Be Careful of the Pitfalls




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Before you purchase a home in an area you aren’t familiar with, make sure you contact experts in the area that can tell you if there’s any extra obstacles that might be in your way. Sheila Konecke tells us a real life story that has not only held up her money, but also the property.

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Transcript

Mike: Welcome to the We Buy Ugly Houses Show, where real investors share real investing stories and lessons from the trenches, where our team buys thousands of investment properties each year. Now, let’s meet today’s host.

Sheila: Hi my name is Sheila Konecke. I’m live in Washington DC metro area with HomeVestors. My franchise buys in the north Virginia, Washington DC, Maryland and Baltimore. I’m going to be talking about “Be careful of the pitfalls.” Basically, before you go buy a house in a jurisdiction that you don’t know very well, or you’ve only bought a few houses, or you know that there might be some issues, call your experts. When you call your experts, don’t blow off the experts. Communicate with them and ask them specifically, are there any pitfalls?

I’m going to tell a story of one that I have in litigation that will probably be in litigation for at least another a year and it’s already been in litigation for a year. Meanwhile, I’m sitting on $300,000 paying $3000 a month in interest. Basically, the story starts out in Washington DC where a seller called me from a referral of another seller that I bought a house from, which was fantastic. And her tenant was not paying the mortgage and her tenant was actually almost related to her. It was her son’s father. She did not live there. And she wanted to sell it quick because she couldn’t afford the mortgage and he stopped paying.

So I said, “Okay. That’s great.” I said, “I can offer you probably this much, assuming that the house needed everything,” because I couldn’t get into it. And she said, “Oh, that’s too little.” And I said, “Okay. Well, you think about it,” and I left. And I called her back and I told her something about it. I always call people back and I think of something. It’s another way to talk to them build more rapport. Meanwhile, she had talked to her husband who was just an advisor. And he said, “Oh, you should just sell the house.”

So she said, “Yeah, we’re thinking about taking your offer.” And her issue was she wanted to close quickly. So I said, “Okay. Why don’t you just think about it until Monday and call me if you still want to do this?” So she called me and said she definitely wanted to do it. We set up a time. I sat with her and she had told me previously that she had listed it. So I asked her. I said, “You had a listing with a realtor?” She said, “Yes, but I canceled that and it never was listed.” Which I verified. It had never been listed on the market so I believed her.

And then, we signed the contract and we were going to sell it in a week. And so I called my lawyer and I said, “Is there any issue in Washington, DC with evicting a tenant?” And she said, “No problem there.” And then I spoke with my title company and they said, “Well, there is this TOPA.” I said, “My lawyer is taking care of it.” I didn’t ask, “What is a TOPA?” And I didn’t say to my lawyer, “What is a TOPA?” So I did not verify that, thinking they were talking about the eviction. And I asked my lawyer if there was anything else I needed to worry about and she said no.

So I bought this house and found out what the TOPA really was. And the TOPA is actually the Tenant Opportunity to Purchase Act. Here in Washington, DC, in all cases, you have to give the tenant an option to purchase the house. And there is a whole format and a legal contract and laws and stuff. And I didn’t know about that. So when my lawyer called me and said, “Oh, yeah. You have to do the TOPA,” and I said I didn’t know, both the lawyer and the title company said they thought I knew.

So this was a pitfall that happened to me. And this story goes on and on because not only did the tenant end up in jail for gun charges, so that was actually the good thing, but then there were a couple of people in the house. And those people actually helped me. But then, the people who the seller had kind of jilted out of selling the house, they called us and wanted a broker fee, which the seller didn’t want to give them. And I didn’t know enough, but I probably should have given it to them also. But I said, “Okay. Talk to the seller.” And she didn’t want to give it to them so they sued us. They didn’t sue us, but they got another company to sue us and they tried to do the TOPA.

So we had to go to court, which didn’t happen until June. I bought the house in December. Luckily, the guy was in jail on gun charges so he was evicted. And then, it took until July to actually to get the eviction to go through. Meanwhile, these people who were suing us, they were suing the seller and me, they thought they should get the house because we did the TOPA wrong, which is technically true, but we ended up doing the TOPA, eventually, as correct as we could. So they changed their suit and now it’s really, obviously, a frivolous lawsuit. But frivolous lawsuits are still lawsuits.

So we couldn’t get a hearing with the judge until November, in which case the judge said, “I’m not even going to hear anything. The plaintiff wins.” And I think we were the plaintiff. But we won. So I thought I could sell the house. Meanwhile, the house had appreciated. We hadn’t done anything to it. It appreciated over $100,000. I got a buyer and then I found out, no, the judge has to write the motion.

The judge still hasn’t written the motion. It is now April. And these vindictive people are going to appeal, which will take a year. So the lesson is to be careful of the pitfalls. At the same time, if you know it’s a good deal, you’ve got to go after it. So you’ve got to balance all this. In the end, this property that I bought is very valuable. But right now, it’s eating my lunch.

But thank you for your time. I wish you well in all your endeavors. Thank you.

Mike: Are you looking to get started in a real estate investing or taking your investing business to the next level? HomeVestors, the “We buy ugly houses” folks. is the number one home buyer in America, where our franchisees purchase thousands of houses each year. Many of which started with little to no experience. If you would like to chat, please visit UglyOpportunities.com/contact.

Learn more from the We Buy Ugly Houses Show, an amazing HomeVestors team, by watching more shows at UglyOpportunities.com/show or by finding us on iTunes or Stitcher Radio.

Sheila Konecke

Sheila Konecke

I joined HomeVestors in 2006 in the Washington DC metro area just before the real estate crash. My partner and I were the only franchise of 7 to survive the crash in DC. Since then we have bought approx 200 houses and we have bought a HomeVestors franchise in Baltimore. I am retiring from my Engineering job where I worked for 35 years this March 2016 to be a full time HomeVestors Development Agent and Franchisee.
Sheila Konecke

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