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Hello and Welcome once again to another
episode of the Selling Greenville
podcast I'm your host Stan McCune realtor
here in Greenville South Carolina and
just a reminder as always you can find
all of my contact information in the
show notes feel free to reach out to me
by phone text email for any of your real
estate needs and as always as well don't
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awesome we we love that I love that
that really helps you know
motivate me to to create even better
content than what we've been doing today
we're going to do something a little bit
different I'm just going to be telling a
story from the field a story from the
real estate field out there people
love stories I love to tell them and
sometimes what happens in order to get a
deal to closing is not what you would
think and this story piggybacks very
closely follows very closely the episode
that we did on backup offers and backup
contracts and so I think it it fits
nicely into some of what we've talked
about just recently and so I'd like to
go ahead and and share this one with
you guys this is a deal that just closed
recently for one of my real estate
clients and they were a client that
was looking for a new real estate
investment something cheap something
safe something that they might be able
to flip or maybe turn into a a
short-term rental property like an
Airbnb or something like that we had a
lot of different directions that we
could go in and and I've shown them
several different properties and we
you know had attempted to acquire some
and and you know there was some back and
forth and nothing had really worked
out and so I was as it turns out
looking at the comps for one of the
properties that we we're going to look
at I always like to just as part of my
prep work because even though I have
pretty good knowledge of the market I
always like to run comps before doing a
showing as well get a a better sense
what is this specific area or what is a
specific neighborhood in some cases what
is a specific Street doing in the
past year what are the comparable sales
from the past year and I'll look at that
just to to make sure that I'm prepared
for the showing that's just to me part
of the job and I was doing that for a
showing that I was doing for this
investor client and as it turns out I
saw in one of the comps was a property
that was listed in the MLS as under a
contingency contract now there are a few
different statuses that we can have
in the Greenville MLS and there are
really two specifically that can be
utilized when a property is under
contract there is the contingency
contract status and that means just what
it is it's under contract but it has
some type of contingency and in the MLS
we have to specify what that contingency
is whether it's inspections whether it's
financing whatever the case may
be then there's also the pending status
and depending on who you talk to no
pun intended depending on who you talk
to pending can mean different things
to different people people I take it to
mean a Step Beyond the contingency
contract status in other words if it
goes from contingency contract to
pending that means it's very likely to
close that means that that most of
the if not all of the contingencies have
already been satisfied now we are going
to closing the thing that makes it a
little bit of a weird thing in the
Greenville MLS is that some Realtors
will start with one or the other and
never change it so they might start with
pending even though there are
contingencies or they might start with
contingency contract and then never
switch it over to pending for me I like
to if there are contingencies I like to
start with the contingency
contract status and then at some
point once really the main contingencies
are are over with then I'll switch it to
pending and that just is a way for me to
communicate to people on the outside
you know looking in hey this is looking
like it's probably going to close unless
something unusual happens but not
everyone does that so as I'm looking at
the comps for this property that we're
going to show I see a property that is
under contingency contract and and
it's been under contingency contract for
a while so that could mean that either
the listing agent didn't switch it
over to pending but it's about to close
or you know who knows what it it could
mean a variety of different things but
one of the possibilities is that there's
something wrong with this it it still
showing contingency and the listing
agent is kind of saying that on
purpose kind of leaving it out there on
purpose you know he might not
necessarily be able to say hey there are
problems here that you're not really
supposed to do that you know if a
potential buyer is is is giving you
problems for whatever
reason but you know some listing
agents may leave it under contingency
contract for a longer period of time as
kind of to show that that red flag that
there is an issue here so I pulled it up
and I look at when's the closing date
oh and it turns out the closing date was
supposed to be really soon I look at
when was the inspection period Well the
inspection period had already ended
quite a bit quite a bit ago and this has
been under contract for for several
weeks now and and I could tell based
on the property this is a property
that's down to the studs and has has
done a lot of demo work it's not
going to be a sorry about that my
my phone just dinged from a text message
coming in it's not going to be the
type of property that you're going to
get financing on I mean maybe you could
get hard money on it but the vast
majority of people that would be
purchasing a property like this would be
doing so with cash so there's no reason
why it should be taking weeks upon weeks
to get to closing so I'm like you know
what I'm going to make a a phone call
here and see what's going on so I call
the agent and and reach out to him
and I'm like hey I was looking at this
property and I just noticed that you
know you've been under contingency
contract for a long time and it seems
like the type of property that would
have already closed by now you know is
there something going on with that and
he said well you wouldn't believe it
I I'm I'm really amazed that you called
me today because for that property we're
supposed to close tomorrow but I can't
reach either the buyer or his agent and
