Ep 569: What Disclosure's Do I Make In Real Estate Land

Transcript

Introduction to the Importance of Disclosures.)

all right welcome to today we have an

important topic today which I wanted to

cover the severity of this importance of

this

topic and I don't think we'd never

mention it mentioned it before prior to

this maybe Loosely but I wanted to

dedicate a whole good 10 20 minutes

about it just because it's very

important just because it came up today

Real Estate Deals and Disclosures in Action.)

and we have a deal going on going on in

El Campo which is by Houston

and we do a lot of stuff with agents um

so one of the ways uh that one of the

topics that's of very up up utmost

importance when you're dealing with

agents and just in general is

disclosures disclosures disclosures

disclosures we did not learn this at

first um we learned this the hard way by

trying to do not necessar sneaky stuff

that was against the law but just not

disclosing disclosures prevent you from

getting slapped in the wrist prevents

you from losing deals prevents you from

losing money and there's a lot of

different forms of disclosure so

disclosure that came up today was on

Allen's deal that we're working right

now and we have we we are essentially

under contract to purchase but we

disclosed and now it is coming out to be

in our favor that we disclosed and I

want I want to cover of this uh from

made Z if you guys have any questions

put in the chat let me open up my chat

here so I can see what happened was is

you you disclosed to pres to prevent

yourself from getting slapping the wrist

or losing the deal and if it's a big

enough deal people get jealous and they

want to try and foil your deal who here

this is a good one who here has lost the

deal because you didn't disclose let's

start off right there in some way shape

or form you didn't disclose maybe your

wholesaling the property you lost a deal

I've done that um prior to this and

early in my career

Challenges with Agents and Wholesalers.)

uh when I was alone but yeah i' I've

lost deals but Allan say happened before

if you've been doing if you've been

doing real estate you've lost a deal

because you did not disclose something

probably once at the very beginning all

right so this one what happens is is

that agents they love to foil Deals they

love the opportunity to foil deals uh

same thing with other wholesalers or

other buyers they love the opportunity

to foil opportunity and that's what

happened today someone tried to call our

listing agent because we we buy us and

stuff at the MLS but we disclosed so

they called our listing agent and they

said hey whoever your buyer is I don't

know if they have under contract but if

they do they're trying to wholesale your

property was that the epitome of this

conversation Allan I didn't hear about

the conversation I heard about it

through Allan so Alan if you want to

talk about this this is good yeah sure

so I'll was just you know folling up

with the agent trying to get some more

info about the survey and then he just

mentioned he's just like hey you know

somebody called me actually about you

you know you guys pre-marketing the the

parcels and you know they were just

trying to you know show that you guys

were like trying to wholesale or

something he's like but you know we

talked about it so I understand you guys

are going to pre-market and you know

yeah we're completely okay with it but I

just thought I'd let you know it's kind

of funny somebody called like a couple

days after we went under contract and

yeah so it's just crazy people do that

you

know what's funny is is he said well let

me know if they back out I'm a buyer and

this thing has been listed on the MLS

for six months and that's what he said

and like that's ridiculous he's just it

just shows that you know we have a good

property and that we know what we're

doing and you know people are just

jealous and and want to jump on the

train every everybody's a bar when they

know you got something

good no it's it it was definitely it was

definitely eye openening and one thing

that we we've done is we we asked for a

lot of disclosures when we contract

Best Practices for Handling Subdivides.)

