Episode 74: [Closing] From Contract to Closing

Danny Johnson / 0 comments

Listen / Share / Download

Show Notes

Geremy Heath is the owner and founder of Texas All Cash Home Buyers.


 

Geremy was on the podcast during the early days for episode 3 where we talked about The Mindset That Guarantees Flipping Houses Success – Click Here To Listen

We talk about his Miracle Morning routine…which is incredible. If you want to find out more check out my interview with the author, Hal Elrod: Click Here To Listen to My Interview with Hal Elrod

There’s a lot that goes on in between contracting and closing on a house. Especially when it comes to the numbers. You have to make detailed estimates of the labor costs, material costs, and other specific skew costs. If you’re not precise in your estimates, then you’ll run into some funding roadblocks.

Geremy makes the suggestion of not going through with a property if the exact estimate is higher than 10% more than the original estimate. When Melissa and I were doing it before we got our team, we would know if something was off when we got to the rehab (which wasn’t too fun).

This work does need to be done regardless. And Geremy makes the point that it’s better to get it over with sooner rather than later. It’s better to know what you’re getting into before you start the closing process.

To get your invite to the new Flip Pilot closed Facebook Group, visit the Flip Pilot Invitation Page – Click Here.

Books

Miracle Morning – Hal Elrod

Links

Texasallcash.com
Flip Pilot Invitation Page
Listen to My Interview with Hal Elrod
Listen to Episode 3: The Mindset That Guarantees Flipping Houses Success

Please Rate and Review

This is my simple request: If you enjoy the podcast and look forward to hearing a lot more episodes, I would be very grateful, happy, beholden and otherwise indebted to you to rate and review the podcast on iTunes.

It’s your choice and I do not want you to feel at all obligated. But I’d love it if you would subscribe and leave a rating and review.

Ratings and reviews allow the podcast to be seen by more people, which will help me achieve my goal of helping as many others as we can to get started in the house flipping business and change their lives.

Click here to rate and review our podcast! 🙂

Not sure how to leave a rating and review? Click here to view the instructions (it only takes 2 minutes)

How to Subscribe to the Podcast

There will be a brand new episode every single week, so be sure to subscribe and receive each episode as it’s released.

subscribe
iTunes Subscribe on iTunes Stitcher Subscribe on Stitcher

Episode Transcription

Welcome to The Flipping Junkie Podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivations to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.

Hey everybody, welcome back to The Flipping Junkie Podcast. It’s been a little while since I’ve done an interview with somebody and I’m not going to forget about doing that. We’re still doing this series we’re I’m talking about mindset, finding deals, putting deals under contract, building your team, finding the money to do the deals, rehabbing, selling, all that kind of stuff. So we’re covering all those in the series right now. We’re at the point where we’ve talked about talking with motivated sellers putting deals under the contract and today I’ve got Geremy Heath on here, a good friend of mine and we’re talking about contract to closing. So from contract of a of a deal to closing, all the ins and outs and all the interesting stuff that comes up and that you should be aware of.

Now Geremy’s a great guy. He’s been flipping houses for a long time and during this episode you’re going to notice that he talks a lot about his team and I want to make special note of that here before it starts as far as what we’ve been talking about lately with the Day in the Life videos and podcast episodes about being a flip pilot and that’s piloting your business and always having a 30,000 foot view of your business. We’ve set up a closed Facebook group for people that are interested in sharing and talking with other investors about setting up systems and working more on their business instead of in their business. All of us can get together and share ideas and talk and do all that kind of stuff. We’ve set that up and to get an invite to that you can go to flippilot.com. Go to flippilot.com to get an invite into that closed Facebook group. I’ve also got a weminar coming up where I’m going to talk about how my website generated over 404 motivated seller leads that became 30 deals in just 12 months and we’ll be doing a webinar on that Tuesday, which I think should be releasing this podcast episode on a Monday so it’ll be Tuesday April 4th at 7:00. GO to flipwebinar.com and get yourself a seat to that. It’s going to be a great one. I geek out about all that stuff with generating leads online so be sure to register at flipwebinar.com, but enjoy the episode. Thank you very much for listening to The Flipping Junkie Podcast. I hope you enjoy.

Danny Johnson: Alright. Hey, Geremy thanks for being on the show.

Geremy Heath: Hey Danny, thanks for having us.

Danny Johnson: Yes, so it’s been a while since I had you on the podcast. I thought I had had you on again since the first one that you did on the podcast. We just talked about it and that was episode three and I’ve got it pulled up. It was Episode 3, I think it was the mindset that guarantees flipping houses success and everybody if you guys enjoy the show go back and listen to that one Episode 3. You can get to it by going to flippingjunkie.com/3 or just click on podcast on Flipping Junkie and you’ll be able to find it. It’s number 3 and that was a great episode. Geremy and I are good friends in San Antonio. We are competition, but we’re also friends. We just have a good time. We just met for coffee two weeks ago I think. He was trying to steal my secrets, I was trying to steal his secrets – no, we had a good time. I’m just kidding about that by the way. He was kind enough to be on the podcast again. It had been a while since I had done an interview podcast. It has actually been I think a month and a half or two months and I said, “Man, I really need to do one.” And Geremy was the first person to come to mind, so I gave him a call and he said, “Sure I’ll be on.” And so here we are and of course our schedules being that it was such short notice, he was saying “Well, 7 o’clock Friday morning is about the only time unless you want to go next week.” And I said, “Well, let’s just do 7 o’clock.” So I was trying to condense my whole morning routine into a much shorter time for him because I usually come in the office about 7:30 or 8 o’clock, but I’d have to get here about 6:30 this morning. And so I had to condense three hours of stuff down into one hour and a half or two hours. And so, I was speed lifting weights this morning doing circuit instead of resting in between and then halfway through the workout, I had to run inside and make muffins for the kids and then come back out finish up my workout and all that kind of crazy stuff, but it was fun. It was actually kind of cool because I got to see like, wow, I could really save like an extra hour a day if I just did this every day, but I’d probably get injured.

