A story about how I lost $4.7 Million…

Sign_The_ContractLet me tell you about a story about how I lost $4.7 million. This was actually a real estate deal that was selling for $4.7 million. My client was at the table with POF (Proof Of Funds), a signed LOI (Letter of Intent), and a pen in his hand to sign the contract. This was a real estate deal that had a fantastic return and consistent cash-flow that was a “no brainer.” We had a little surprise – a good surprise. The sellers presented my client with an additional pool of properties that were being combined with the initial properties for sale – which resulted in a 15% CAP (a rate of return). Sure enough, the buyer was interested, but preferred to review the additional news with his partners. The sellers were hoping that all the paper work would be signed that day even after they presented the other properties. Luckily, the sellers agreed for my client to have 3 days to make a final decision – this was great, but we weren’t so lucky. The second my client, and myself left the office, the sellers went behind our backs and called other interested parties that were motivated to purchase the properties. To make a long story short, we tried to get back our 3-day exclusivity period, but ended up in a bidding war with the other buyer.

What was the result? The other potential buyer won the bid and got the deal. We lost $4.7 million, or more since there was great appreciation and cash-flow in these properties.

A $4.7 million Lesson

Here’s the lesson that I learned and that every home owner and buyer should learn…

When dealing with money, ALWAYS get “agreements” in writing. When my client was at the table ready to sign the papers, We were sure that the sellers would grant us a few days to confirm the purchase without needing to sign anything – I was dead wrong. We thought their word as professionals would suffice. We should have had an addendum that was signed by both parties stating that the buyer is guaranteed a 3-day exclusivity period. In other words, the sellers could not contact any other interested buyer during the 3 day period. What could have been a great investment was lost because we took someones word instead of their signature. Since then, everything I do with a buyer or seller that is discussed and agreed upon is done on paper. This is a greedy and selfish world, and it’s our jobs to stay proactive and smart. Understand that this rule applies to both sellers and buyers. As a seller, you want a Realtor that has a written commitment to sell your house with all his/her power. As a buyer, you want a Realtor to make sure you’re protected from losing a deal. Do you have a similar story to share? Post it on my fan page!