Are you getting enough deals from your leads? You may want to look at your follow-up system. Join in as Jeffrey Rutkowski brings in experienced real estate entrepreneur JD Esajian to share how a relentless follow-up system has been instrumental in the success of his company. With his team at CT Homes, JD has invested in over 1,000 residential properties. For this year alone, 65% of the homes that he has purchased have come through a relentless follow-up system. For some perspective, that’s one out of every 15 offers accepted. What exactly is this system and how can you apply it in your own investing efforts? Tune in to find out.
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Building A Fortune In Real Estate Through A Relentless Follow-up System With JD Esajian
I have with me Mr. JD Esajian, our resident expert and co-host of the show. He is one of our top FortuneBuilders trainers. He teaches and trains students all across the country at the Rehabbing Bootcamp. He also runs the day-to-day operations of CT Homes. He has bought and sold over 1,500 properties in his career and is responsible for taking down over $1 billion in commercial real estate. We have a special episode planned for you. Before we get into it, as always, I want to bring you the word of the week. The word of the week is relentless follow-up. JD is going to share with you how 65% of the homes that he has purchased this year have come through a relentless follow-up system.
As real estate investors, we know the majority of the offers that we write and present with sellers will not be accepted, but what is our follow-up plan? Are you marking off when the offer gets accepted? When is their inspection contingency? When is that mortgage contingency? Following up on those dates and at least once a week. In this business, it’s all about the follow-ups. That is our word of the week. In this episode, we’re going to share some secrets that JD is using in his business on a day-to-day basis to get 1 out of every 15 offers accepted. Let’s get into it.
We have in the house our resident expert, Mr. JD Esajian. What’s up, brother?
What’s up, Jeff? It’s so good to be here.
It’s good to have you back in the bunker. I was thinking about this. We always tell people we’re here in the bunker, and I’m thinking, “What kind of mental image is that?
What are people thinking?
Are we in a hole in the ground or something like that? I wanted to explain that to you for those of you thinking that we’re buried underground in a bomb shelter. We’re here in our headquarters of over 27,000 square feet of commercial beauty, housing five different businesses, FortuneBuilders, CT Homes, MinD Protein, RealFlow, Equity Street Capital. We are down in the bunker.
Don’t forget Local Krave, our coffee shop up in the foyer. It’s available to the public that is walking by too. It’s good coffee.
If you’re in San Diego, come by at 3033 Bunker Hill Street.
Tell Pete we sent you.
He’ll charge you a regular price.
You will get great coffee in exchange.
I am pumped for this show. For those of you reading that haven’t known JD yet, let me tell you who this man is here. He is one of the owners and operators of CT Homes, LLC with over 1,500 residential real estate deals, bought and sold. How many employees are in the company?
We have nine full-time employees, and we have over 30 homes inventory in San Diego county. We average 23 to 24 active rehab projects each year, and have now for well over a decade. We write thousands of offers each year in San Diego County. What we’re going to talk about is something that is directly related to offer writing and how we do buy the properties that we buy.
I’m pumped for that. I know historically, your company average about 1 offer accepted per 22 offers written.
Historically, that has been the case. Overall, different formats. Stuff we buy on the MLS, directly working with sellers, online, offline and etc.
In 2020, probably one of the most competitive markets in our history, how has that number changed?
Believe it or not, Jeff, it’s gone down, which means we’ve been more productive. We’ve written less offers to buy one home, and we’re down in the teens, fifteen to be exact.
That is why you’re here. When we were talking, we could quickly agree this would be the most valuable thing for the audience reading, because the big question is what are we doing in the competitive market to get offers accepted? I have here in front of me the master list. There are about twelve different things that you have put into motion since 2020.
I buy and sell, so things have been doing better and different when we go to buy things that we’re going to touch on, and then there are some very unique things when we go to sell. Frankly, with what the market has been doing, selling homes is easier because it’s a seller’s market. How you operate within that and how you maintain that when it transitions into a more balanced buyer market are also things that are on your secretive notes there. That’s probably good for another day because we’d probably be here for four hours if we tried to cover everything.
We could not get that. Quite honestly, I’m looking at this list. I see twelve points. Each one of these could be a point. That’s one thing to put out there. As we go through the show, if there’s a certain point, we’re going to go high level and cover as many of these as we can, but I do feel that many of these should be an individual show. The ones that speak to you the most and you feel, “I need to learn more about that,” just leave us some comments. We’ll come back and dive deeper into the areas that you want us to.
It will guide us into what we can go further into on subsequent shows.