properties and that's one of the things

we go through on purpose when we're

Contracting a property is disclosures

hey is it okay if we put maret the

property we're going to subdivide this

property it's going to take something

can we put signs up can we put it on the

mrss can can we show the property is

okay if we do showings without you being

there like we ask for all these

disclosures we we we tell them what

we're going to do a to z start to finish

and then it's no surprise when we do it

it's not a surprise when we do it so it

it protects you as a as a as a buyer and

it protects your potential buyers in the

back end because what what we provide is

product to the marketplace that would

never have been there if it wasn't for

us so we have to disclose to our buyers

hey this is the subdivide we're going to

close the project out and we're going to

sell you 10 acres off this larger

purchased project pro pro property and

that's how you're going to get your 10

acres or 20 acres whatever it's going to

be so we have to disclose to buyers we

have to disclose to sellers we have to

disclose to everybody what's going on

and this is the this is the point where

you're better off oversharing especially

in real estate transactions that has

multiple six figures involved U with all

parties you're better off sharing too

much information than not enough because

if you don't share enough it's going to

end up bad and even even to the point

where whenever we contract properties we

ask hey is there anything I need to know

about about this property that would

prevent me from buying it you ask those

things on the front end as a buyer yeah

it has no utilities it has no Road

Frontage oh I don't have a survey I need

to get an updated survey like you ask

for those disclosures when you're buying

too as much as you want because you're

supposed there them as a seller is

supposed to disclose everything that's

up or could be up with it and you as a

buyer have to disclose everything that

you're planning or wanting to do do with

Handling Obstacles and Risk Management.)

