In January we went under contract to sell our portfolio to another real estate investor interested in the Las Vegas Market. Our instructions to our Property Manager, who was going to act as the sellers agent ( We thought the commission check would be a decent reward for the good work she was doing) was that we wanted to sell both, at the same, time, and preferably quickly.
Well, we made a lot of mistakes. A lot of mistakes, and it took until July, yes 7 months to sell 1 of the two properties left in our portfolio. Our PM ended up double siding the transaction because there was another investor she worked with that was interested in the property. This led to many of the problems that we experienced over the 7 months of trying to close this deal. And let me remind you, this was not a complex deal, 2 fourplexs in Las Vegas listed for $325k. Less than the cost of some homes in Las Vegas, and less than homes in San Francisco Bay Area, or Seattle.
Without getting into gruesome details here’s a list of the lessons I learned:
- Make sure if you are in a portfolio deal you treat it like a portfolio deal. Being the first time trying to sell multiple properties to the same person, we allowed separate contracts, and addendums to be written for each property. This turned out to be the causation of a lot of our problems.
- Addendum tracking, we did a horrible job of keeping track of our addendums for the each sale, and allowed some addendums to apply to both properties, and some addendums to apply to a single property. This caused us to miss out on a significant upside later on. We just used email, and DocuSign to keep track of the addendums, and over the course of 7 months, it became more difficult to track what was happening with each individual property.
- Don’t allow A realtor who is double ending a transaction to write the wording of addendums that you are sending to the buyer/seller. In theory I don’t have a problem with the dual-agency, but in this instance, we did not manage the process well enough, and our agent was not primarily an agent, but carries their RE license as a state requirement. Our addendums ended up poorly written, and often times confusing, or too brief to lay out what was supposed to happen. We forgot that we were working on a legal document and that we needed to treat it as such.
- I fell into the mental trap of, keeping the deal alive, instead of walking away. I let myself be too overly concerned about selling the properties and getting our equity out of them and not walking away from a deal that caused nothing but anger and frustration on a weekly basis.
Here’s an example of the 4 items above working together in on instance, at one point in April after being frustrated that the properties were not sold yet, we threatened to cancel the contract, when the buyer came back to us and offered us $75/day per property for every day after the 15th of the month it took to close the deal. To us, this was great! The price per property was going to increase every day, and hopefully get the buyer to wrap things up quickly. Well, that addendum was one which stated both properties on the addendum instead of a separate addendum for each property, it was worded awkwardly that didn’t specify whether it was a price increase, cash out of pocket, paid out of escrow, or any of the other things that it should have stated. It caused title and lenders to have a fit! And, when the investor brought in a new partner to close the deal, it caused the whole deal to unravel, he offered to pay it on Hopkins, but refused to pay it on Arlene. And eventually they closed on Hopkins, but left Arlene out of the deal.
There’s a lot more to the story of our sale, and I may share more over the coming weeks, but this is an important lesson to learn. Be a Hawk with your addendums.