As we get started, if you know anybody looking to get into real estate or even buy or sell their own home, share this with them because this is going to be one of the best shows we’ve ever done. Hands down. I pulled these slides because you were training. It immediately jumped out at me. I’m like, “This is amazing stuff,” just on this first page right here.
There are six major points.
There are six things from signing backup positions to 9 to 90 day closes and 24-hour closes to the deposit amounts you’re putting down, additional terms and all of these different things. Where would you like to start? How do you want to kick this off?
We start from the top. To set it up, what we do and what investors should focus on is helping other people. Everyone has a reason why. If we’re talking about buying, which we are now, there’s a reason why they’re selling. You may be talking to the homeowner directly because you’ve sent out some marketing, generated leads online, door-knocking or talking through a real estate agent. Nevertheless, you still want to find out why someone’s selling, because if you don’t know why they’re selling or what their hardship is, sometimes financial, sometimes physical in their body and sometimes it’s situational if you don’t know that you’re never going to write the strongest offer.
We could start right there, to be honest. That’s so good. I remember early on in my career, the biggest mistake I probably made was assuming the price was the most important thing to every seller.
It’s only one term in the offer.
Typically, investors have our number. We hyper-focus on that, but if you don’t take the time to understand what people want, you can’t serve them and help them at the highest level.
That’s fundamental in anything we’ll talk about here at CT Homes or at training in systems education at FortuneBuilders, because when you come from that place, it’s the right way to do business, number one. Let’s not go past that. Also, as importantly, you can help someone and understand what they need. Do they or not need to move quickly? Do they know where they’re going? Do they need help going where they’re going? Do they need cash faster in some capacity even before the transaction is closed?
There are ways to facilitate that like getting someone money in their pocket before you own the home safely and securely so that they can have money they need to put a deposit down on the next place they’re going to buy or rent. If you write an offer that way that answers that major problem for them, even when someone is writing an offer that’s higher, they may look at yours and say, “Your offer is not as high priced as this other one, but then you’re solving five other things that I didn’t get solved in these other offers.”
That’s good sales. JD and I share a mutual mentor, Andy Tanner, who trains us over the years in sales and communication. I love the way he defined sales and he say, “Sales is simply helping other people discover what they want, and then if you can, helping them get it.” That’s exactly what you’re doing here.
That’s the perfect way of putting it. Starting at the top, I’ll touch on each. You can add stuff and ask me any more questions. First and foremost, if you look at where I think where we’ve had a lot of success, not just during this last year, but over the last couple of years is when you write an offer, many times for us, and investors probably experienced the same thing, you don’t get your offer accepted. Someone else pays more and buyers accept another offer.
Most of the time, you don’t.
Many times, but sometimes people do is they say, “That deal is dead. I don’t have an opportunity to buy it,” but what we’ve always done and done more so in the last years is we make sure that we get ourselves in a signed backup position.
Signed and sealed.
If the seller accepts someone else’s offer and we don’t get ours accepted, if we can, sometimes the seller doesn’t want to, and the agent doesn’t allow it. We try to get our offer accepted in basically second position. The reason that we do that is that if it’s signed properly contractually, that if the first buyer doesn’t perform for a variety of reasons, maybe they can’t get their financing, they find out their numbers don’t align, they decide they don’t like the shape of that or whatever the reason is, we’re right there in next position to move up to the first position.
Follow up on your leads so you don’t miss out on an opportunity.
They don’t need to look any further.
You still have to go through your due diligence period potentially, and your clock will start at that point whenever that second offer, your offer gets into the first position, but what that does is it puts you right there, ready to go. I’ll share something with you. Over 50% of the homes that we’ve bought in 2020-2021 have been where we were not the first offer that the seller accepted. We were in 2nd, 3rd, and we’re buying a home, but we were the fourth escrow the seller went. If you’re not tracking that home, in a signed backup position, and doing something to make sure that the seller is satisfied or not satisfied, hopefully with that first buyer that they decided to go with, that’s not going to happen. Signed backup positions, if you’re able to do it in your state and most states allow it contractually, then you do that for the reasons I mentioned, the stat I showed over 50%.
Number one, there you have it, signed backup position and over 50% of the properties you acquired.
It was where we were, not the first offer that the seller accepted. If we gave up on those, we would have bought more than half less homes than we purchased in 2021. We’ll do over 100 transactions.
Where are you at?
Right now, we’re at 64 transactions so far. We’re pacing a little bit above 100. The second half of 2021 will be stronger than the first half of 2021. In our second quarter stats, we bought more homes than the first quarter and more homes in the second quarter than we have since 2014 in that same quarter.
Have you got anything interesting in the pipeline? Anything that jumps to your head right now that comes to mind.
