Watch It Roll Down the Hill Again – Breaking the Cycle of Failed Sales

A few weeks ago I was having an early breakfast with my stepdad at Southern Grounds in Avondale. We were catching up, having let a little too much time pass since we’d last gotten the chance to see each other. While describing in detail a particular challenge he was facing, he said something that’s been rattling around in my head ever since. 

 “Sisyphus was cursed to know that his task was futile. Every day before he started, he knew the rock would roll back down the hill. I think he might have been lucky. Imagine how much worse it would be if he woke up every morning truly believing that today would be the day he finally accomplished his task, only to be disappointed again and again.” 

For those less familiar, Sisyphus was a mythological Greek King who tricked Thanatos, the god of death. As a punishment in the afterlife, he was cursed with the eternal task of rolling a massive boulder up a hill each day, only for it to roll back down each time it reached the top. In the classical story, Sisyphus is fully aware of the futility of his task, which many philosophers say allowed him to find peace in the effort itself, rather than the result. 

As humans, we understand the nature of futility, and in many ways like Sisyphus, we rush to embrace the challenge. Even managing to do the impossible and rise above it on rare occasions. But sometimes the end result really is a given. Like my stepdad, I think there’s a true curse in not knowing when the futile is…well… really and truly futile. And I see it all the time with home sales. 

If at first you don’t succeed…

Try, try again right? Maybe not without making some changes first. 

I spend a decent amount of my time talking directly with home sellers here in Jacksonville. Or with my team at Duval Home Buyers, who are even more hands on with the homeowners that become our customers. Here’s the thing. Most of the time, we’re not the only group these sellers are talking with. But a lot of the time, we’re the only local group in the mix. And time and time again we see sellers taking an offer that’s good to be true – usually from an out of town Wholesaler trying to throw some spaghetti at the wall to see what sticks. Just like Sisyphus, that sale rolls right back down the hill, only this time it takes a good 30-60 days to get there. And that sucks. For them, for us, for everyone involved. 

Most of the time, sellers considering working with an investor or investment company like ours, have some motivation for selling that’s outside of the standard: “I want to make a change.” “I want something new.” Or “I want to make a profit off of the equity I’ve built.” Maybe they inherited the home and live across the country. Maybe it was a rental and the tenants trashed it, or moved out and they can’t find a new renter. Or it’s simply a home that’s been let go where the seller is embarrassed to show it to anyone, but still needs to find a way to sell it. For most of those scenarios, time really is money. And having the sale blow up after 40 or 60 days because your buyer wasn’t being forthcoming can be downright demoralizing. 

The price change

When a seller is demoralized, they can quickly become prey to those who are looking to make a quick buck without much skin in the game. The most common way this happens is the last minute “price negotiation.” 

I’ve got to pump the brakes here for a second before we continue to give a bit of a disclaimer because I’m all about transparency. Not every price change is a bad thing. Not every request for a price change is predatory. Sometimes an investor might mis-analyze the home a bit and come to you in good faith asking for a little bit of an adjustment to make everything work. Even Duval Home Buyers has done this on the rare occasion that we’ve overlooked something big. We’re still human. 

However, there’s a difference between asking for a reduction during an inspection period or after exploring all options with open communication vs. asking for a price reduction the day before closing saying it’s the only way you can sign the closing documents. One is problem solving. The other borders on extortion. And I don’t want to see people fall prey to the latter or its close cousin: The last minute cancellation. And yet I see it over and over again, with the worst part being some sellers go through this process 4 or even 5 times before they finally make it to the finish line. In a word. Futility. Sisyphus would be proud.  

The warning signs

So it’s time for a second little disclaimer. Not every wholesaler or out of town buyer is out to get you. Some are legitimate options that can offer you real value in solving your problem. I still think you’re better off working with a buyer you can meet face to face, preferably one who actually has some experience in your neighborhood, but that’s another conversation. Unfortunately with out of town companies and wholesalers, it’s difficult to tell who can actually back up their word. Luckily, there are some red flags to look out for when you are first getting into the conversation. 

Most of these will be terms, or conditions of their purchase offer, but again I really need to stress that only a Sith deals in absolutes, just because it’s a bit of a red flag, doesn’t mean that it’s automatically a scammer or bad actor! At the end of the day, you’ve got to have an open conversation, and trust your instinct with their answers. 

1. The Inspection Period – Most home sales have an “inspection” or “contingency” period built into the sale terms, during which the buyer can conduct professional inspections of the home and major systems. In Florida, this inspection period acts as a get out of jail free card, meaning that during this period, a buyer can cancel the sale without penalty for any reason. 

What to watch out for: Look out for exceptionally long inspection timeframes. Normally 10-15 days is enough for a buyer to get a good feel for every aspect of the home. If they are asking for more, especially if it starts to reach 30 or 60 days, ask them plainly to explain themselves and pay close attention to their answer. When they can’t provide a compelling reason or seem like they are hiding something, be wary of letting them tie up your home sale for that long without some major skin in the game. If they say they are 100%, ask them to waive it entirely, and gauge their reaction. Which brings us to our next red flag. 