Geremy Heath: It must be an awesome new template for you moving forward.

Danny Johnson: You’re going to see me in some kind of like arm sling or something it is because I tried to speed lift weights and it didn’t work out so well. But what time do you normally wake up in the morning? What’s your routine normally like?

Geremy Heath: My routine is nowadays I normally likely to get up between 4:00 and 4:30 and that’s something that I’ve done over the last probably two years. But it’s been pretty transformational for me. A book that I listen to a read probably about two years ago was one called “The Miracle Morning.” That’s really kind of the structure that I used as a template for my morning routine. I typically am spending like two hours before I get started. If I think of my first three hours of the day, it’s really getting up and doing some reading. I like to get about 30 minutes of reading out and then I’ll go through my miracle morning routine which includes things like meditation, visualization, affirmations, reviewing my goals, and that had a huge impact on kind of my progression. And then once I’ve got that all done, I like to kind of block a solid hour where I just get super focused on whatever the most important thing is for me to knock out for the day so by 7:00 o’clock I’m ready to sit down with my wife, have coffee and I’ve already got a good start going.

Danny Johnson: Nice. Yeah, that’s awesome. I don’t know if I can get up at 4 o’clock in the morning especially like the time change like that’s happened recently. How was that? That was like waking up at 3:00 then.

Geremy Heath: Yeah, it was pretty rough. Maybe that week I had a week off.

Danny Johnson: That’s awesome about The Miracle Morning stuff. I’ve been doing that too. I actually had Hal Elrod on the podcast. I’ll look and go back to the episode and put that on the show notes if you guys are interested in hearing about that and I talked to him about the different – what’s it called SAVERS is the acronym and it’s all those different things to do in the morning and it will change your life and it’s changed mine and Geremy saying it’s changed his. I don’t do as many of the things anymore that I did when I started, but I’ve still been doing it and it really sets the day up right. It sets you up to be proactive instead of reactive.

Geremy Heath: Yeah, absolutely. If I’d stop doing it my wife is the first person to know when she’ll be like, “Have you been doing your miracle morning?”

Danny Johnson: Because you’re acting different, you’re frustrated right?

Geremy Heath: Yeah, for sure. And I think for a lot of people they hear it and they think some of this stuff is maybe foo-foo stuff or whatever but what I’ve learned is it’s so fundamental to getting the most out of your life essentially. And I’ve recently been reading and listening to some books to do with the brain and without going into all the details on it, there’s a true science behind the method of the miracle mornings which really does center in how your brain is structured and your thoughts. So I guess once I’ve gone through this education on the brain, I was like, “Dude, now I understand why it really works.” It’s not just like some of foo-foo stuff, it’s truly science-based.

Danny Johnson: Right. Yeah, I know that’s awesome. I believe that too and I think if you’ve seen The Secret and some of those things, it’s somewhat along the same lines, psychocybernetics and but you’re talking about actual science of the brain. But it’s just crazy to me thinking like I’ve whenever I maybe you’ve experienced this too where you’re thinking about somebody you’re talking to your wife about somebody that you hadn’t thought about in a long time and then all of a sudden they call you like the next day or something. All those kind of like weird things that happen but with goals when every morning you’re spending time thinking about those, I think something does happen also not just in your brain but the whole universe. And like you said, kind of foo-foo stuff. But I don’t know, I believe it and if not for that, just the fact that most people will come up with goals at the beginning of the year stick them in a drawer or put them somewhere and never look at them or think about it much until it’s until they’re halfway through the year and say what happened to those goals, I don’t remember what they were. But when you thinking about them every single morning, meditating on them, praying about them, you just are always lined up with what your plan is and headed in that direction, right?

Geremy Heath: Absolutely. If you’re not clear on the outcome of where you’re going to be, you’ve no chance of getting there. I guess for me and my journey since I started my real estate business about eight years ago to now, every milestone that I’ve met has been something which was clearly visualized in my life in my mind because it’s something that was taught to me early by my mentor. And I guess now I just feel like I have so much proof to myself to show the validity of it because every stage of growth that I’ve had, I’ve clearly seen that point in my mind before I reached it, and what I found is that my goals and dreams have got bigger and bigger over time and that’s partly because I’ve really understood the power of it. And so now I’m like, “Dude, you might as well think big.”

Danny Johnson: Well, I think it’s that momentum right? And then in the faith and then the realization that what you set up for yourself happened and so you can ask for bigger things right? Yeah, it’s incredible. It’s super powerful and I think we did talk about a lot of that in Episode 3 so definitely everybody go and listen to that. In the show notes I’ll put a link to that episode and also the one to the Hal Elrod interview episode and the show notes is at flippingjunkie.com/74, that’s this episode, you’ll be able to get those. We’ll go ahead and get started today. I wanted to talk with Geremy about going from contract to closing. And so this is putting a property under contract and then taking that to the title company and all the different things involved in between. And you might be thinking well that’s probably going to be a 10 minute episode but it’s not because there’s so many small things that come up, so many things involved in that I want to go into and I wanted to dedicate the whole episode to that so that we could cover a lot of that for people because you feel like it’s maybe a couple of steps in the whole process of flipping a house. But when it’s time for you to do it for the first time, you find out how much you don’t know, where you find out the questions that you need to ask. What was it like for the first time that you ever were getting a house under contract?