Before I walked in here to start doing the show with you, we were talking with the team, Dan, who directs our acquisitions and Kevin, known as Beefcake in our office.
He is a basketball player.
He’s a very good athlete. He was talking directly to the seller on this transaction. A quick story. We’re going to be hopefully buying this on Monday. The woman who owns the home lives on the first floor. It’s a two-storey one-family home. It’s not a two-family home, but she lives on the first floor and her son lives on the second floor. Unfortunately, they don’t get along and they have restraining orders against each other.
The mom against the son.
They live in the same house in a single-family home on different floors. It’s a very interesting story. Interesting is you could put a lot of words there. It’s unfortunate.
I’m laughing, but that’s pretty sad.
It is, but it’s a problem. It’s a problem for her because her health isn’t great. I’m sharing this, but these aren’t things that someone normally tells you unless you ask or find out. There’s a whole backstory that I won’t go into that she shared, but the reason I’m sharing that story is that’s a real problem. That’s a situation where she doesn’t know what to do. We have to help solve that. Now we’re going to end up buying the home here in a couple of days, but there is another son who isn’t at odds with her mom, who doesn’t live in the home. They want to be done with the house and don’t want to own the home anymore. She’s going to go to a rest home and doesn’t want to live in the house anymore, but she also can’t get her son out. We’re going to have to take ownership of the home with her son upstairs, who has security cameras for the downstairs so that no one can go upstairs.
That should be fun.
That should be interesting, but I share that because it’s a real problem that if you’re trying to buy the house at a certain number, and you’re not trying to solve these issues that the woman is going through, she’s going to look past you. We’re going to buy the home, but there are eviction moratoriums and situations going on definitely here in California that doesn’t allow someone to go through and start the eviction process. We have to account for that financially. Ultimately, we’re going to have to buy the home a little bit lower than what we would normally pay for it because we do not know what’s going to happen with the eviction process. We have to count for the worst-case financially.
How did you acquire that property?
It was what we call in the industry a pocket listing. It was not on the MLS and not available to the public, but an agent, with who we’ve done business before and we have a great relationship, brought it to Beefcake. I can’t not laugh when I say it, but it’s a great nickname. You’d think he’s an exotic dancer on the weekends, but he’s not. He lives with his girlfriend in a home in Claremont, but he’s a great guy.
The agent shared it with us and one other investor. She only brought it to two investors that she had a good relationship. The other investor didn’t know how to properly solve the situation that I described to you. The things that we’re covering are not theories. It’s not like, “It could work.” It actually works in our office. Investors that implement these kinds of strategies and use systems within our community put themselves in positions to be able to buy more homes.
We should try and get some pictures of that house. Do you have any with you on your computer?
I’m glad you asked. Ask and you shall receive.
Look at this. It doesn’t look too bad.
That’s what’s interesting about this home. It’s in a neighborhood called Tierrasanta in San Diego County. You’re probably familiar with that.
My daughter goes to school out there.
You’re buying a new home or I might put this in front of you. The distress in the transaction isn’t the home. The home is not completely renovated, but it’s not in bad shape. There are people living in it. They not getting along, unfortunately, but they’re living in the home, and it’s not in terrible shape. The distress of the home comes from the situation and you don’t know that because they’re not listing that on the MLS. This wasn’t on the MLS and people aren’t necessarily always sharing that because it’s a personal thing. They’re uncomfortable and upset. It’s got a nice little pool. Get home from a long day at the office or working, you jump in, get a little swimming going, maybe open up seltzer water, whatever you’re into, and relax.
The house is not in bad shape. We have a plan for the renovation. That’s the property across the street. The home was renovated years ago, but it’s dated. It’s not a situation where the home needs a ton of work. It does need updating, but the real problem and the reason we’re able to buy it at a discount is situational. There are usually two kinds of major distress, maybe three. You’ve got the physical property distress with the house. There’s some maybe financial distress either with the house or with the person or actual physical distress of the actual individual, whether it’s emotional, mental or physical.
We call ourselves real estate investors, but we’re in the business of solving problems.
Real estate solutions is what we do.
The better we get at that, the more successful we become.
This one, we were not the second escrow or the second buyer because the agent didn’t list it. She brought it to two investors, but we were the one that was able to solve the problem the best. We’re going to close this here. We’re going to own this home. We have to get a little lower price for it to account for what’s happening in California with the eviction moratorium and potential dates, but we’re going to solve their problem.