2. The Earnest Money Deposit – Also known as the EMD, this is a good faith deposit which usually accompanies an offer to purchase a home. In the event the buyer fails to close, as long as there isn’t an active contingency such as an inspection period, this deposit is retained by the seller to cover time lost and damages. 

What to watch out for: Extremely low earnest money deposits are an instant red flag. If the amount is less than $500, be ready to ask them why so little. Realistically, a good EMD should be anywhere from $1000 to $10,000 depending on how many contingencies the buyer asks for. The fewer outs they give themselves in the offer, the more reasonable it is for them to offer a lower initial EMD. However, it’s also important to look for language as to when the EMD is to be put up. Make sure it will accompany the offer or be placed with a reputable and licensed company within 1-2 business days of signing at the very least! 

3. The Closing Timeframe – One of the key components of a contract in Florida is the “Term” which in a real estate contract establishes the start of a contractual agreement with the date of signing, and a defined endpoint: the day you close and get paid. 

What to watch out for: If the term isn’t clearly defined it’s an instant red flag. A realistic closing timeframe should be about 30 days on the average. If the date is months in the future, or open ended, that’s a real problem. A serious buyer should be able to give you confidence that they’ll close as soon as a title company can ensure the title is clear. And you can always ask a buyer what’s to stop them from closing as soon as the title work is done. We can usually do it in about 7 days when the scenario is right. If they are a capable buyer, they should be able to offer a similar timeframe. 

4. The Contract – The terms, obligations, and penalties for default are all outlined in a legally binding contract. 

What to watch out for: Many wholesalers and investors will opt to use a custom contract for their purchases. While not inherently a bad thing, this gives them an unprecedented control over the terms of the agreement, as they are familiar with the fine print, and you may not be. Be sure to read every section carefully, and consult an attorney if you really aren’t sure what you’re signing up for. All too often we see sellers blindly sign contracts that bind them for months or even years, sometimes even clouding the title to make selling to a different buyer difficult or even impossible. Many good companies will use licensed agents and BAR approved real estate contracts, drafted and reviewed by state real estate attorneys for the National Association of Realtors. 

5. Overpromises – Maybe too broad of a category, but this one is all relative. You know the age old adage: “if it’s too good to be true, it probably is?” There’s a lot of practical applications when it comes to negotiating your home sale. Unfortunately, too many sellers get caught up on price and price alone. And while price is obviously incredibly important, it can also be a trap. If you are getting real offers from local buyers, and another buyer comes in way above their price claiming 100% certainty, stop, breathe, and take a second look at their terms. Ask some hard questions. There’s a trend in the industry of offering the world without much to back it up, then re-negotiating in the final hours to a realistic price once they have a seller stuck in a bad situation. 

Protecting yourself from futility

I don’t like losing a sale. Neither do my agents, nor the owner of our company. It means someone else did a better job of earning your trust or presenting their offer. But if you succeed in selling with that offer, and get where you need to go, we’re always going to cheer you on, even if it wasn’t with us. It’s the right mentality, and one I try to have in and out of business. 

But what I really do hate seeing is the same people, after just getting burned by a hopeless buyer, going right back to the same promises and falling into the same traps. And I’m serious, we’ve had conversations with sellers that last a year or more, where each time they take a crazy high offer that never makes it to the finish line, all the while wondering how they’re going to make their next mortgage payment, or cursing the headache of having to make another drive down to Jacksonville to show it to a different buyer. 

So before you sign the contract, I implore you to do some due diligence. Do a google search of their name or the company name. See what comes up. Look at reviews. Ask for references, or, if they tell you they are buying homes, simply check the court records to see if they’ve ever actually recorded a purchase deed for a house. 

It shouldn’t take jumping through hoops to get a feel for the legitimacy of a buyer. And because I’ve obviously got some bias for Duval Home Buyers, I’ll even tell you to do one better: get multiple offers from multiple companies. Like your dad did with contractors, be wary of the lowest and the highest offers. Compare them, and make an informed decision. A legitimate buyer really won’t have any fear of you taking a day or so to think it over. It’s a big decision. 

But no matter what you do, I beg you to break the curse and stop letting your sale roll back down the hill. Have a real conversation with your buyer. Ask them simple questions about their offer. Do some research. If you check these boxes and still feel good about the sale, then, and only then, sign the contract. Happy selling! 

 

About the Author: 

Erik Jacobson is the Director of Brand Marketing, and the Operations Director for Duval Home Buyers, LLC and Wholesale Realty, LLC in Jacksonville. Erik has spent the last 8 years engrossed in the world of real estate investment, working to find new ways to improve the experience for sellers looking for an easier option in Jacksonville. In his spare time, Erik is an avid reader and writer, offering general advice and consultancy on marketing and brand positioning. 

Duval Home Buyers celebrates the unique expertise and perspective of the professionals that make up its organization. The views and opinions expressed in this article are those of the author, and not necessarily those of Duval Home Buyers, LLC or its affiliates. This article is not intended to be real estate or legal advice.