Geremy Heath: I remember when I first got a house under contract, I was excited that they’d accepted my offer. I had no funds lined up to close a deal and I think this is what spoke about on the first episode if I remember. No money to close it, I think I had a 14-day close and then work out quickly, found a real estate attorney, got him a contract, really had no idea of what was involved. But I guess, what I thought was, “Hey, if he’s a real estate attorney he must know, so as long as I get him to sign the contract, I’m sure he’ll look up to that part of it and I need to go off for now and find some money so I can close.”

Danny Johnson: So the more important thing was just finding the money to get the deal done. When you got the property under contract, was that a bank-owned property or property straight from a seller, from a homeowner?

Geremy Heath: That was a direct marketing lead that I got. And so, I was dealing directly with the seller.

Danny Johnson: Okay. Well, let’s start with that. What is your process then from when you have an offer accepted both if you’re meeting with the seller and then when your are following up and maybe they accept over the phone verbally, what are your processes for meeting with them if you’re not with them and then putting it under contract?

Geremy Heath: Yes. I guess as I break it into two pieces. And now, I’ve built a team so I’ve got processes that I have my team members to run. But there’s really like the pre-contracting phase, which is all really having a sales process where you’re interacting with the person looking to sell the house, you’re making them familiar with how the process works, you’re assessing their property, giving them an offer and then you’ll have The negotiation period and potentially a follow up period until you lock it down under contract. And I think one of the things that a lot of investors make the mistake is once they lock down that contract they kind of have the feeling like, “Man I’ve got the contract, my job’s done.” And what I’ve learned over the years, as we’re doing a few hundred of these type of deals, is that a lot of the time the deals can fall apart between the contracting phase to the closing phase and that can be one of the most frustrating experiences that exist. Over the time that it’s actually fortuitous timing that I’m on the show because just recently I’ve set up a really detailed due diligence process that I’ve put in place with my team and I use a tool called Process Street, which is basically like a checklist driven system and it’s very easy to configure checklists and you can attach different things, e-mails, e-mail templates or standard contracts whatever is part of your standard process you can build into Process Street and so now I have like over 20 steps in my due diligence process which is from the time I get a contract to when I close and that’s really helped to tighten up things so that they go smoothly in that critical phase.

Danny Johnson: Wow. So would you be able to share what those processes are? What are those steps?

Geremy Heath: Yeah. At a super high level, I can go through the main thing. Once we actually get a contract my acquisitions manager would get a contract and the first thing they’re going to do is communicate with the team, “Hey, I’ve got a contract.” And so part of their responsibility also is to have an advanced agreement with the seller that we’re going to need to get access to the property because sometimes we may be wholesaling it and we need to show it or other times if we’re rehabbing it, we want to get our crews in there to get our estimates together at the beginning. So either way we have an advanced agreement, “Hey, we’re going to need access.” We prefer to get a lockbox and key, but if not we’ll just arrange it with them.

Danny Johnson: Do you even ask if they’re living there? Even if they’re living there do you ask that or are you just not to ask and then schedule them if they’re living in the property?

Geremy Heath: If they’re living there, then I’d just say we’ll need to schedule it with you. We let them know, “Hey, were going to have to schedule that with you.” And normally if I’m wholesaling it then I’d probably say something along the lines of, “We have other partners that we work with or our insurance guys need to come through, but we’ll just prearrange it with you.” And I’m sure a lot of people who listen have had that situation where you get a contract and that’s a simple step. You don’t take care of it and then you’re trying to wholesale it, you can’t even show the property and you’ve not been able to [inaudible]

Danny Johnson: Right. You got to have access.

Geremy Heath: Yeah. That would be like the upfront and then I’ll kind of get through if we’re rehabbing it because we rehab most of our houses, but once we’ve got that contract, the acquisitions manager will email our project manager and say, “Hey, I’ve got a contract Here’s my rehab estimate. I think I’m going to be at about $22,000 on this project.” And then if there’s areas where there is a high risk that our estimate may be wrong and that’s going to be things like maybe the roof or the foundation or if there was a swimming pool, then there’s a request for the project manager to get a firm bid on those variable items. The general rehab stuff is not really going to be that variable, but if there’s a big variable thing even HVAC will be part of that then we’ll require to get firm bids before we close as part of our due diligence.

Danny Johnson: Wow, I like that. It’s a good idea because there are times where – yeah, those are the surprise items right? Especially in San Antonio, foundation, roof, HVAC system, pools. I don’t like pools.

Geremy Heath: Yeah, I’m with you.

Danny Johnson: In-ground pools. I don’t like them.

Geremy Heath: Yeah, it’s funny I think you’ve wholesaled me a couple of deals with a pool.

Danny Johnson: That’s part of our thing now. That’s part of our criteria. If it’s got a pool, we’re wholesaling it. We don’t want to deal with them. I mean, a lot of times they are in great shape, but we just we don’t want to deal with them.

Geremy Heath: Yeah. I think what it all comes down to is the variability in an estimate in any area. I think when people are looking at their estimates, if there’s variability there’s uncertainty and if you close on it, you’re taking a risk.