We’re going to help them, assist the mom and the son that she gets along with. We’re going to take ownership of this property with an individual that we don’t know exactly how we’re going to vacate, but we’re going to account for that with a time. Meaning we’ve accounted for the appropriate worst-case scenario of time, and two, we’ve accounted for the potential financial ramifications of that worst-case scenario as well. Hopefully, it doesn’t go to the worst-case scenario, but you have to account for that when you’re writing your offers.
Maybe throw a little Cash for Keys at them as well.
That’s probably going to be plan one once we are physically the owners and we record. We’re going to have a conversation with him, and there’s something he’s trying to solve. We’re going to try to discover what that is. If it’s a money thing or not knowing where to go or feeling he’s entitled to something financially or otherwise, we’ll try to solve that. At this point, he won’t be dealing with his mom who owns the home. He’s going to be dealing with CT Homes. We’ll approach it the same way to try to solve his problem.
There’s a new sheriff in town, as they would say.
That is true but we’re going to do our best to not have the worst-case scenario for him and for us. We got sidetrack there, but it’s an interesting story. These are the kinds of things that when you’re reading and learning, you can find yourself helping more people, and as a result, helping yourself more too by being able to buy more homes.
From the day you made the offer to closing, what’s the timeframe there?
If you don’t take the time to understand what people want, you really can’t serve and help them.
It’s going to be about eight days.
That segues perfectly into the next point here because point number one is to get yourself in the signed backup position, but then you offer anywhere from 9 to 90-day closings. You even have a 24-hour closing program. Talk to us in general about tips in terms of framing a close.
As a buyer of distressed homes, the automatic response when we’re writing an offer is, “Let’s do cash. Let’s close as fast as possible.” It isn’t a wrong way of thinking that people want, in a distress situation, to sell fast. Many times, that’s the case, but sometimes that’s not the case. I can tell you, example after example, where we’ve written a strong offer financially with a very quick close, and the seller took a lower number with an extended close. Years ago, we had that happen and we said, “We’re offering more than what you ended up selling the home for.” What happened? They didn’t want to close in 9 days or 10 days.
The other side of the other thought is, “Why didn’t they ask for a longer close?” Sometimes, people don’t think to ask for things they don’t know are there, or they’re in a situation where they don’t know. Now with our closing timelines, we make it optional for the seller. We put in a number of days that the fastest days we can close. For us, we can do it in 24 hours. Not everyone has that ability or if your financing takes longer, but whatever your quickest closing timeline that you can perform on, we put that in. For us, it’s 24 hours if we can get a clear title or up to 90 days, the seller’s choice.
In the contract, you’re writing 24 hours to 90 days.
We can perform with clear title in those timeframes, 1 day to 90 days or anywhere in between. What we’re doing is we’re not making the decision. We’re telling you what we can do in writing, and then you, as the seller, who’s dealing with whatever you’re dealing with, you tell us when you want to close.
It goes back to helping people get what they want and at this point, we don’t know. Do they want a short close? We offer nine days. “I don’t like that. I want 90.” That’s brilliant.
We leave it flexible up to them and many people like to make their own decision. Some people need to be told what to do sometimes, and most people like to make their own decisions. This way we’re leaving it up to them. As a result, handling whatever timeframe they feel comfortable. Think about someone that’s been in the home for 50 to 60 years. They have all their life’s belongings in there and you’re saying, “We can buy it, but you got to get out in seven days.” They don’t know where they’re going. Some people will freak out and we’ve had that happen. They don’t have to feel that way and think about asking us for more time. They know that we’ll perform on their timeline.
There you have it. The takeaway right there is to know the quickest you can close.
That starts there. If you say, “I’ll buy your house in seven days,” but you have no ability or know how you’re going to perform in seven days, you’re lying. That’s all I’m saying.
Don’t put 24 hours if you can’t close in 24 hours. If you know ten days is your fastest, put 10 to 90 days, the seller’s choice.
If you’re borrowing hard money and you need fourteen days to get the appraisal done or the walkthrough with the lender, then put in fourteen days. Just because you’re sitting there saying, “I can’t close in 24 hours.” Put in the fastest timeframe that you know you can perform in.
I want to ask you next about how you’re framing and how you’re structuring the positives, but before we do that, I want to invite all of you reading to an upcoming one-day training that we’re hosting with a real estate expert, Than Merrill. I’ve talked a lot about Than on this show. He’s been a personal mentor of mine for years. Before meeting him, for those of you that heard my story, I tried investing in real estate, after reading a couple of books, watching some videos, and it did not turn out too well for me to say the least. After this class and after learning his systems and tools, for me, it was a game-changer. What this class is, is a fast pass.