it's been like that for about a week now
and we don't know if we're going to
actually close tomorrow but this buyer
has been dragging things out as much as
possible and right now we're we're
really concerned that we're not going to
get to
closing and and so I was like well
you know I have a client that has been
looking for this type of property and it
and it checks off a lot of boxes for him
would you guys consider a backup offer
and he said well yeah we we got a bunch
of a bunch of offers the first time
around the one that we end settled with
was a good offer that was cash and
whatnot but again the buyer has just
been giving us problems but but I
think that the seller would would
definitely entertain backup offers so
I go back to my client and discuss
it with him and he was like yeah let's
go ahead and let's look at that one
after we look at the other one you know
the one that I was originally looking at
when I was pulling comps so we go and
we look at a few different properties
that day and the one that was under the
contingency contract had a lot of
things going for it and it really did
seem to to check off a lot of boxes and
so the next day I reached out to the
agent I was like hey I think we're
definitely going to put a backup offer
in on that if you know assuming that you
guys didn't close did did you guys end
up closing because he was supposed to
close on that day it was a
Friday and he said well no we we
did not close we did finally reach out
to we did finally get a hold of of
the the buyer agent and they said they
almost got everything figured out they
just they ran into a financial
issue they had provided proof of
funds and then you know prior to
going under contract and then they went
and spent that money on something
else and now you know they have money
that's coming in but it's just not in
yet and so they asked to extend for
for a couple of weeks and we go we went
ahead and we told them okay we'll we'll
go ahead and extend that for a couple of
weeks and and extended the contract
and we've already got all that in
writing that was a bit of a of a downer
for me
but again I I've been in this
situation before and I know when buyers
start to get fishy like that usually it
doesn't work out so I was like well
listen I think we're still going to put
a good backup offer in here and
hopefully we can get under contract and
and I don't hope for your sake that that
your primary contract falls through but
but if it does and we've got that
backup ratified we can close in in just
a couple of weeks and so that's what we
did we we submitted a backup offer
my client actually asked if if we should
go up to a certain price and I I
recommended actually coming actually
submitting an offer lower than than what
he was asking because again the
beauty about being a buyer submitting a
backup offer is it's unlikely that you
have much competition and in this case
from my communication with the with the
listing agent I knew there was no
competition so if the you know if the
seller didn't like the backup offer he
could just counter the backup offer so
so we put forward the U the backup
offer and very straightforward very
clean offer and the seller accepted that
as a backup without any counter
without any issues at all so now it's
just a waiting game now we've got a few
weeks to to try to see what's what's
going
on and and so you know we wait we
wait our time and about half a week
prior to when they were supposed to
close again on a on a Friday I reach
out to the listing agent and I'm like
hey just you know just haven't heard
from you guys in a while just wanted to
check in and see what was going on and
the listing agent says well we
are still having issues and I still I do
not think that this is going to close
but what I found out recently from not
from the Buy or from the buyer's agent
but from the closing attorney is that
now there is a bank involved and now
he's trying to get some type of creative
financing in order to finance this
deal and I was like well the contract
that you that you have with this guy
that says that he's purchasing it for
cash right and I mean that's a that's a
material aspect of the contract people
choose to and again I'm not a lawyer but
from a realtor standpoint I consider
that a material aspect of the contract
sellers decline contracts contingent
on financing to accept contracts that
don't have financing
strictly because a non-f financed offer
a cash offer is a stronger offer like
that's a major part of the consideration
so I was like you know to me if I were
in your shoes I would be thinking about
that as being a breach of contract
and the agent thought for a second he
was like you know you're
you kind of got a point there and
honestly I just want to move on from
these people they've been a nightmare I
don't think they're ever going to close
so he was like let me talk to my
broker about this and let me see what's
going on I failed to mention before they
had also gotten some extra earnest money
from the from the buyer in order
to extend you know the contract that
they had so that was another factor
that had to be worked out so so the
next day the listing agent calls me back
back and he says we are done the buyer
agreed to go ahead and sign release of
contract he the the buyer fully admitted
that it was not going to happen that he
had you know committed a breach of
contract that he could not provide
the cash that he you know threw up a
Hail Mary to try to get financing at the
end but was willing to rather than
drag it out for several more days to to
to get to closing was willing to just go
ahead and release and terminate the
contract and so then at that point
technically we already have the backup
offer technically that is already a
backup contract we went ahead and
just signed an addendjust to
fully make sure that everyone had you
know just all of our te's cross and all
of our eyes dotted all of those things
just to be one 100% above board
because that's the world that we live in
we need to make sure that everything is
100% on board when it comes to these
real estate contracts and then my
client went under contract so now my
client then had a due diligence period
and a a period of doing you know
title work and all of that the due
diligence period went great of course we
had had we had already been out there
he had already been out there with
with a contractor we had already done
some of the due diligence again this is