Danny Johnson: Right. Yeah I like that a lot. I don’t think we’re going to probably update our processes if we’re not already doing that. I’ll check with our guy on our team and see if we’re doing that, but I like the idea of getting the firm estimate before closing that way if adjustments need to be made or at least we’re aware of it. Do you ever go back and renegotiate with the seller if you do find out that some of those costs are more than you thought?

Geremy Heath: Yeah. As part of due diligence, if the estimates come in higher than we have to. If it makes it that our numbers don’t work anymore, we’re going to have to go back and have a conversation and let them know like, “Hey, we assumed that maybe the foundation was okay, but now we’ve got this report that shows it’s not and so we’ve got a factor that in and we’re letting you know that change is a surprise.”

Danny Johnson: Yes. I think that’s huge because I think a lot of people hesitate to do that. They feel like they shouldn’t do that, but there’s no harm in asking. You’re not telling them, “We’re not doing this deal unless you do this work.” You’re asking or are you guys are already saying we can’t do that. It depends on I guess the cost.

Geremy Heath: Yeah, because I guess the way I look at it is, at that point, you can go back to them give them the information and they can they can decide to lower the price. All that may stay firm and maybe there’s no deal. But then at that point, you’re making an informed decision whether you want to move forward at that price them or not based on what you now know. And I think another part that’s really important about it is that once you’ve disclosed that information to the seller. I mean, they’re required by law to disclose that to future sellers as well and doing that is strong on them but it’s just a fact. If you looked at it and the foundation you thought it was okay but it’s not and now I know. They got to let other people know that as well which can impact their price.

Danny Johnson: Right. Now, that’s big so. Okay, so continue on the process there. Anything that’s variable that would get a firm estimate on those and then adjust from there and then what’s next?

Geremy Heath: Then I guess the project manager is going to schedule the contractors to get those bids in. But then in parallel to that, we really start our detailed planning for the rehab phase. So we do very detailed scope of work document and then off the back of that scopof work document, we do a very detailed estimate which goes down to like skill level with specific skew items and material costs and then also the labor costs for all of the work items. So that kind of lets us go from a high level estimate like where we came in and said, hey, this is going to be $22,000 down to an estimate which now says we’re going to be at $23,122 and it’s very precise. And so part of that process is really acquisitions manager working with project manager to get straight on the vision of what’s going to happen with that house and then the cost with that and then we’re trying to be within 10% of what the original estimate was. And so if it was greater than 10% out either because of the variable bids or just one we did the estimate that was higher, that’s kind of a red flag where we then have to stop and make a decision whether we’re going to proceed or not.

Danny Johnson: Yeah, that’s big. So what you’re talking about for people listening is with the team where you’ve got the project manager and acquisitions people are different people. A lot of real estate investors including myself for so long, me and my wife, it was just us so we kind of knew if our estimates on repairs when making offers the acquisitions part of the job was off we would know when we went to rehab because we were the ones that did the acquisitions and estimate for repairs. But Geremy saying having a good idea of estimating repairs, but at a fuzzy level right whenever you’re making offers because you’re not going to go and spend the time to get actual skew level, every single piece of material what’s it going to cost all that kind of stuff when you’re making offers on houses because you’ll lose those deals to the people that just know the numbers and just give a rough idea and maybe add a little bit of padding in case they make a little bit of a mistake and then you go and now you’re talking about finding out like what’s the actual cost that we’re going to have a contract with somebody to fix this up and pay them for at a very detailed level.

Geremy Heath: Yes, absolutely. And then even though this may seem like a lot of work, here’s the way I always think of it. The work has to be done at some point in the process so it’s better to do it on the front end and then what we then do is provide that information to our contractors so they don’t need to go bid the job. I mean, that that is the bid and we’re aligned on the labor costs and the material costs are what they are. So once they get our estimate, there’s no beating or whatever. That’s the price and we know that works and so we’re able to also then stop projects straight away once we cost which is nice.

Danny Johnson: Yeah, it’s awesome because you’re not waiting and going back and forth. Yeah, I like that. That’s a good way to do it. Alright so then the rehab is going to start, but that’s – so you’re getting all of that before you actually close them is what you’re saying.

Geremy Heath: Yeah. And there’s times when we don’t, but our goal is to do that because then we have a true number of rehab and we know we’re moving forward without the risk of the overages and to be honest, that’s the overages is something that’s plagued me for years and years and years and so it’s really – this process is just a solution to that problem and it’s mainly around being able to control cash flow. If you’ve got 30 or 40 projects in your pipeline, and you’ve got a lot and you’re off like $5,000 a house, that’s $200,000 that you needed. It can get crazy.

Danny Johnson: Yeah. Wow. Let’s go back though, back to putting a house under contract and because I think that that spans like from the contract to closing in the middle what you’re doing when you’re flipping houses, but let’s talk about getting the house under contract. Specifically, do you have any special elements in the contract that you use when you put houses under contract?

Geremy Heath: I think one of the things that we do is we set up a three page contract and then we change that to a one pager and we just found that there was less resistance with that one page contract because it was easier to understand. So that’s kind of one of the things that we’ve done and then we just try to keep it very simple and straightforward because a big part of our solution, the motivated sellers are looking for something that’s simple. The more questions that you can raise in someone’s mind the more that they are going to resist and want to pull away, so we make it simple with a contract and then it’s a simple explanation of the process and we’re buying our houses as is and we pay the closing costs, so it’s pretty easy for them to understand which I think is important.