If you like getting to where you want to go quicker, join the class because he’s going to take you through the systems and the tools that he’s using currently to do over 100 deals a year and how he’s been able to acquire over a billion dollars in commercial assets. If you’re interested in creating wealth in real estate development, multiple streams of passive income through real estate, this is the class for you. They are one-day on Saturdays, visit FortuneBuildersShow.com, and I’ll see you there. Let’s get into these deposit amounts. How are we making that as attractive as possible to the seller?
Just a follow-up on what you shared with Than. I’ve been friends with Than and business partners with him now for many years. I met Than right before he met Paul in grade school. It was in middle school when they met. Than and I grew up together in Fresno. We’d been friends for many years. Paul and Than are best friends and now business partners for years, as we get through the different businesses. Beyond that though, extremely smart and successful real estate investor, a great guy, and no better person to learn from in real estate than Nathaniel. It’s his real first name.
Than, as he’s known on the streets, Merrill. Deposits, you ask me. In a contract, every state is a little different in how they operate deposits, but to make a contract real or actually valid, you have to give something in exchange for signing the contract. I’m not saying you slide money over to the seller and say, “Here. Hold $1,000.” It goes to the closing agent, escrow title, attorney, and that’s the deposit. Every state operates that a little differently, but that’s a term in a contract that can be adjusted to make your offer stand out. In some states, there are norm standards, 1% of the offer price. There might be a baseline, $2,500 or whatever it is. When you are willing to put more into escrow title with your attorney, when your contract gets signed, it can make your offer stand out.
We increased our deposit. We’re willing to put more skin in the game if our offer gets accepted. As a result, it can speak louder to the seller when they’re looking at and comparing our offers, apples to apples. In other states as well, but in California, we have some very high-priced real estate. When we buy a home for $1 million or offer $1 million for a home, which we do often here, $1,000 of a deposit doesn’t look that strong. On something like that, we might put $25,000, $50,000, $100,000 in deposit. Now, if your offer gets accepted, you have to have that money to send to the attorney, or here in California, we use escrow a lot.
Don’t offer $100,000 in earnest money deposit if you can’t and don’t have the ability to do that, but if you have a larger amount to offer if your offer gets accepted, and put more skin in the game, then that can make your offer stand out. For us at CT Homes, our standard deposit amount is $10,000, but as the price of the home goes up, we will do $20,000 and if the price of the home goes up, we’re buying a home here for $1.8 million. On that home, we put $50,000 into escrow held by a neutral third party before we close.
As the purchase price goes up, we’ll put more, and then we’ll sometimes even add to that, so that if someone’s looking at our offer, we’re offering $500,000. Someone else is offering $500,000, but that other offer has $5,000 and we have $25,000 of earnest money deposit. Hopefully, our thought is, and it has worked for us because it gets us into more deals, they’re going to look at our offer the same number with a higher deposit and say, “This team is more serious.”
I’m assuming you have inspection contingencies in most of your offers, so whether you have $1,000 or $100,000, it’s protected the same way. It’s that psychological factor when the seller sees that bigger number that you see.
You’re asking about contingencies and we could do a whole show just on contract contingencies and how we use them, dates-wise. For us at CT Homes, we can do all of our inspections and contingencies in 48 hours. Many people can’t do that because they don’t have their teams set up yet, although we can help you set up your team too. It’s good to bring that up as we have contingencies in a contract, so if we find something in our due diligence period, we get that money back.
The method you gave us, will you approach that the same whether the property is on the market with a realtor or if it’s a private sale with the seller? Any differences there?
If we’re dealing directly with the homeowner sitting in their living room, making an offer or writing it through an agent, we’ll approach it the same approach. The intent of that term operates the same way dealing directly if you and I are sitting at your coffee table and you’re looking at selling your home, or I’m talking to you on the phone and you’re a real estate agent and giving you offer terms. It works either way.
Where do you want to go next? Do you want to talk about some sellers’ terms or anything?
I don’t want to say that these next two are the most important because they’re all important when you use them properly. These next two are some of the high-level ones that if you implement, it will allow you to stand out as a person who’s writing offers. Let’s do additional seller terms. When I say additional seller terms, what that means is we’re putting things into our offer or offering things in our offer. I guess that’s saying the same thing twice, things that aren’t normally associated with the contract.
I’ll give some examples. The reason I started off by saying you need to understand what someone is trying to accomplish or what their problem is that you need to solve is because it brings you back to this term right here. For example, let’s say you’re a seller and you’ve been in a home for 35 years. You lived there with Claudia, your wife, and your two girls, who are hopefully off to college by now. You’ve been in a home for a long time. Everything you love is in that home, and you decided to sell your home. The market’s right. You decided to move and we’re in contract and buying your home, but you don’t have the means or the ability to move everything, but yet you want to sell fast. You’ve got a lifetime’s worth of belongings in your home.
