re in it. Your company exists now. There’s no turning back.
Steven Butala: So before we get into the topic, Jill, like always right before the show, Jill checks her phone, even though I’ve asked her not to do that 50 times. “Jill, can we please just concentrate on this episode right now?” “Hold on a second. Hold on a second.” Well, it turns out there’s something meaningful for this show that she found in there. Go ahead.
Jill DeWit: Yeah. Okay. There’s a deal that came in on the Land Academy deal funding. I started down the path to do this deal. It was a great, great infill lot, right? And going along, and then something tripped me up with a perc test. It had failed a perc test back in 1970-something. We’re like, “Okay. Well, how important is this?” My original thought was, “Okay, we’re out. Whatever it is, there was already going to be some issues. Not sure how we’re going to get …” It’s zoned for one SFR, single family residence, on this infill lot, and it could be awesome. I’m trying to remember what state it’s in. I can’t remember. I want to say it is … It’s somewhere on the East Coast. It might be Virginia, too. Anyway. I had originally green-line it. Then this came back, and I red-lined it. Then I was-
Steven Butala: And we talked about it on the webinar a little bit, and I said, “Wait a minute. Let’s get an infill report.”
Jill DeWit: So that was it. I went InfillReports.com-
Steven Butala: Which we own.
Jill DeWit: Right. … and I ordered the report. I just literally before the show got back an update, and it’s like talk about … This is a $1,500 report, too, that’s going to save me thousands.
Steven Butala: And probably a year.
Jill DeWit: I mean, in a big, big deal. I just got a quick update saying that he spoke to the county, and they confirmed that the public sewer is located so far from the site that extending it to the site would be financially infeasible when building one SFR. Further, the site won’t facilitate a traditional septic system due to this natural drainage swale. Talk about this interesting stuff.
Steven Butala: Oh, my gosh. Okay.
Jill DeWit: It adversely impacts the majority of the site. So then we go along a big further going, “All right.” This is the value of the [inaudible 00:09:02] so the InfillReports, our guy, Mike Marshall … Awesome.
Steven Butala: He’s our business partner on this website.
Jill DeWit: Thank you. Mike Marshall went a little further saying, “Here’s the deal, too. If you really pursue this, for $950, I found a company … For $950, they’ll come out, and they’ll do the perc test for you. If it does perc okay, it’s going to cost you 30 to $40,000 to do a septic, to do an alternative system.” I’m like, “Whoa.” That’s way more than we’re spending for the property or would be spending for the property. I’m like, “You know what? Now we’re definitely out.”
Steven Butala: Mike has such an amazing talent.
Jill DeWit: Thank you for sharing all that.
Steven Butala: Mike’s going to be a public speaker at our live event in … Is it October?
Jill DeWit: Uh-huh (affirmative).
Steven Butala: So if you want more information on that, we have a bunch of speakers that are actual members, who are killing it, at our live event in October 6, is it?
Jill DeWit: 5th and 6th. Saturday and Sunday.
Steven Butala: So go to LandInvestorsLive.com if you want some information there.
Jill DeWit: Yes.
Steven Butala: It’s almost all sold out, and what is it, July 5th? Oh, it’s Jill’s birthday.
Jill DeWit: Yes, it is.
Steven Butala: Today’s topic, When To Use Escrow For A Land Deal. This is the meat of the show.
Steven Butala: I have some hard and fast rules about this, and then Jill has probably a little bit more detailed touchy-feely information. But our office rule is if the acquisition prices is less than $5,000, we generally do not seek a title insurance, because that’s the type of property we kind of sell on eBay, and that’s it. If we plan to ever sell the property to somebody who’s going to build on it, or get financing, or if it’s that kind of property, which is the vast majority of the property that we do now, we get title insurance. I hope I didn’t steal your thunder.
Jill DeWit: No. Well, you did, but that’s okay. I’m just kidding. Also [inaudible 00:10:49] say go back to the first one, the $5,000 mark. It’s not just eBay, but anywhere that we’re just going to just quickly flip it ourselves on our website. We might sell it via Instagram, who knows?
Steven Butala: Right. So that’s when we use escrow. More, and more, and more we’re using lawyers now, because they’re faster and more …
Jill DeWit: True.
Steven Butala: … in a lot cases, less expensive.
Jill DeWit: I’m sorry. I messed up your train of thought. You had more. You had $5,000, someone’s going to build on it …
Steven Butala: Whether any type of loan’s going to happen, they require title insurance.