some of the nice things about submitting
a a backup offer is that you know as
long as the seller is okay with you
looking at the property you can kind of
get some of your due diligence out of
the way prior to your offer
becoming the primary the only thing
is you might be wasting your time you
know if the if the primary contract ends
up working out and your backup contract
never ends up you know becoming the
primary than any due diligence work that
you've done is just a waste of time so
you don't want to do all your due
diligence UPF front and particular
you don't want to be spending money on
inspections and all of that but we were
had done a little bit that that wasn't
very time or labor
intensive everything went smoothly very
easy about as easy of a transaction as
you could possibly get my client now
has a has a great property that
he's got a few different options that
he can do with that we'll see if he ends
up flipping it or maybe turning it into
a some type of a rental property
shortterm or or long-term rental
again those of you that have listened to
this podcast a lot you know that I
preach all the time buy investment
properties that have multiple exit
strategies that is always the best way
to go if you can buy a property that you
could easily Flip or that you could sell
as is or that you could turn into a VAR
iety of different rentals those are the
best possible properties because you're
not tied down to one strategy now if
you've got a niche and you've done this
for a long time and you know okay
this is what I do well and I'm just
going to keep you know I do mobile home
parks very well I know right away if a
mobile home park is going to be the
right fit and and and whether the
numbers work then absolutely by all
means be decisive don't worry about
the multiple exit strategy rule but for
a lot of of investor clients that
haven't done as many real estate deals
as as others having that flexibility can
be crucial this is the perfect property
for that and as I said in my backup
offers podcast that really is a great
strategy for investors there's a lot you
can look at some of these deals and that
one you know I'll be honest I you know
my client said I pulled a rabbit out of
the Hat pulling that off and
that's true to an extent but obviously
there was luck involved as well I I
would not have noticed that property
if I hadn't been you know looking at the
comps for another property and you
know there's a lot of properties out
there that have been under contract for
a while and I don't necessarily call on
every one of them but that can be if
you're looking for prop if you're
looking for investment properties or
looking for you know properties that fit
a specific criteria I really do think
like I said in the back up offers
episode that is an option that investors
tend to not think about as much that a
large percentage a large percentage of
of properties that are distressed that
are being sold on the open market and
have issues you know whether they're
just in really bad shape or they've got
really you know they've got squatters
living in them or whatever the case may
be a lot of those the first contract on
them doesn't work work out and so if if
you see them one of them that you really
really like go under contract or if you
see one that's been under contract for a
while that could be a prime opportunity
for a backup offer and and that really
gives you an option a really great
possibility for that to work out I mean
those backup offers those at least
have the likelihood of working out the
same likelihood as if you're in a
multiple offer situation which almost
always those types of properties are
if you're one of 15 people throwing an
offer in on a property at the same
time you're probably the odds are that
you're going to actually get it and
that's going to get to closing and
whatnot those aren't very great odds
and I would say you at least have the
same odds of submitting a backup offer
of that getting to the closing table for
you as you do when you're submitting
offers into a multiple offer situation
so it's really a great a great option a
great strategy and the we don't
always have these types of success
stories to tell but this was a a a great
one that had a lot of unique twists and
turns in the end it ended up
really working out and really being
really being a great one and if you have
any questions about the backup offer
system and how that works and and how
backup contracts work go ahead and
listen to that episode that one we
kind of hashed out some of the
details if you'd like to talk about it
more in person maybe there's a property
that you see that's like you know what I
really like that property and I don't
see anything else like it I would like
to submit a backup on it even though
it's under contract I would be more than
happy to discuss that with you to
discuss what your options are there
what type of Leverage you might have
what the likelihood is of that
working out obviously some of this is
done just realtor to realtor so I always
call the realtor to to get the inside
scoop a lot of them are are amenable to
sharing details because hey they love
you know if you're the listing agent
listing agents love backup contracts as
well that means that they don't have to
to put the home back on the market if
the one that they have falls through and
that gives them tons of Leverage to be
able to you get a situation like this
where a buyer starts getting flaky you
say hey man we've already got a
backup contract in hand we're not going
to dilly-dally around with with you here
if if you can't close the deal we're
moving on to the next guy so that is
definitely something you need to keep in
your tool chest make sure whether
you're whatever realtor that you're
using listen I know that some of y'all
I'm sure are listening to this actually
I know for a fact that there are some
people that listen to this that use
other Realtors I do not take that
personally
make sure that your realtor
understands these types of things that's
something that isn't isn't important
it's important that they have these
types of things in their toolbox because
they can come in handy and really
make or break a deal that's all for
today's episode again if you have any
questions or any comments please feel
free to reach out to me all my contact
information is in the show notes and
until next time stay safe
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