the

property it is 100% legal to no vate

properties if you disclose to the seller

that you're going to contract it and put

in the MLS 100% legal but if you don't

it' be some form of fraud you know so

it's it's under it's understanding that

Junior asked that the agent tell you the

name of the person that called I don't

think so I don't know if we would want

to we want to put them on blast but it

could be it could be anybody like

there's so many there's so many

potential people that could have called

it could have been anybody I had I had

one I had a I received a message the

other day they're like uh you're selling

these properties I'm like yeah because I

own it I don't know what you want me to

tell

you like I'm just asking because there's

an idiot in Houston I actually have him

as a friend on Facebook that's been

emailing agents and doing the same thing

that's what I'm asking oh okay yeah well

I mean this one of those things where as

long as you dis skills what you're doing

and how you're doing it you protect

yourself in our party

when you first start you might not know

what to ask or what to even disclose but

we've learned this through hard lessons

we've lost big transactions by not

disclosing or asking direct questions

there's a recent transaction that we we

me and Anthony are always learning as we

do more and more transactions and

something we didn't get was we we didn't

ask for a release so we do a lot of

these subdivides essentially if you buy

100 acres and you cut it into 10 tracks

if you get a cash buyer that buys that

property technically you have to have a

lean

release some sellers will not do a lean

release so if you're going with the

intention of subdividing make sure you

ask hey if I bring you cash will you

give me a lean

release very very simple but it's

something it's something that we've

learned in the past not just not asking

for that disclosure from the seller if

we can get that lean release so there's

a lot of things there's deal there's

deals I bought solely on the that they

gave us a lean release where if they

wouldn't I wouldn't have bought it so

there's a lot of things you you need to

ask when you're Contracting especially

subdivides like this that are medium

siiz like for instance we have a deal

closing end it's like in the next week

like September 2nd I believe we have a

deal closing next week it's 30 Acres we

told them we're premarketing the

property we got one buyer coming in to

close uh we're double closing them out

and and we're bringing our own funds to

knock out the rest of the purchase so

once you once you

hey sometimes sometimes what we'll do is

last ask for a partial lean release and

just close part of the transaction and

continue that grow so there's there's

there's ways to carry on a transaction

and do a large transaction if you just

asked for

it so we we've done that that's a good

one Allan was laughing at that one have

you done that one Allan

before no okay so I I'll explain a

little bit better so what happens is

let's say

hypothetically this is a good one for

everybody here if you broke and don't

have private money and you want to do a

big deal this is how you do it all right

every taking

notes so what you do let say it's 30

Acres like that track we're closing next

week hypothetically if you get one buyer

to close you have you're buying at a

certain price breaker so you can

negotiate with the seller as long as

everybody knows what you're doing you

should have already disclosed that

you're premarketing the property and

selling it off when you come when you

get a buyer on the hook hey can I close

out 10 acres 20 acres whatever that is

whatever that buyer is buying at X price

per acre and I'll give you the X price

cash per ACR well if it's 5,000 an acre

and you're buying 15 Acres that's 75,000

hey can I give you $75,000 in cash next

week and you sign a lean release and

I'll give you $75,000

$75,000 well can you make it 80

absolutely

I might have sold that thing for 100

grand 115 Grand now I just got paid on

that deal before even completed the

whole transaction and I lean released

that part of the property seller got

paid I got paid and we I'm continued to

subdivide chunk by chunk and that's just

asking for a lean release no money

lender involved you just ask for a

release for that section of the property

hopefully you did your surveys prior to

that and you already have that ready to

go and you cut that 30 Acres down to 10

or 15 whatever that acreage and you pay

them off whatever price point breaker

you contracted at and that's a way to do

a deal and get paid intermittently while

doing the transaction now one thing

we're we're diving into is if we can get

a certain amount of sales on a track

we're we're trying to bring private

money and to close that transaction out

as soon as possible because if you stall

out a deal your buyers could fall off

your seller could fall off I mean

there's a lot of things that happen and

we have plenty of conversations like

that we have a deal that we did we

negotiated so such great terms she

ghosted us for two

years but we filed the lawsuit against

her so we still have our original terms

but she ghost to us for two years what's

the price of what's the cost of doing

that at that for that so long doing that

for so long you know what I mean that

was one deal we we negotiated was like

no money down 5,000 a month for I think

for like 24 months and it was a crazy

deal but she realized what she signed

and she didn't want to close

so you want to close transactions out as

soon as possible whenever they're ready

sign so that's the big thing let me see

here so disclosures asking for the right

things knowing what to ask for being

creative and just asking I say this all

the time so I grew up very in a in a

Biblical household and if there's

there's a verse if you ask if you don't

ask you won't receive I forget the whole

verse it's been a while I'm Rusty but

you don't ask you won't receive so I'm

very open to the opinion of asking and

you never know what you're going to

receive other end you never know what

terms you're going to receive you never

know what what what a seller is going to

do what a buyer's going to do ask and

shall receive there you go Stephen got

me I'm a little rusty these days but I I

still I still believe that theory and

people ask me a lot of stuff and I was

like hey I I'll give it to you for

whatever whatever that may be in some

some instances just because you asked

you have not because you asked them it's

another verse thank you Carla yeah 100%

And I think this business is is built

off of that that asking that asking you

don't know if you don't know you don't

know what they'll say yes to if you

don't ask so I think me and Anthony had

a a podcast that just came out I think

was either yesterday or Friday but we

talk about how to find unicorn deals and

it's just asking you ask for crazy terms

and you get crazy terms if you ask