In my offer, I might write in, “You take everything that you love and dear to you. Anything that you decide you don’t want to keep anymore, you leave right there in the house, and CT Homes will take care of that for you.” You can go through your home. You don’t have to go through every item. You take what you love. You leave what’s become trash or whatever it may be, a picture of someone in your past that you don’t want to have anymore. Things that you don’t want anymore, you don’t have to do the yard sale and donate them if you don’t want, you leave them there, and we’ll take care of it.
We do that a lot. That’s an additional term that isn’t a standard term in a contract, but if you’re sitting there with a lifetime’s worth of stuff and you have no idea what to do with it, you don’t want half of it, it’s a big burden. You leave it there. I’ll tell you what we do with it, because I’m of the opinion that we try to reduce our footprint, so we don’t take that and take it to the landfill. We buy a lot of homes with a lot of stuff.
First off, we donate what we can to Goodwill and those types of places that can repurpose it. We do that. We live in San Diego, very close to the border of Mexico, and a lot of our workers here will take the things down south of the border, and they’ll donate it down in Mexico. We try to repurpose and sell, donate it, and give it away wherever we can. There are things that get left behind that no one wants, so those make it to the landfill. That’s an example of an additional seller term that speaks to someone who doesn’t want everything in their house, but yet doesn’t want to go through the hassle or burden of getting rid of it.
They take out what they want. You take care of the rest and maybe find some cool stuff for yourself like the dogs playing pool.
I’m much like my mom, and that I like to collect things. I wouldn’t say I’m a hoarder, but if I had more space, I’d have more things. There is a bunch of furniture in my house. That might be the definition of a hoarder. That’s a conversation for another day, but there are furniture pieces that are so cool that we’re left back in other homes, and now I have mid-century modern pieces that I love. We’ll give them to team members at CT Homes. Have you ever seen American Pickers? Do you ever see that show?
What do you think of Armenian Pickers? It doesn’t have the catch?
It doesn’t have the same appeal.
No? You can’t think of Paul and me as two Armenians driving around?
Sometimes people don’t think to ask for things they don’t know are there, or they’re just in a situation where they’re uncertain.
Driving in the old ATV.
I’ll come back to the name of the show, but there are a lot of cool things that people don’t want anymore that you can do things with or donate. You could even use it as staging if it’s cool. You could stage a house with it when you’re done. That’s one example. I’ll tell you a story to give you an example of another additional seller term. We bought a home from a couple and they were moving to Arizona.
We found out through the conversation of discovering what they need, that they didn’t have a vehicle worthy enough to move from California to Arizona, where they were moving to. We formulated in our offer the ability to release a certain portion of the earnest money deposit once all contingencies were removed before we closed, so they could have that money to buy the vehicle that they needed to load up to move out of their home to Arizona.
You clear contingencies. It’s a done deal and you release a little bit of money for them.
Than knows what kind of vehicle they bought because I was curious. I’d never release money early, so someone could buy a vehicle to move, so they bought and loaded their car. They moved. We bought the home, renovated it and found a great new owner to move into it.
Did they request that or is that an idea you came up with to try to help them?
By asking them why they were selling, they said they’re moving to Arizona, but they don’t know how they’re going to get there. It was after an agent told us that. We sat down, strategized and we’re able to come up with a solution that made our offer stand out. That’s another example that happened. There have been situations where someone had a lot of stuff as well, and they wanted it all, but they didn’t have a place to put it. We prepaid for three months of self-storage at a facility nearby and written it into our offer so that someone could move. They didn’t have to worry about where their things were going to go for three months.
You are having a theme here. Take the time to learn what people want, and then you’re able to help them get it. There’s a great question one of my coaches taught me years ago, and I’m sure you use this as well, but when dealing with sellers, ask them, “What interests you most about selling your home to a company like mine?” A lot of times, that will pull out something, “You guys can close quick or you buy as is,” or whatever it may be.
We’ve adjusted that phrasing a little bit. The way we ask it is, “Assuming we can agree on a price, are there any other special terms or needs that you have that we could include in our offer to make it stand out?”
I’d be writing that down and implementing that.
If you’re sitting there saying, “I don’t know what the seller needs or how do I find out?” That’s how you find out. You ask that question.
Can I try? JD, assuming we’re able to agree on the price, are there are any other special terms or conditions that I can include in my offer to meet your needs?
Jeff, I’m glad you asked. I’d like to be able to stay in the home for at least 30 days after we close, so I can be comfortable moving into my next place.
Do you want to lease back?
It’s another additional seller term.
