What To Learn When A Deal Falls Through
One of the hardest things for any investor to experience is losing a deal. You may spend weeks, even months, chasing after a property only for it to fall out unexpectedly. As much as this stings, it is a part of the business. Every investor loses a tough deal or faces an unexpected setback from time to time. How you respond to it will define your business and shape your future. If you pout and complain it will lengthen the time between deals. On the flip side if you accept that it is part of doing business you will quickly get right back after it and build your pipeline.
There are learning experiences to be had in almost everything you do in real estate. Dealing with adversity and the unexpected is a huge part of building a successful real estate business. Here are five lessons to be learned on deals that fall through.
- Know Your Deals: No two real estate deals are exactly the same. On every deal there is something that makes it unique. It could be the property itself or something with the seller. There could be a restriction from the town or there may be a snag with the title. It is essential to always know everything about the deal you are getting into. You never want to spend three months on a deal only to find something you should have picked up on months ago. In most cases when you lose a deal it is because of a problem that should have been snuffed out from the start. When something does happen, you should go back and evaluate your deal from the beginning and see where you went wrong. Never let a lack of knowledge about every aspect of the deal be the reason it fell through. Always know your deals inside and out.
- Be Proactive With Potential Problems.: As you evaluate your deal you will almost always see a handful of potential issues. Instead of waiting or “crossing that bridge when you get to it” get on them asap. Some of the problems with title, insurance and zoning can take weeks to rectify. There are times when these problems cannot be squared away at all. Instead of spending months on a deal, and throwing money away, you can save yourself by being proactive. Diving head first into an issue can be annoying and time consuming. However, you are going to eventually have to deal with the issue anyway. Don’t wait for things to clear up or multiple things go your way first. You don’t know what will pop up in the future and what you will have on your plate down the road. Get on the issue asap and see exactly what you are working with. If the problem is more trouble than the deal is worth, you can cut bait and move on to the next one.
- Never Assume: We have all heard what happens when you assume. This is certainly the case with it comes to real estate investing. Many deals are lost based on assumptions. You assume that a wholesaler’s information is correct. You assume there will not be any liens on title. You assume that someone else is doing something you should be doing. You assume that everything will work itself out, when deep down you know something is coming. Instead of making assumptions you should take the time to get hard data. This doesn’t take more than a few minutes to make a phone call, sent a text or write an email. Instead of basing months of work on hope, you can get the answers you are looking for so there is no question.
- Always Consider The Worst-Case Scenario: There is a difference in real estate between being cautious and being pessimistic. The pessimistic person is negative by nature and never thinks anything is going to go their way. The cautious person always considers the worst-case scenario in any situation and is prepared to act on it. If you listen to any successful coach they always think the game a few moves ahead. Of course, they would love if their plan A always worked, but that isn’t very realistic. They have back-up plans ready for any situation so when it comes all they need to do is act. They are not shaken or panicked by the moment and don’t need to evaluate the situation. They simply act because they have already thought things through and don’t waste any time. Nine times out of ten you will never face the worst-case scenario, but the one time you do you need to be ready for it.
- Face Bad News Head On: As we stated, negative things happen in the real estate business all the time. The center of almost every investment show you see on TV is how your favorite investor deals with unexpected situations. The best thing to do when you face bad news is deal with it head on. Instead of keeping it inside, reach out to any and everyone who may be involved in the situation. Call your real estate agent, attorney, partner, buyer and anyone else who has an interest in the deal. These calls won’t always be easy, but you are better off making them sooner rather than later. Not only will it help the current deal, but your reputation will be preserved.
You should anticipate an unexpected deal or two falling through every year. This will certainly sting but view it as an education experience and learn something from it so it you are prepared for the next time it happens.