When to Perform Due Diligence (LA 1490)
When to Perform Due Diligence (LA 1490)
Transcript:
Steven J Butala:
Steve and Jill here.
Jill K DeWit:
Hey.
Steven J Butala:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill K DeWit:
And I’m Jill DeWit, broadcasting from sweet Scottsdale, Arizona.
Steven J Butala:
Today, Jill and I talk about when to perform due diligence on a land deal.
Jill K DeWit:
For every property before the mail goes out.
Steven J Butala:
This is a snarky little topic where we don’t want you to waste time. We only want you to do due diligence on properties that have already-
Jill K DeWit:
I’m going to help you.
Steven J Butala:
… pass the financial test first.
Jill K DeWit:
I’m going to help you. We got this.
Steven J Butala:
But 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 if you’re already a Land Academy member, please join us on Discord.
Jill K DeWit:
Cool. Mike wrote, “Hi guys. I’m trying to conduct my due diligence on a property that I got a response on today.”
Steven J Butala:
That I got a response on today.
Jill K DeWit:
Thank you. What the heck was that? Oh my god, could you imagine-
Steven J Butala:
If I conducted-
Jill K DeWit:
Wait, wait, wait I’ve got to say this. Could you imagine if we walked around like that in life?
Steven J Butala:
Let’s do it. Let’s do it all show today, on the whole episode today.
Jill K DeWit:
This would be so fun, like, hey, what do you want for lunch? What do you want for lunch?
Steven J Butala:
I’m sure there’s people like that.
Jill K DeWit:
This is awful.
Steven J Butala:
Let’s do it right now, annoying and funny.
Jill K DeWit:
It’s annoying and funny.
Steven J Butala:
She says.
Jill K DeWit:
This is awful. That’s a good one.
Steven J Butala:
Let’s do it.
Jill K DeWit:
Do you remember that movie, How to Lose a Guy in 10 Days? That would be the way. If you go on a first date and you act like that, you announce whatever the person says like that with emphasis on all the wrong words too.
Steven J Butala:
Yeah.
Jill K DeWit:
Oh, this is good. Anyway. Okay, this is going to be funny. “I looked it up on the county assessor’s website” … I’m waiting for you to do it again.
Steven J Butala:
I’ll do it at the end of the sentence for effect.
Jill K DeWit:
Oh, okay. Got it. “But it wouldn’t pull up on the county map. It only gave a general area to look.”
Steven J Butala:
A general area to look.
Jill K DeWit:
“No luck. I took the APN from the county data and I tried to look it up on the ParcelFact. Still no luck. Any suggestions on a workaround for this issue? I also tried calling county assessor, but they were not any help either. Thanks.” County assessor, no help.
Steven J Butala:
So what’s going on with Mike here, Jill?
Jill K DeWit:
Oh, this is totally easy. Okay. So he’s just having trouble finding the APN. So sometimes it’s a formatting issue. No big deal. You and I do … Well, hold on a moment. I’ll get to that in just a second. There’s two parts of this question. One is I can’t find the property because of my APN’s mis-formatted, or something’s on here wrong. I don’t know what to do. So, the quickest, fastest, easiest way is to jump into something like TitlePro or DataTree, search by owner name. You have that. Or if you’re staring at your purchase agreement back in the mail and you’ve got a reference number on it, maybe jump back into your master spreadsheet where you downloaded the data, look up and see what the correct formatting is somewhat. Usually it’s in there. Like when you download the data, there’s usually two ways of format APNs, and sometimes there’s even an ownership number, depending on the area that starts with like an R one, two, three, four, five, six, seven. You might be able to find it like that.
Jill K DeWit:
But my easiest way is just go search by owner last name, and then you can find it in one of the other sources and go, oh, you take off the first two zeros, you dropped the last zero. It’s usually something little like that. And then you can just go, okay, now I got it.
Steven J Butala:
This whole career, this whole buying and selling land is a big, huge puzzle, and what Mike’s describing, this happens to even us today, where we get a APN. A deal comes in. That’s not what this topic’s about, but I want to correctly prepare people for the fact that there isn’t a two and a half minute YouTube video that’s going to teach you how to buy and sell land the correct way so you can just quit your job.
Jill K DeWit:
That would be great. That’s a topic. We should have that show.
Steven J Butala:
It takes years and years and years to understand-
Jill K DeWit:
One podcast and you could quit your job.