Danny Johnson: Now that’s huge. And we also use a single page contract and I’ll probably provide that on the show notes page, so you guys can go to flippingjunkie.com/74 and get a copy of our single page contract and obviously have that looked over by an attorney where you are to make sure it’s going to be a valid contract for you and there aren’t any problems for you. What works for us might not work well for you so check it out, but I’ll have it there on flippingjunkie.com/74. And the reason why we did also switch with to the single page contract was for the same reason because the Texas real estate contract, what is it now, 9 or 10 pages and it’s mostly CYA stuff for realtors. When you’re trying to go through it – first of all, you bring that to a seller and a homeowner that you’re buying a house from and you show them this huge stack of legalese papers that you can hardly make sense of and you’re trying to explain it to them and they’re just freaking out not knowing what they’re signing. And yeah, it would take a week for them to go through all that and learn all of it and feel good about what they’re signing. So yeah, the single page one is much better to the point it covers the key elements who’s selling, who’s buying, for how much, when are you closing, who’s paying for what and that’s it right?

Geremy Heath: Yeah, yeah absolutely. And I think it’s simple because really the transaction is that simple. So why make it more complicated than what it is. And I think particularly for us because we’re rehabbers, we close on our deals once we contract them. We do wholesale some, but for the most part for sure we know we’re always close on it so there’s nothing that’s going to go wrong on our side that’s going to stop us it going through.

Danny Johnson: Right. Do you ever have any pushback from sellers on that single page contract that you use?

Geremy Heath: No. I think for the most part people like it. We’ve never really have people say, “Hey, this doesn’t seem like it covers enough.” From their perspective, they’re just interested in how much money am I going to get and what it’s going to cost and I don’t have to do anything in the house.

Danny Johnson: Yeah, alright. Great. I wanted to talk with you about when you get the house under contract. You’ve got to take it somewhere, right? So where do you take the contracts after you get it under contract?

Geremy Heath: Yeah. It goes to our office manager, I sign it and then it gets sent across to our title company that day that we receive it and then they start working on it from that point. The other things that I guess happen to that the other triggers in the process at that point is my office manager will send an e-mail out to me and say, “Hey, we’ve got this contract and who’s the lender on it.” So it’s kind of like a funding request and then that triggers me to work through what lender I’m going to set up on the property as well.

Danny Johnson: Okay. Now getting that, you didn’t always have the team. You didn’t always have the title company in the beginning, your first one. How did you find the first title company and who you were going to close with that that title company?

Geremy Heath: I think it was a referral. I had a friend that was in the mortgage industry and I asked him if he knew of a title company where I could close and that’s actually the title agent who closed at that deal. She has moved to different companies, but she’s always been my title agent for eight years that I’ve been doing it.

Danny Johnson: What’s her first name?

Geremy Heath: Roxanne.

Danny Johnson: Okay. I don’t know that we were ever used. Isn’t that funny though like the key ones that most investor use end up moving to different ones and everybody follows them to the different title companies. It’s more about the closer than the title company right?

Geremy Heath: Yeah, yeah. Definitely.

Danny Johnson: I mean, I guess sometimes the top companies have rules and stuff that they implement that make it tough. But you find a good one, you hold onto them.

Geremy Heath: Yeah, yeah. Definitely. Because I think that at the end of the day you want somebody who’s going to be working through the issues and making you aware of the issues. What I guess what you want to be aware of is a title company where title issues do come up and they’re not being proactive about trying to resolve it. They’re like throwing it back over to you like it’s your problem. And so you really want somebody who takes you on a ship or try to get a clean title for you and helping to work through those issues.

Danny Johnson: Yeah and that’s huge because some investors think that that the closer will make them feel like it is their job to do to get a hold of the relatives to do this and then find out get a hold of the people that have the lien on the property and do all those kind of things. And really the title company should be doing that. The closer and their assistant, and their team should be working on doing that and not you. So you’re right. You need somebody proactive to try to do that and that’s something that’s going to kick the can to you or just sit on it and say, “Well, I’m waiting for this.” It’s like, we’ll go out get it.

Geremy Heath: I was going to add in addition to that because I think what I do say to my team as well is that even though a title company is always doing the best for us, at the end of the day, the one that cares about closing the most is us. From time to time it does require us. We need to kind of also be actively engaged in the process to make sure things are moving forward. And what I say to the team is always just call up and if things are sold, call up and say, “What can I do to help? Is there something you need me to do? Do you need me to grab an affidavit of ownership and drive it out to that person to get him to sign it?” We also are proactive, so combined it’s a good team working together.

Danny Johnson: Yeah it’s awesome. Yeah I think it was my dad and his office had a print out on his wall next to his desk that said nothing’s happening unless somebody is pushing.

Geremy Heath: Yeah that’s very true.

Danny Johnson: So it’s like if nobody’s pushing, nothing’s going to happen. So if you don’t see something happen, you need to push or get somebody else to push. It’s a simple thing but it’s the truth right? That’s what drives me nuts about attorneys a lot of times. It’s like it’s going to take two weeks. Well why is that? Because it’s going to sit on the desk for two weeks and then you’re going to get around to it? I don’t know I do it.

Geremy Heath: And then it ends up taking two months.