enough people and that's it that is all

the sauce is just asking the right

questions and following up yeah

disclosures anybody have question about

disclosures anybody anybody yeah I got

one H what are a couple that are are I

guess you can say crucial for every deal

for every deal I would say if you're

doing a subdivide verify you have a lean

release I would disclose that you're sub

dividing I would disclose that you're

pre-marketing a lot of wholesalers

they'll contract stuff and then they'll

market and they're always like I hope

the buyer they'll Target buyers that

don't live in the same state because

they're going to pre-market it and they

want the buyer to find out just tell the

buyer gonna Market it I have I I have

partner buyers that may want a chunk of

this or want to buy it from me is it I'm

gonna is it okay if I pre-market it well

as long as I get X absolutely you know a

lot of times

people I think especially land sellers

they they understand how the game works

to an extent and okay to the process

because we just talked to a seller I

don't I think it was Kyle here recently

they've been trying to sell their

property for over two years land is like

that people can struggle to sell their

property for years years and years and

years and years and then Here Comes hi

mind or easy Land USA and they come

negotiate some crazy terms and they just

disclose like yeah I mean as long as I

can get X I'm good whatever X may be so

it's one of those things where I think I

think the price

and that you're pre-marketing the

properties is very very important at one

point do you make disclosures oh very

very good question Stephen very good

question I make disclosures before I

even write the contract I tell people

exactly what I'm going to do either

while I'm writing the contract before I

sign the contract a lot of times sellers

be like oh or agents like just just

write up the offer and I'm like I don't

know if they'll accept it why am I going

to waste time drafting up a contract

just ask if they'll if they'll sell our

finance

well no well what if we put 100K down or

200k down well they might be open to

that well okay A lot of times you have

to you have to work yourself through the

agent and the agent says no to

everything so sometimes you do have to

draft the contract but usually we're

asking for some type of disclosures up

front hey is it okay if we premarket the

property and that's usually after we

have we come to an agreeable price we

we'll negotiate negotiate negotiate do

the verbal terms hey is it okay if we

Market the property while we're under

contract here's this disclosure and ab

in the exhibit can we put signage on the

property can we listen MLS can we do

clearing we just did this on a property

we asked if we can uh cut some trees

down and do some land clearing to make

it nicer so you can't just go on

somebody's property and start cutting

down

trees especially not why you're under

contract but if you disclose you can so

what do you do when they say no not okay

with marketing generally

it depends on the project and I it

depends on the size of the project too

most of the time I uh I don't know if we

I don't know if we've heard a no yet but

generally we tell them that we're

subdividing and they're usually okay

with us marketing it once we tell them

we're subdividing because most of these

old oh access yes edver says access is

important once we tell them we're

subdividing most of them are privy to

the game and they just don't want to

deal with it so they they'll let us

Market the property to find buyers and

we tell them too it's like hey once we

get a certain amount of buyers we're

going to close this thing out doesn't

matter we'll close and we we have the

track record that we're going to close

so it's having the confidence that we're

going to do the deal and they're going

to get their result no matter what and

usually they're okay with it with

whatever terms or disclosures we may set

because they know when they know we're

going to buy so part of our our asset to

the marketplace is we sell a liquid land

I had I had it's so funny I had a an

agent hit me up on Twitter and S side

note I just closed our first deal from

Twitter last week lead came from Twitter

and we bought it last week and we're

selling a two-acre lot in Florida but

that came from Twitter shout out to

Twitter here but yeah usually usually

when you disclose you're not going to

have any issues what and how you're

doing it especially if they if they're

once they understand what you're doing

it how how you're going to do it how

you're going to get them their price

they're usually okay with it like I had

a lead come in today from somebody and

they told me listed on the market for

over a year the seller did not want to

get paid in cash in full they literally

wanted to seller their Finance offer

because they didn't want to pay

taxes and I'm like those deals are out

there we just bought a deal I want to

say in July same reason they didn't want

to pay

taxes so they got a full price offer

with

terms so if you can find those those

buyers out there those are the guys that

you're going to get seller financing

on because they do not want to pay taxes

taxes are the enemy good questions

though hey Daniel before we get off the

subject this is just a tweak on this

here but I have got a question about I

was talking to somebody uh just a few

hours ago about Innovations and they go

well what happens if you know say for

instance you're buying at 500,000 you're

going to put a $100,000 into a road and

then you're going to you know Market the

whole project for little over million

you know split the profits with the

owner what if things don't sell as

expected what typically happens with

your contract and you've already put

$100,000 into it things aren't selling

quite like you thought they were going

to I guess what type of uh safeg guards

are you putting in your contract so that

I guess what your exit look like that's

a tough question I don't think I would

go too hard into the paint on a deal

like that I wouldn't I wouldn't go into

like hardcore development especially

putting in a road on a project I might

do I've done covers I've done some land

clearing I've done fences I've done

water lines I've done a lot of that

stuff and I'm okay with doing that

because I know my numbers to an extent

and I'm not jumping too forward into a

project that I don't I'm not very

confident in my numbers so

generally you have to have that

conversation and it's a hard

conversation to have in my opinion

whoever that person it may be they need

to have that conversation of if if they

can be remedied in some way shape or

form for improvements if not they just

have to take a loss and they can

disclose that in the beginning hey if

numbers don't pan out can we have a

separation agreement or whatever and you

you that's

something I hope you do not whoever that

person is does from here on out they

