'Spidey Sense' Tingling? (Learning To Tr...

Hey guys and gals, we’ve got another awesome lesson from The Amazing Cody Sperber – your neighborhood friendly investor.

Today we’re going to talk about your investor Spidey Sense, aka that inner voice, intuition, instinct… a gut feeling that you get that helps you decide if an investing opportunity is good or bad.

With Great Power Comes Great Responsibility

Investing and making some really good money can make you feel powerful and hungry for more.

And unfortunately, sometimes we want to ignore that Spidey Sense that makes us great investors. Most of us have to learn this the hard way (often, more than just once), but today I ‘m going to share with you my story in hopes you don’t make the same mistake.

I Goofed so You Won’t

We bought a house at auction and the owners were still in the property. We let them know that they had to leave or we would help them move. They asked us what we were selling the property for and we told them…

The next day they contacted us and said they had a real estate investing friend that might be interested in buying the house and letting them stay there. We, of course, said, “That’s great!” And about 10 minutes later we had a contract come our way. We were all excited because it seemed like a win/win situation and we were going to make about $10,000 on the flip.

Well, come to find out, in this contract the terms weren’t the same as the terms we would normally put in a contract. In our wholesaling agreements, we like quick closes. Even though this buyer was buying with cash, he had it as a 30-day close. Also, he didn’t want to put down any earnest money.

Two troubling things that just didn’t seem to make sense.

So I call the guy, whom we’ll call Green Goblin (just for fun) and I say,

“Look, Green Goblin, we gotta change some of these terms and we got to change the title company. We have to close within 7-10 business days. We also need $2,500 non-refundable earnest money.”

Well, the Green Goblin just kept talking in circles and ending up in the same direction he wanted to go.

Finally I said, “Look, you’ve gotta abide by our terms or Shazzam!” And he refused.

So we are kind of at a weird stand-off. But he kept reassuring me not to worry…that the deal would happen… and that he wanted the property as long as it had a clear title. He said as long as we are good with the inspection he wanted the house.

I got off the phone and told my partner – whom we’ll call Captain America (just to stay in theme) – what the Green Goblin had said. Captain America says, “ABSOLUTELY NOT.”

So then Captain America calls the Green Goblin and gets the same run around.

Instinct And here, folks, is where I should have but didn’t listen to my Spidey Sense, and here’s why…

I wanted that $10,000 so I stretched for the deal, even though deep down I had a feeling this was gonna go south. Like a gut feeling, the lure of money speaks volumes, too.

So, against our better judgment, we went into escrow on a contract for a 30-day close with $0 earnest money on the deal. (I know, you’re probably shaking your head. I’m rolling my rolls at myself as I relive this. Ugh.)

About 10 days later, our title company officer let us know that the guy was nonresponsive and she couldn’t get a hold of the Green Goblin. So we call, but no answer. We then cleverly blocked our phone number and finally got a hold of the guy.

He said, “Look, the deal is kind of falling apart with me and the owners for the rent-to-own program.”

I say:

“That’s really not my fault Green Goblin. Look, whatever is going on with you guys has nothing to do with me. You have a deal with them and you have a deal with me. They have nothing to do with each other. You have to perform per our contract.”

He tells me he isn’t doing the deal if he can’t do the deal with the owners.

So, of course, we’re pissed off because now we are in escrow with someone who has the right to buy the property for 30 days and we can’t do ANYTHING. Unless we both contact escrow and cancel, it just sits there for 30 days. 30 loooong days.

So then we call the original owners and find out that the Green Goblin was trying to rip them off big time. The Green Goblin wanted $7,500 as the option deposit, and he wanted them to pay a too-high rent for $1,400 a month (when it should have been like $1,200, max), and then he also wanted them to buy the property with cash after 12 months for $7,500 more than he bought it for from us.

These people just went through foreclosure, so there is no way they would be able to do this deal. The Green Goblin was just taking us all for a ride.

Lesson Learned

So remember, even though you want that cash, never do the deal without:

(1) earnest money to know they are serious about the deal, and

(2) your own paperwork and terms to give you all the control, especially about closing.

I sure hope this helps you guys from making the same mistakes. Don’t ignore the tingle!

Ya know, this lesson was pretty good, if I do say so myself. So please, check out my awesome previous training call and other super-helpful lessons here at Mogul.

Share Please

As always, leave any questions or comments below. I love hearing from y’all.

Listen to Your Spidey Sense – If your intuition telling you something is wrong, make sure you listen!

Know the Importance of Earnest Money – Never accept a contract without it. A contract with $0 earnest money is one factor alone that should be a major clue that something is fishy.

Use Your Contract – Don’t let someone else use their contract for a deal. Use your paperwork that gives you control by using your terms.

Avoid doing Business with Your Arch Nemesis- If their name is Green Goblin, that’s probably not a good sign.