Danny Johnson: Right. What else do I have here? So it’s a receiving the contract, I’ve got to tell the story. I used to be embarrassed about it, but I don’t really care. I think it’s funny now but the first time I ever got to a house under contract I was doing the “what’s the next step I need to do and doing it” and that first deal that we got under contract, I had no idea what to do with the contract after I got it. I don’t know what I’m supposed to do. I know I’ve got to get it to a title company, and of course I’m what 24 or 25 at this point, but I had to get it to a title company but I had no idea what I was supposed to say when I brought it into the title company or even who to give it to.

Geremy Heath: I’m sure you had a big smile on your face regardless. You got a contract.

Danny Johnson: Oh yeah. But then it was like fear. It’s like I don’t know what I’m supposed to do or if I mess this up and does something with the contract makes it and nonbinding or something. So if you don’t know, like, for people listening, the first thing is find a good closer so ask around to other investors. Go to your REIA meetings, real estate association meetings and talk with other active investors, find out who they’re closing with and start there. That’s the easiest way and not just the title company. You want to find out who they’re closing with at that title company. And so once you have some good recommendations just talk to them say you’re getting started and you want to work with them and they say, “Great, bring us the contracts.” And so once you get one under contract, you go there and say, “I need to receive this contract.” It’s basically receiving the earnest money. You give them the contract plus earnest money and they receive it saying that it’s been received and start title work on it just so that you don’t have to sit there in the car calling your mentor asking “What am I supposed to say now that I have this?”

Geremy Heath: Definitely. And I think you’re bringing up an important point around the receiving of the contract, once you get a signed contract, that that’s only part way to where you need to get it. You need to get the receipt of contract which shows that title deed receive it and they are working on it. And a lot of the time people will hand the contract and not get a copy that receipt of contract back and that’s really what’s the most important thing in terms of the contract, having that receipt of contract.

Danny Johnson: Right because if somebody else gets a contract with the same seller for the same house, but receipts it first, they have the valid deal don’t they?

Geremy Heath: Yeah. I think it gives an upper hand. I guess there are things you can do which is known as clouding the title, putting an affidavit to cloud the title. And I guess in my experience what I have learned is that if two investors have both cloud of the title then the can often be in a stale mate. But I do think like ethically, if me if I was in that situation with a guy and I saw that his receipt of contract was before my mine, I’d step away and say, “Dude, you obviously had it before me.” But I think if you came across somebody that wanted to stand their ground granted it even if they had it in the second position, you probably would have to take legal action to enforce it. But my code of ethics especially in investing, a lot of people know each other so you get a call to do the right thing and step away. But without the receipt of contract is not proof.

Danny Johnson: It’s true, very true. And Geremy is referring to is a memorandum of agreement I think is what you can typically record down at the courthouse where the deed records are and that will cloud title. But I’ve heard you’ve got to be careful about that because you’re clouding title without legal or without— I forgot, what some kind of process. And it’s amazing they allow you to do it. You can just take the contract down there and say I want to record this memorandum of this agreement on this property and you do that without the seller’s consent. And I think that’s where the issue kind of comes in, but I haven’t heard of anybody actually having an issue doing that. But it’s something I’ve been told to be aware of and be careful about.

Geremy Heath: Yeah, absolutely. It’s really mainly at the end they just kind of a leverage point. With a lot of these things like if you’ve got into some big legal fight over it all, would you win or not? Hey, it’s debatable and it’ll probably cost you a bunch of money. But I think it’s more there just a point of leverage because at the end of the day, the way I look at those agreements is you had a signed agreement with that person so contractually they’re committed to you and putting out that memorandum mean to cloud the title is really just the step that’s validating their commitment to you in a legal manner.

Danny Johnson: Right. Yeah, there was the agreement and everything. So you only do that when a seller’s sort of deciding to sell to another investor or something after they’ve already had the agreement with you? Is that really the only time that you—

Geremy Heath: Yeah. I think if you have a feeling somebody might be trying to get around your back or something strange is happening, then you can pop that on to give yourself a little bit of protection.

Danny Johnson: Yeah, we’ve had that happen before and we did record one and I think something happened with that other buyer couldn’t perform and they got another buyer or something like that after we already had the agreement and then they changed their mind and felt like they wanted more money or whatever and so we had done that and then another buyer came along and they were trying to buy it and they saw that and so they contacted us and said “Hey, we’re trying to buy this.” And we said, “Well, we have it under contract from the seller.” And I think it’s just something like $2,000, like, “I’ll release it if you give me $2,000.” And so we made $2,000 off of that.

Geremy Heath: Yeah for sure. It covers for some marketing costs.

Danny Johnson: Right. And that’s the thing because a lot of these deals cost us typically what $15- to $3,000 on per deal so you’ve got to do something to kind of cover that. What kind of delays or what kind of problems have you had in closing with a property? So title comes back and there are problems, do you have any stories or situations that have come up maybe weird interesting ones and that had come up with property?

Geremy Heath: Yeah. I think that a lot of delays obviously can be related to people passing away. So some of the most complicated ones that we’ve had is where somebody has passed away without a will and there’s a huge family involved and without going into all the details, but there’s a legal way that property then gets split based on the family line and so sometimes that can definitely get complicated and you may have a situation where you’ve got like 10 or 15 people that need to sign off on a property. That can be hard to get everyone on the same page and I’m sure you’ve experienced this and families get pretty cutthroat over a couple of grand but there might be maybe a $20,000 deal and there are 10 people involved.

Danny Johnson: There is always 20% of them are in prison too.