Let’s talk about that.
Another term, and I’m seeing it more happening. People need the money, similar to the car situation, but in a different capacity where they need or want the proceeds from the sale, and they want to close fast, but they don’t want to move out of the home fast. You can structure it as you have experienced as well, a lease back where someone after closing stays in the home so they change from an owner to your tenant. You can have a lease agreement, terms, they pay for staying there, or you can structure it if you want where they don’t pay and they’re out at a certain time. Then there are consequences if they’re not out at that time.
Have you ever had that go bad on you?
Yes. I have to say that you have to know your best and worst-case scenarios. Meaning if you’re going to consider that and they turn into a tenant, then you want to be very clear on what the eviction situation is and process it in your state because the worst-case scenario is, they don’t honor what they say. Now, you have someone that’s squatting in your home. You want to understand what the worst-case scenario could be. Talk to an attorney if you need to. In that situation, then you go to your plan B, which is going through the channels and process that you would have to take with moving anyone.
It’s so you know the worst-case scenario you prepare for, but that is happening a lot because people are realizing, “My home is worth this now. Let me sell it. I sold it. Now, I have to figure out where I’m going to go or what I’m going to do.”
A story I’m thinking of, which is related to what we’re talking about with someone being in your home that shouldn’t be, in Connecticut, we did house on High Street. It was filmed for one of the episodes of the show. We always do a final walkthrough as you should before you close the day of closing to make sure everything’s as it was and no one’s there. We did that on this home. I don’t remember what day we closed. I did the final walkthrough. No one was there. We close on the home.
The next day, I went through with Fabio. We walked through the home and we got the cameras with us because we’re filming it for the TV show. It was the first time I’ve been in the home since we owned it. It felt weird like someone was in there, but I’d just been in the home the day before and no one was there. We closed on it.
We’re going up the stairs and all of a sudden, it sounds like it was a 500-pound dog that starts barking. I hear this, “What are you doing up there?” I’m getting chills because I got chills when it happened. We run out of the home, and Fabio is a big guy. He got scared too. We’re running out of the home. I go outside and I’m like, “Someone is in the house.” We had walked through the home. No one was there. Between when I did my final walkthrough and when the attorney’s closed the transaction, someone found the way back into the home.
We had to go through an eviction process. Unfortunately, the person shouldn’t have been there, but that’s the only time that’s happened, where someone moved back in after I did my final walkthrough. It seemed like a funny story to share right there. The purpose is it’s a good reminder to know what the eviction process is in your state, and what you may have to go through if someone is in your home or if you offer a rent back, which is where we got to that story.
Let’s close it off it with a follow-up here. I want to hit that hard. As I said, I believe each one of these things will be a show. Let us know what you have the most interest and most help in, and we’ll circle back. Talk to us about follow-up.
The devil is in the details here, and I’ll get into some specifics. I want to go big picture and say that when we’re talking about follow-up, we’re saying that when you don’t get your offer accepted, whether it’s the 1st, 2nd, 3rd, 4th, you never stop following if you want to buy that house. You never stop following that transaction until someone else buys the home, and then maybe you still follow up because another investor buys it, and they don’t want to rehab it. They want to wholesale it, which is another investment strategy. You can buy it from them wholesale. Over 50% of the homes we buy are on a follow-up. If it’s on a 2nd, 3rd, 4th system, if we’re not following up, we’re not buying the homes that we typically buy on an annual basis.
It’s very important. The last term I have is relentless follow-up. It’s one thing to follow up on. It’s another thing to follow up relentlessly in a professional way, in a not annoying way, and not a way where the agents or the seller sees your phone number and send it to voicemail. That’s not what I’m saying, but you want to be persistent and relentless in a professional way so that if you have the opportunity to buy the home, you can.
I will give a couple of key points that are good to follow up with or on timing. When an offer gets accepted, there are usually two main points in the contract where it shows someone’s very serious. That’s when the individual, investor or other buyer puts their earnest money deposit into escrow or to the attorney. They’re putting their money where their mouth is. That’s a big point in a contractual relationship.
The other major point and we’re talking about real estate contracts is when that same person, who put in their money where their mouth is, signs off on all of their contingency and says, “Now I’m good with everything. The numbers are good. I’m buying the home. If I don’t buy the home, you’re entitled to that money.” Those are two key points in the contract that you, as the other investor that’s following up, want to know about or know when they are and follow up on those days.