Jill DeWit: Yep. I have more. [crosstalk 00:11:27]
Steven Butala: Yeah, yeah. Go ahead.
Jill DeWit: Do you want me to add to this?
Steven Butala: Yes, absolutely.
Jill DeWit: Okay, good. One of the reasons, too, what we would do is if there’s a goofy transfer situation. A kid’s inherited it and can’t find the brother. We think he’s … Whatever there is. Or maybe So-and-so passed on. There is a will. This person’s the trustee. It’s not super clear. There’s something funky going on that you’re not comfortable with, and there’s enough money in it to do title, that would be a reason to use escrow or an attorney to get it close.
Jill DeWit: Then my other final reason for me is it just makes financial sense.
Steven Butala: Yeah.
Jill DeWit: There’s something … It’s a beautiful property. There’s a lot of meat on the bone.
Steven Butala: Yeah.
Jill DeWit: Because when you do traditionally have … Say I’m buying it for 8,000, I’m selling it for 30.
Steven Butala: Yeah. That’s the real reason.
Jill DeWit: Even though everything’s perfect, it’s going to add value.
Steven Butala: That’s right.
Jill DeWit: That would be a reason that I would also buy it with title or an attorney.
Steven Butala: Yep.
Jill DeWit: Well, I would do [inaudible 00:12:36] Let me specify this. You can still buy a property with an attorney’s help and not have title insurance, so it’s really about title and doing it that way.
Steven Butala: When it’s financially feasible and there’s a big spread between the buy and sell price, we almost always get title, if not always.
Jill DeWit: Exactly.
Steven Butala: The other thing, too, that we didn’t talk about is it’s easier. Someone else is doing your deal. When you send it to title or to a lawyer, you’re basically shoving all the paperwork onto them, and just managing their timeliness on it, which trust me, has to happen.
Jill DeWit: You’re right. We have several members that are now at the point in their careers, they’re like, “There’s so much …” How do I say this? It’s just a system for them. It doesn’t even matter, the value of the property, they just run them through title. They don’t even do them anymore, because if it costs a little more on this one, it makes up for this property. I don’t care. That’s just their system.
Steven Butala: Yeah.
Jill DeWit: And I think that’s fantastic, too.
Steven Butala: Yeah. Like the writer of the question today. If you’re a one-man shop, you shouldn’t be closing your own deals. I mean, it’s very time-consuming.
Jill DeWit: It’s true.
Steven Butala: Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for another interesting episode.
Jill DeWit: And we answer your questions posted on our online community at LandInvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Steven Butala: What do you want for your birthday besides large gemstones?
Jill DeWit: I just want to not have-
Steven Butala: We’ll go to dinner. We’ll do whatever you want.
Jill DeWit: Yeah. You know what I like? I like last year, like we just went out and had some fun with our friends.
Steven Butala: Yeah.
Jill DeWit: That’s kind of my favorite. And it’s fun, because it gets [inaudible 00:14:10] you know? What’s great about this … Pretty much every year on the eve of my birthday, there’s always an event, Fourth of July, so it always turns into a couple days of fun and silliness.
Steven Butala: These little beach communities that we live in in Los Angeles, Fourth of July is like …
Jill DeWit: Big.
Steven Butala: It’s been a hundred-year-old tradition to really pull the stops out, so …
Jill DeWit: Exactly. It’s going to be fun.
Steven Butala: It’s always a rough week after the Fourth of July.
Jill DeWit: Oh, yeah. Yeah. So wait till you see us next week. You’re going to be like, “What happened to them?” Like, “Man. I guess they did have a good time.”
Steven Butala: Yeah.
Jill DeWit: That’s awesome.
Jill DeWit: Hey, don’t forget to check out ParcelFact. We have just rolled out version 2.0. It is a game-changer.
Steven Butala: Yeah. It’s an amazing product if you don’t know about it. You can instantly find out any owners of any of the 150 million properties in the country, regardless of property type. It’s not just for land.
Jill DeWit: Exactly.
Steven Butala: And 300 more statistics about it over that.
Jill DeWit: Including what they bought it for.
Steven Butala: All of it.
Jill DeWit: There’s mortgage information in there. It’s pretty amazing.
Steven Butala: Corner points, GPS coordinates. Truly amazing.
Jill DeWit: It is.
Jill DeWit: Wherever you’re watching or wherever you are listening, please subscribe and rate us there. We are Steve and Jill.
Steven Butala: We are Steve and Jill. Information …
Jill DeWit: … and inspiration …
Steven Butala: … to buy undervalued property.
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