Geremy Heath: Yeah. We’ve had a few documents signed in prison and sent back for sure.

Danny Johnson: Right. All over the country.

Geremy Heath: Definitely, definitely. And I think in those situations where this super complicated the reality is that the title company is not going to work through it the way that you would, so you kind of have to make a decision. But I think you work with them to do it, but you’re going to have to really drive that process to get to the bottom of things because again like the person is going to care the most about it is you. But the one story which is not related to that which is probably an interesting one to share that’s more of a watch out, I had one situation where I bought the house from a guy and his son was living in the house and we closed and his son had said he’d be out by that day, but we made the mistake of not going back to verify that and then we turned up and he still at the house. This guy was some crazy black belt fighting dude or whatever. So me and the one of the guys who work with me, we went down there and he was kind of having the big standoff with us, “I’m not going anywhere” and it’s kind of like “Well dude, we’re going to get the police to throw you out.” But the lesson that I’ve learnt from that is that when that does happen, yes you own the property, but you’ve got to work through a legal process to remove them that can take you ne to two months depending on what happens. So in terms of our standard process we now have a step which is to verify the occupancy especially when people are doing the whole business themselves and maybe it’s a part time gig, that’s one of the things that you may not have the time to go and do. And probably nine times out of 10 or even 99 out of 100 you’ll be alright, but the one time you’re not can definitely cause some problems for you.

Danny Johnson: Yeah, I know that’s huge. And these are things I learned through experience over all of these years that we’ve been doing this right. It’s the times where you didn’t do it and then the reason why you’re doing now is because you had an issue and you weren’t doing it before because you never had the issue. So this can save a lot of trouble from people by having those checklists like you were talking about and having those processes in place where you do all this because of that and I think another reason to check on the property before you close it is that something could have happened. You don’t want to buy a property that had some sort of fire or something happened between when you got it under contract when you closed on it or some other situation where the insurance wasn’t on it or something or something happened and you’re buying something that’s even worse shape than you thought. I don’t know that we’ve ever had a problem with that. But I think especially the people not being out of the house is a big one so it’s a good thing you brought them up.

Geremy Heath: And touched on insurance and I mean insurance is kind of the obvious one. But the insurance is a great example of of the importance of the due diligence process and having a checklist because with all these things, like as you can probably gathering from people out there from what we’re talking to, there’s lots of elements from once you contract to when you close and so with all those things going on, is there a chance you might actually get good insurance on the property if you’re not following a simple checklist? And so what I love about the checklist is that you don’t have to remember what you have to do even something as fundamental as putting insurance, if it’s not checked off on the list then it’s not done and we can’t close because the impact of not doing it could be yourself and your lenders at risk of hundreds of thousands of dollars betting on the value of property. It’s a low chance of it happening but massive impact if it does.

Danny Johnson: Oh for sure, yeah. With so getting under contract obviously you have to have earnest money and I’m just trying to think of real quick to wrap this up is basically what are the things that we take to the title company to receive the contract and what do we do for the closing? What are the things that we need to bring? What are the things that we need to do? So when we’re going to receive a contract obviously you need earnest money, what kind of earnest money do you typically pay for your deals when you’re buying directly from seller?

Geremy Heath: Out standards is $100. And then if we’re in a situation where we need to pay more to secure the deal and then we will pay more, but our standard is $100.

Danny Johnson: We find most people don’t. I mean we’re paying cash we’re closing quickly. We always close, but yes, so most time people don’t complain. I could probably do $5 and people wouldn’t complain. It’s like we’re going to get the deal done so the earnest money is not so much of – okay, so that goes with the receipting and then obviously you do all your due diligence, you do your stuff where you’re checking on your rehab estimates and stuff like that, getting the contractors lined up. And then for closing, who is scheduling the closing with the seller and with you and who goes to closing for you and where does closing happen all that kind of stuff.

Geremy Heath: Yes. Our standard process would be the office manager is in communication with the title company to confirm that they have set up an appointment with the seller. But then also our office manager would then say to our acquisitions manager, “Hey, your seller scheduled for 2 PM on Thursday and the title company.” And then our acquisitions manager would quite often reach out to the sellers since they are the person that really has the relationship with the seller, they’re the one that did the contract with them. They’ll reach out to see if there are okay with everything and meet them at the closing if they would like them to be there.

Danny Johnson: Okay. And we don’t we don’t typically close when we’re buying at the same time, just avoid awkward moments where you’re trying to make small talk and it’s just kind of— so we typically sign first, that way they can get the check right after they sign in. Do you do anything to try to get testimonials at closing?

Geremy Heath: Yeah. If we meet them at the title company, we’ll try to definitely collect the testimonial at that point because I think if you don’t get the testimonial at the point and you ask a week later or two weeks later, they’re gone. They’ve move on so the opportunity is definitely right at closing.

Danny Johnson: Do you have an idea of what the percentage of people that are willing to give testimonials?

Geremy Heath: It’s been something that we’ve been trying to focus on more lately and our goal is to be at 50% and it’s something that we’ve just started tracking. I believe that it all comes down to how you set it up and how easy you make it for them to do that testimonial. And so I think if you get that process down, 50% is a realistic goal. If you just kind of randomly do it, you don’t think through a systematic way, you’re probably going to be way lower than that.

Danny Johnson: Right. Now that’s smart and testimonials are huge and working with other sellers showing that “Hey, it’s not just you talking about how good you are.” You can find out from all these other sellers like how we did what we said we were going to do and all that kind of stuff, but I’m trying to think Is there anything else between contract and closing.

