You know that feeling when you call the cable company to dispute your bill, and you get “passed around” by 8 customer service reps before you finally speak to a manager who can actually make an actual decision?
No? Just me? Okay then...
Hey investors, Jason Lucchesi here. Today, I want to chat about a similarly frustrating feeling that comes from daisy chains. You’re probably like, “Huh? Daisy chains, really Jason?”
But let me explain!
I’m not talking about the pretty daisy chains that little kids put in their hair. I’m talking about the ugly daisy chains that suck up your time and leave you empty-handed, as an investor.
In real estate investing, a “daisy chain” happens when Mr. Seller contracts a property to Mr. Seller II (another seller) who contracts it to Mrs. Seller, and so on. By the time the chain reaches the buyer, the closing often falls through – because the property was A) never under contract or B) sold without informing all the people in the daisy chain.
Break the Chain (Literally)
Here’s another example to help illustrate this idea…
Imagine a metal chain. The very first link is the person who wants to sell their property – they’re the owner of record. Suddenly, someone (the second chain) says they want to buy the home, but they have no intentions of actually closing the transaction.
So that second person (the supposed “buyer”) lets the “chain links” after him know about the property. He tells Johnny, Billy, Sally, Tim, Andy, Chad, Nathan, Sandra and Sondra. (Yes, we do have a “Sandra” and a “Sondra,” for the purposes of my über-creative illustrative story.)
If you’re still imagining the chain – it’s really long by now! That’s way too much to get yourself involved in.
So, how do you avoid these daisy chain deals?
Simply ask to speak with the owner of record. If you’re not able to – it’s a waste of time!
If the person you’re speaking to is hesitant and expresses concern that you’ll go “behind their back” to circumvent the deal, that’s wayyyyy overboard – and far from the truth. Sign a non-circumvent agreement or a non-disclosure agreement.
And please, don’t pay any points; it’s just stupid. If they don’t know how to mark up the deal properly, that’s their own darn fault.
Instead of doing a daisy chain, make sure there’s only one person in between you and the owner of record (that would be the person who tells you about the property). If you have more than 3 “links” (people) involved in your chain, that’s too many!
Ain’t nobody got time for 7-8 links in the chain.
Avoiding Daisy Chains like the Plague
Most of the time, when you’re dealing with people in the middle of a daisy chain, you will be dealing with – ahem – idiots. Sorry, keepin’ it real. Don’t let idiots waste your time.
Right off the bat, you should know if they’re a broker if they say something like, “Hey, this is a $1 million package with 43 properties in it. We’re asking $800,000 plus 3.” With just that info, you know it’s probably NOT a deal. You will waste a ton of time pursuing it.
I should know... I made that mistake a time or two (or three). I got caught up in so-called “good deals” and soon discovered – at the time of contract – that the person I was talking to was gone.
So, my advice?
Don’t. Even. Go. There.
If you can’t get a phone call set up between you, the person telling you about the package, and the owner of record – run away (figuratively).
One more tip: You can verify with the County Recorder’s Office if the person is the legit owner of record – and it’s an absolutely free process. Or you can have your virtual assistant check Upwork and pull all the records for you. It’s as easy as that.
So, if you’re talking with Billy Smith, but the record shows that the owner is Johnny B. Good (I know, I’m super talented at coming up with these names), then you know for a fact that you don’t have the actual owner on the phone. At that time, you can give them a clever line such as, “You sit on the throne of lies.” Okay, well... maybe don’t do that.
But, seriously, people – learn from my mistakes. It only takes a few minutes to find out if a property is a real deal or not. Don’t get caught up in daisy chains – they’re stupid.
Talk to Me
Have you had any experiences with daisy chains? What methods do you recommend for avoiding these sticky situations in the future?
Check out your County Recorder’s Office. Figure out the exact steps you need to take to obtain info on the owner of record. You’ll thank yourself later, when you don’t waste time on dead-end deals.
Limit Your Links. Unlike sausage links, which are the definition of deliciousness, too many links in your chain are not good. Don’t let multiple people come between you and the owner of record. Just one person is fine.
Shut Down the Nonsense ASAP. If you discover that you’re working with someone who is not the actual owner of record, don’t waste any more time. Your time is precious – act like it!
Jason Lucchesi
Jason Lucchesi is the co-founder of real estate and marketing company Global Fortune Solutions, LLC. Jason has been in the real estate industry since 2002, where he began his career as a Loan Officer. His career flourished in the mortgage business when he accepted an Account Executive position with Countrywide in 2004. Within his first six months, he had achieved the #1 Account Executive in the Midwest territory. In January of 2006. During this time, Jason began investing part-time in multi-family rental properties while also becoming involved in wholesaling. By 2006, Jason was transferred to the Indianapolis area to save a struggling branch. He quickly took the branch out of the red into the green while also beginning to purchase distressed residential properties part-time. In 2007, Jason began pursuing his ultimate dream of becoming a full-time real estate investor and began investing in REOs in 2008. Since then, Jason has been involved with many aspects of real estate including short sales, tax sales/deeds purchasing, purchasing homes in distress, wholesaling, and many other avenues. Jason has been married to his wonderful wife Jamie since 2007, and they are proud parents to their sons Brady and Gavin.