Steven J Butala:
… understand this stuff. We all know people that refuse to learn new software. I do it this way, that’s it. I’ve been doing it this way for 15 years, which in software years is like three million years. You can’t be that way with this. You have to go back to wherever you got that APN, figure it out. There might be like, there’s no coverage for that in ParcelFact, which we own by the way. So we still experience these kinds of issues.
Jill K DeWit:
Use NeighborScoop, by the way.
Steven J Butala:
It takes a lot of patience and a lot of like, okay, let’s just chill out. We will get through it, that kind of thing.
Jill K DeWit:
Can we save the other part of it to the topic, because it ties to the topic?
Steven J Butala:
Sure. Absolutely. Today’s topic, when to perform due diligence? This is why you’re listening.
Jill K DeWit:
So the other point that we wanted to make about that question, which ties into this topic, is Mike got a response today. So here’s what I want to think about. If Mike’s response was from PATLive that a seller called back interested.
Steven J Butala:
Hold on a second. This is a sentence that Jill’s joking around about. I’m trying to conduct due diligence on a property that I got a response on today. You should never-
Jill K DeWit:
Wait, wait, wait. I want to clarify the response.
Steven J Butala:
… conduct due diligence on a property where you got a response on today.
Jill K DeWit:
Unless your response is a signed purchase agreement. That’s my point I’m trying to make here.
Steven J Butala:
I’m just trying to cut to the chase here, Jill.
Jill K DeWit:
I realize that.
Steven J Butala:
Because it’s not a deal until it’s signed.
Jill K DeWit:
Yeah.
Steven J Butala:
You don’t want to waste your time.
Jill K DeWit:
Do you want to go ahead? I’m sorry.
Steven J Butala:
No, go ahead.
Jill K DeWit:
So what I was trying to say, a response could be, “Hi, call me. My name is John Smith. About reference number 1234567.” Do you jump in and do due diligence before you call the guy back? Nope. PATLive version of that, or an email that come in. “I got your offer. Let’s talk.” All these things, I don’t want you to go down the due diligence rabbit hole. Basically I don’t need you to go and do due diligence when they’re thinking about it. So, let me back up. So we send the offers out. The people get them. Some are ready to go, signed, and they will email it back to you. They will email you. They’ll send you a picture. However you have that conversation. That’s when you do due diligence. What? Really? Why? What? I don’t want you to waste your time. This is the whole point of this.
Jill K DeWit:
If you start doing due diligence the minute you get a, “My wife and I are talking about it. Let’s talk on Friday,” and you’re digging in and spend three hours. You bring it up on a Thursday member call, and we all do this, we all do that and everything. And then what often can and does happen, you call the guy back Friday, as you planned. You talked to us, we looked at it on Thursday. We’re all great. And you think you’re getting it for $1,200 and he goes, “Oh, you know what? Great, thanks for calling, Mike. I do want to sell. Can you do better?” Or, “We’re thinking 10,000 sounds fair.” You’re like, “What just happened?” I spent three hours on it. I did all my work. I’m lined up. I even found an escrow agent. I’m about ready to open escrow, thinking I’m going to get the signed purchase agreement and now it’s 10,000, or they change their mind.
Jill K DeWit:
The point of this whole conversation is, because people get it wrong sometimes, the minute someone has a response, they assume that it’s exactly the purchase and whatever. You need to get it in writing. I had to learn this myself the hard time. This is truth time too. I have gone down that rabbit hole way away, way, way back when, because I got excited too. I start looking things up and getting ready, and like I said, they back out. You’re like, oh, I didn’t want it anyway. Why did I waste that time? That’s so awful.
Steven J Butala:
And get personally riled up. The worst thing that can happen is somebody calls and says, “Hey, I got your letter and give me a call back. And oh, by the way, this is Jack and APN whatever in this county.” So you look it all up.
Jill K DeWit:
Done.
Steven J Butala:
And it’s the greatest property there ever was, and the price that you offered, you’re going to make $50,000. So now you’re all emotionally riled up and now you want the property too bad. And really what should happen is this. I’ve been doing this for years and years and years. My first response has always been, and this is not how Jill does it. And trust me, Jill does it the right way. But my response to cut to the chase is, “That’s fantastic, Mr. Jones. Does the price on that agreement that you received work for you?”
Jill K DeWit:
No, that’s the right way. I like that.
Steven J Butala:
And if they say, “Yeah, that works for me. I do really just want to get rid of it.” And then they’ll give you some reason or some story about why, which is always helpful. Then now you should be logging onto NeighborScoop, trying to find the deal. See if it works, see if it’s got access, apply all your due diligence. But if they say something like, when you say, “Does this price work for you?” “Well, about that. You offered $4,300. My wife and I talked about it. $7,000 will work. Can you make that work?” What do you say?