might have a a separation agreement but

sometimes you have to eat it and that's

why you try to go I try not to go too

hard in the paint on properties I don't

own okay yeah that makes sense

separation agreement just to kind of

finalize that things aren't don't happen

way what happens then okay thank you

absolutely and a lot of times like I I I

don't I don't want to go through that

because it just makes the the con it

makes the if the opportunity is

partnership I may do a separation

agreement but if I'm coming in as a

buyer I'm just going to take the L

because I don't want to muddy that

conversation with the seller if

and when I need to contract it like if

the seller is super chill and you can

get a separation agreement and all that

stuff I mean more power to you but in

most these cases you're you're coming in

like hey can I cut the grass and the

seller's like yeah of course you can cut

the grass like I'll pay for it okay like

if you if you put it that way you're

going to get a lot of yeses um if you

tell them like hey can I cut the grass

and cut some trees and send you the bill

they're goingon to be like

no you know and it's it's going to be

one of those things where it depends on

each transaction I'm sure there's gonna

there's going to be some transaction in

the future and it's going to be super

chill and we might do that but in most

cases the money we're going into it it's

I don't want to fight the seller on it

if we if I send him an invoice like for

instance we just did a deal we're doing

a deal right now the seller agreed it

was part of their usually we pay for

surveys we pay for the boundary survey

we pay for the subdivision survey we do

pay for all that in the the negotiations

with the seller seller's like I'll pay

for a boundary survey half of it okay

I'll send you the invoice you know and

we paid for our half and he paid for his

half and I didn't expect him to do that

but he offered so I took

it so the I I I don't I don't get that

very often but I you do get stuff

sometimes like that where they'll split

the survey costs they make they may pay

for the survey I think we did a deal

recently where they the seller paid for

the whole survey it didn't even they

even call us and usually we pay for that

so I don't know everything's negotiable

and if you can get it in writing you can

get it you we talk about asking if you

don't ask you don't receive so if you

ask them to pay for half the cleanup and

they say yes I mean it is what it is p

the survey the whole survey you can ask

for anything you want through

concessions and I think I think a lot of

people they might not know what to ask

for but you can literally ask for

anything I I think I I heard

somebody we had a deal where there was a

car in in a barn and we asked for the

car in the barn just because what

technically makes a contract Novation I

I think the process of Novation is we we

do a form of Novation but we do it

through representing representing

ourselves as a buyer there's Novation

paperwork that you can file that gives

you Equitable interest and you you have

a seller CL close to yeah Novation is a

broad term like we do a form of Novation

through PSAs so and a part of it is that

we disclose hey we're going to sell this

in 10 acre tracks and we're going to

market the property and if whatever we

don't close I will close the property

and buy it cash we just ask for a little

bit of due diligence period to find at

least one or two buyers to make sure the

price is is valuable at the at the exit

price we're trying to cut this up back

okay that makes sense okay perfect boom

Novation and that's through a PSA so I

know there there's Corey giri does

Novation Nation he does it through like

backend paperwork that gives an

equitable interest I like doing it

through PSAs U which your person sale

agreements but there's a lot of ways to

no v a property hey Daniel H me on the

on the last lady who asked a question

about what happens if a deal falls

through I wanted to say something about

that absolutely you can you can do

everything right you can do all your

homework you can you know get all the

best people involved and you never

really know what's going to happen until

it hits the market so one way to kind of

cover yourself is to do a little

pre-marketing marketing and seeing what

the you know what the market is like

start running ads before you even put

your earnest money down and see if

there's actually a market for that kind

of property for those size Lots in that

price range you know if you start

getting a bunch of hits that's great

news if you don't you might want a

second guess you know maybe pull back

maybe negotiate price you know you never

know but before you you know dip your

toes in the water you can kind of check

the temperature so that's just one way

to kind of cover yourself I just thought

I'd throw that in

there absolutely no thank thanks Mike

100% there like I said if you disclose

you get it in writing it is what it is

but if you don't you have to you have to

eat that cost in some way like I I've

seen I've heard of people buying houses

fixing them up and then the dude never

shows up at the closing table and they

got a free an improved house stuff like

that happens happens all the time it's

not going to stop

happening there's going to be people

that the they'll buy a sub two catch up

the mortgage and then they never move

out and now now you paid for that

person's mortgage and caught them up and

brought them out of pre-foreclosure they

never moved out seen that happen not

that it happened to me but I've seen it

happen there's just like Mike says you

can do everything right and things can

still go wrong we're in the real estate

game and there's a lot of moving parts

and pieces

and things that can and will go wrong in

this game and you just have to eat it um

I was talking to one of my lenders about

this recently because he's been in real

estate for over 20 years and he's we had

we had a Frank conversation about

transactions and I think it's okay to

have that Frank conversation with any

lender but essentially we talked about

hey if what happens if things go bad uh

what's the remedy what happens if you

can't sell it at that price point what's

the remedy a lot of times your lenders

want to know what the worst case

scenario is and what's your remedy to

the worst case scenario so luckily but

unluckily I have a lot of experience

with that so I can show up case studies

of when things go bad what happens and

what's the worst thing that can happen I

have a lot of experience with that not

that I I I could put it on my chest it

hurts it still hurts we're still dealing

with some of those situations but you

got to have that conversation of what

can and will go bad and how you're going

to remedy that situation

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Ep 569: What Disclosure's Do I Make In Real Estate Land

Daniel Esteban Martinez

Anthony Gaona