Geremy Heath: I would say another important piece like if you’re financing the deal would be, you may be working with a hard money lender and if so there’s obviously a communication and coordination with them or you might have like private individuals who you are lenders which is the main case for me. And so in either case, the communication with them is really key, but I think if you’ve got a private investor who is not necessarily a hard money lender, it’s even more critical that you are proactive in the communication with them so that they know where to send their why, they know when things have closed, to make sure the company sending them copies of their docs and that you’re really servicing them as your lender to make sure that they’ve got all the docs they need to be protected and you’re being proactive about it for them.

Danny Johnson: Right. And do you get those and review those before they send them off or you have the company send them directly to them.

Geremy Heath: So I would sign them all at closing and so when I’m signing them I’ll review them. But then once they’ve been signed, they’ll just get scanned and sent to them on the day of closing and then the originals are sent to them as well. But I have the title company scan and send them at closing so that kind of lets them know how we closed on this.

Danny Johnson: Yeah and you said something there about it’s the reviewing and even if you’ve been working with a closer and title company for a long time it’s so important to review everything. Don’t just go through the papers and sign everything.

Geremy Heath: Definitely.

Danny Johnson: Especially after doing hundreds, the temptation is just there to sign where you need to sign and be done in two minutes. But check the main points, check the main things especially with the loans even. If you have different structures for different loans with different people, you don’t want to sign some sort of loan with somebody where you’re paying way more interest than you’re supposed to or if you’re not supposed to have payments where you have no payments and interest only paid at the end, but it shows payments and then you’re not making those payments because you didn’t think you were going to it looks bad with the lender and all of that kind of stuff. So review everything, make sure everything is as agreed upon even if you’ve done it a hundred times. Don’t ever skip.

Geremy Heath: That’s great advice. Definitely.

Danny Johnson: Make sure it’s the right address too.

Geremy Heath: Yeah, yeah. And make sure it’s your name or business entity.

Danny Johnson: Right. So it says that we probably had these things before where it was wrong and it was like “Whoa, what is this” or that the contract that you signed with the seller that the terms of the deal who’s paying for title that kind of stuff needs to be reflected correctly too so that you’re not wasting thousands of dollars on mistakes.

Geremy Heath: Definitely. And I think on that point especially for people going that have taken ownership of the properties, I mean if you’re signing it, it’s kind of a little less important what is involved, but when you take ownership of a property for a lot of people who are getting started you have to realize that you’re really dealing with lots of money and these deals if they go wrong you can risk losing lots of money. And remember what I first got started, I kind of almost felt like it was a bit of a game and I didn’t understand the seriousness of it until a couple of things went wrong and then I kind of said, “Well you’ve got to be careful with the stuff. You got to be careful with your estimates. Careful when you sign stuff.” Because at the end of the day, if you screw up there’s no one there, you’re on your own.

Danny Johnson: Right. There’s no safety net, right?. Just because you missed it there’s not somebody coming in behind you to double check everything for you. And we’ve made some mistakes and it’s like, “Wow, had I just spent two seconds looking over, that I would have not made that mistake.” But anyway, yeah, I appreciate it Geremy. And I guess we’re going to get our morning started now and doing all the stuff that we’re working on. But it’s awesome talking with you and I enjoyed meeting with you the other the other week and we’ve got to get together again.

Geremy Heath: I appreciate it. Thanks for having me on the show again.

Danny Johnson: Yeah, no problem. And for anybody listening if they want to get a hold of you is there a way that you’d like for them to reach out to you?

Geremy Heath: The best way would be you can go through my Web site which is at texasallcash.com and then just submit through the contact us and I’d be able to get back to anybody.

Danny Johnson: Alright, great. And I’ll put that link on the show notes page flippingjunkie.comn/74. Alright Geremy have a good one.

Geremy Heath: Thanks.

Alright guys. Awesome episode with Geremy. I really appreciate him being on the show and you’ll notice I got talked about that the intro Geremy has built up a good team for doing his house flipping and he’s definitely a flip pilot in the sense that he’s always got at 30,000 foot view of business. In the morning he does this miracle morning routine to focus on his goals, focus on his business and really work on the pieces of it, grow it and have the right people right place managing stuff and having systems in place like those checklists to make sure that everything’s going properly and so it’s super powerful.

I’ve set up a closed Facebook group for people that are interested in building their business like that just so that we can all collaborate and get together and talk about hiring and systems and all that kind of stuff so be sure to go over to flippilot.com. And I figured because I love aviation everything and fliping that the idea of that metaphor of being somebody that’s piloting their business and they have that 30,000 foot view to be able to work on their business instead of in it. I don’t know. I just think it’s an incredible thing and I hope, if you consider yourself a flight pilot or want to be one where you build out your business like that eventually, definitely be a part of that group. I’ve got a lot of great people in there. We just started it. So it’s growing pretty quick but you can get an invite into that closed Facebook group by going to flippilot.com. You can get your invite over to the closed Facebook group. So check it out.
Thanks for listening the podcast please subscribe, rate and review if you enjoy the Flipping Junkie Podcast. We’ll be doing more of the interviews and of course I’ll keep doing the day in the life videos sharing all that stuff. There are videos for all this too. If you like to watch the videos, you can go to YouTube.com/flippingjunkie to watch the videos and get all the show notes from today. Alright you guys have a great week.

Leave a Reply

Your email address will not be published. Required fields are marked *