Jill K DeWit:
Give me it in writing, and I’ll let you know. I’ll see if I can make it work. I want something in writing. I want something, even if it’s an email back, like you’re going back and forth with them a little bit and there’s an email saying, “We agreed on this.”
Steven J Butala:
You want a commitment.
Jill K DeWit:
I do. I want a little bit of a commitment. It could be a text. It could be an email. It could be a signed purchase agreement. It could be cross it off and write in your number. That’s a really good effective thing, like, “Okay, here’s the deal.” You got my purchase agreement, right? Yeah, we all agree 4239 doesn’t work for you. You know how I roll, and here’s the deal. Whatever price we agree on, I’m the owner, I get to make the decision. Whatever price you and I agree on, that’s going to be net to you. Please keep in mind that I’m not retail, I’m not an agent. There’s no commissions. I’ll pay for this. I’ll pay for that for closing, whatever it is. So please spend some time, think about it, write in what number you think is the number that you would accept and be willing to walk away tomorrow, cash out, and send that to me, and I will see if I can make that work. And then let them do that.
Jill K DeWit:
And by the way, no matter what, how you get to this point is okay. There’s a lot of different ways to do this. The whole point of this show today is I need something in writing. So they send it in. Now I’m going to look it up. And then I’m going to give you one last tip here, because we’re talking with career path and helping people really get to be pros like we are about this. Don’t chase something shiny. The minute it comes in, I don’t mean to drop everything and look it up. I know that’s our first instinct. In a perfect world, you look at everything maybe Monday, Wednesday, Friday, between 9:00 and 10:00 AM. That you’re deal review time. Something like that. If you really want to get ahead-
Steven J Butala:
That’s great advice.
Jill K DeWit:
Thank you. Start making some systems. Because otherwise, every time one comes in, you get distracted. You’re looking at this, and the next thing you know, the whole day has gone by and you’ve just been a crazy person running around looking at deals and you didn’t get the deeds out you needed to get out, and you didn’t post a property you need to post, and things like that. So be efficient and just do it when they have a number and you’re serious about it.
Steven J Butala:
When they’ve made some type of commitment, that’s the time to start digging in to see if you want to do the deal. This is completely 180 degrees different than everything you’ve ever been taught in real estate.
Jill K DeWit:
It’s true.
Steven J Butala:
And our way’s better. If you get 10,000 offers out and it’s priced correctly, you’re going to get tons of responses. You’re going to get a lot of angry people calling you back. Tons and tons, a lot of it, a huge volume of stuff for you to deal with by yourself. You’re going to get a lot of people that say, “Hey, I got your offer. Give me a call back.” You’re going to get responses where it’s signed and they send it right back to you or they email back and say, “Oh please, can we close in three days?” And on and on and on. All different types of variances of that. Your job is to take the very, very tip top cream of all that. Let the mail work for you. Let the mail do its job. The mail will find the five or eight people that really want to sell their properties for the prices that you offered. That’s your job. Your job is not to make wine out of water. You’re not supposed to-
Jill K DeWit:
Not make wine out of water.
Steven J Butala:
I see a lot of people trying to see something in a deal that’s just not there, just because it’s the first one that came in off their mailer.
Jill K DeWit:
That’s the whole point here. I understand how this happens. You’re excited. You’re so excited.
Steven J Butala:
Yeah, I get it.
Jill K DeWit:
It’s my first thing come in. Let me save you. If you do this right, you’re going to have too many going forward that you can’t do this. So I want to set you up now and really make some good habits now so you can handle the load that you’re going to get in a month from now, because that’s the point here. You like that? Happy you could join us today. Five days a week, you can find us right here on the Land Academy Show.
Steven J Butala:
Tomorrow, the episode of the Land Academy Show is called the top three data and pricing tips by me. You are not alone in your real estate ambition.
Jill K DeWit:
Steven’s top three data and pricing tips tomorrow.
Steven J Butala:
It’s just not funny anymore.
Jill K DeWit:
I know. See how fast that went? We can’t walk around like that. Nope, that would not work. That’s awesome. If you’re interested in learning more about us or what we do, please check out landacademy.com or houseacademy.com. We provide the education, tools and support you need to be flipping property like the pros. We are Steve and Jill.
Steven J Butala:
We are Steve and Jill. Information.
Jill K DeWit:
And inspiration.
Steven J Butala:
To buy undervalued property.
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