If I’m talking to you and buying a home that you’re representing the seller, you’re an agent or the homeowner, and you accepted another offer, I’m going to ask you, “I appreciate you considering our offer. It sounds like the sellers accepted another offer. I’d love to follow up and I’d like to follow up on a professional timeline. Can you let me know when it is scheduled for the other buyer to put in the earnest money deposit?” They may say, “Why would I tell you that?” My answer would be, “Only because that’s a very pivotal point in the contract. If that other buyer doesn’t perform, I want to be there in front of you to see if we can help the seller help your client.” They’re not entitled to give you those dates, but if you explain why, they’d likely do.
It’s the same thing with contingency removal. I’ll ask you that date too, and then that way, we will follow up more often than those timeframes, but those are good dates in a contract to know about, because if a seller is waiting to sell their home and the person they agreed to sell their home to doesn’t put their money into escrow, they’re going to be like, “Forget this other investor. Let’s shift gears potentially.” It’s the same thing when they go to remove their contingencies if they don’t do that.
It’s very natural to follow up if you’re in the backup position. You spoke about it.
It makes it more natural to follow up.
Let’s say, I’m the seller. You present your offer. We go with somebody else during the backup position. We’re going to schedule the inspection contingency as a follow-up and then when there are ultimately any other contingencies, are they released?
When they put in their deposit, that’s usually here in California within 48 hours. Every state is a little different, but when their money goes in 48 hours, in California that’s the typical timeline. In other states, sometimes it takes longer. When they’re signing off on all their contingencies and their money or deposit goes hard as we call it in the real estate term, it’s nonrefundable contractually.
Outside of those benchmarks is a weekly follow-up.
If it’s a deal that is a home run or for whatever reason, we want to buy the home, which is every house we write an offer on, we will follow up on a weekly basis or maybe more than once a week. If we have other business with that agent, if we’re working with an agent, then we’re following up a lot more. Let’s say you and I have done twenty transactions together and for whatever reason, this one didn’t work out. Your client accepted someone else’s offer and we’re good friends, I’m going to follow up and text you a couple of times a day saying, “How’s your day going? How’s 123 Main Street? I want to buy that home.” If I know you well enough, I’m going to bug the you-know-what out of you because we’re friends, and I know you can handle it.
If it’s a newer relationship, I don’t want to annoy you, so you don’t want to ever do business with me again. You have to temper that and balance that against your actual relationship, but then that goes into building rapport with someone. We could do another show on building a rapport with the seller or the agent. We want to follow up on those key points, deposit when it goes in, contingency removal, and then definitely on a weekly basis, if you know the person and if you have a good enough relationship with the seller or you know the agent well, follow up as much as you need to buy the house.
I love how you said you never stopped following up until the property is sold to somebody else.
We might even still follow up.
This has been incredible. Just to recap here. What I’m taking away is to take time to understand what the seller wants us from the beginning and get yourself an assigned backup position and know the quickest you can close. If that’s nine days for you, then you offer 9 to 90 days, seller’s choice, be good to go there. We talked about deposit amounts and again, the more skin you put in the game psychologically, the more committed you are to the seller, but it’s protected the same way. We got into some seller terms and follow-up. Is there anything else you want to say?
Those are strong, and there are individual details within them, but we covered a lot of ground. These are things that at CT Homes allow us to help people more and as a result, help the company by being able to buy more homes.
This is amazing information. It’s always a pleasure to have you on the show. Any final remarks you want to close out with?
If you’re in the San Diego area, if you’re a real estate agent, have someone looking to buy or sell a home, or you’re an individual in San Diego looking to buy a home, give us a call. Go to CTHomesLLC.com and see if we can help.
You’ll be working with the best. Thank you for tuning into the show. As always, we’re on a mission here at FortuneBuilders to reach as many people as we possibly can with this education. We would always appreciate you sharing the links to this show with your friends and family. Help us get the word out. I’ll see you next time. Take care.
About JD Esajian
JD is the President of CT Homes LLC, a real estate investment and redevelopment company headquartered in San Diego, CA. JD oversees all deals and rehabs with as many as a dozen active deals going at one time. He has over 10 years of experience in residential redevelopment and has been involved in over 500 deals in his career, making him one of the premier investors in the country.
CT Homes LLC, founded in Connecticut, is a nationally recognized real estate company featured on A&E’s Flip this House. JD starred on Flip this House for the duration of series with brother Paul Esajian and business partner Than Merrill. In 2009, JD and CT Homes relocated to San Diego and have completed hundreds of real estate deals since.
In addition to managing an active real estate business, JD is a national speaker and real estate educator for FortuneBuilders, the premier real estate investment education business in the country.
Outside of work, JD’s passions are his Family, Health, Music, Real Estate and Cooking. He is regularly involved with FortuneBuilders Gives, a charitable initiative focused on Children, Education and Housing.