What to Do When a Buyer DEFAULTS on the Deal

All right. Welcome to this week's Deal Structure Sunday. We did this live on one of our sit-downs recently, but I wanted to go through this with you guys because it's a little different. Instead of whiteboarding it, I'm going to walk you through a little history on this one because sometimes what happens is a buyer defaults, right? And everyone's biggest question is, oh, what happens if a buyer defaults? And my answer is there's a bunch of pivots you can do always. This is one way we did this one and we still made out quite well, which you will as long as you're tied to someone who's been through the ebbs and flows, the curveballs, the speed bumps, i.e., our coaches, right? Or myself or the family, so that you don't get yourself in trouble. There's one way, in my opinion, the best way to learn how to do these deals. You can watch these deal structures Sunday till you're blue in the face, but when it's your deal and your money, even if it's a $10 deposit, right, you're invested in the deal mentally and financially. It's different. Your learning curve is much steeper, faster, in other words. And so I'm going to walk you through this to help you learn sometimes what happens. It's normal course of events. Okay. We started this deal in November of '21. This was a little cottage with rights to a little lake, little lake. I don't know if it was a pond or a lake. It was only a 2-bedroom. And again, tiny little house. You see that in the slide. November of '21, just to give you a timeline, I'm going to walk you through this and if you have questions, You can either send an email to support@smartrealestatecoach.com or you can go ahead and come on to one of the Wicked Smart Sit Downs. We do them every Thursday at 4:00. We've been doing that for, I don't know, 7, 8 years now. So we started this in November of '21. You see the agreement here? I'm just throwing these at you so you understand that this is our standard purchase and sale agreement. It was an owner financing deal with the seller. A little different because it wasn't principal only. Actually, if you look at the note here, $219,000 purchase price, we put $10,000— sorry, we put $5,000 down as a sign of the purchase and sale. We put an additional $10,000 cash down. So they were financing $204,000. Now, why did I want to show you this? Too many educators will say to you, never put any money down. And, you know, all these fluffy good things, right? Well, sometimes things change, right? This deal warranted some money down. We thought it was worth it. And you'll see, you decide if it's worth it or not. We structured only a 3% interest rate. Think about that, a 3% interest rate. That's pretty cool, right? And then we had to amortize it over 40 years instead of 30 to get the payment down to where we liked it. Now, he, the seller, liked that because that's more interest for him, right? A little less principal paydown. All right. So here's the original HUD. Remember, this started November of '21. Contingent upon finding a buyer. So March of '22, we closed on it. All right. Here's the statement. We had to bring to the table $14,000. That was the $10,000 we owed plus additional fees. So when you're buying one or financing or sub-to, might you have some expenses? Yes. That's why I strongly suggest when you're brand new, if you don't have some 0% credit cards or line of credit or cash, No problem. I didn't when I started. I was dead broke. So you do lease purchases. Our agreements are preprinted with a $10 deposit. Pretty cool. You can't go wrong there, right? Okay. We entered into a lease agreement in August of 2022 with the buyer. You know what? Now that I think of this, guys, I could be wrong on the buyer contingency. It looks like we might have tied it up in November with a Set closing date to happen in March, knowing that we thought we'd be close to a buyer, and then by August we had it. That's what this is appearing to me. I'm going to keep going through this with you. Yeah, this is a buyer agreement. All of these agreements, all of our checklists, everything we do as a family company are located in the QLS Home Study Program in the module that has all the agreements. I will tell you that that module some attorneys would sell for four or five. I've been in seminars where they sell for ten grand. It's just part of the QLS home study program, which, by the way, is free. The most robust course on the market, in my opinion, and it's free with the apprentice program. Crazy. Well, you can just buy it on the website if you want. All right. So this is the option agreement portion of the, of the, the buyer's side of things. Remember, we bought it for $219,000. If you look down the bottom left here, we received it. We sold it for $249,900 and received a $25,000 deposit. Okay, so think about this. We put in $15,000 deposit plus foreign expenses, about $19,000. We took in $25,000 deposit from the buyer, nonrefundable. And that's going to be important later because the buyer is going to default. And we sold it for $249,900, bought it for $219,000. So this is where the 3 paydays come in, guys. Pretty, pretty important. Now, the buyer defaulted. We have only done what I'm about to share with you Twice in the history of doing creative deals, and that is when a buyer decides to move on or defaults, they lose their deposit, they move on. It's in their agreement. It's ironclad. We've never, ever lost with a challenge on that in court or otherwise. Never, never. It's a pretty strong statement. Okay. Now, we had a gentleman down by Cape Cod one year who's super cool tenant buyer, never missed a payment, came to me and said, look, you know, instead of getting my mortgage, he owned a bunch of property. And he was an electrician. He said, I'm just going to move on. Can I get a little profit on this? Like, I don't want to just walk away. I've been here, I've been improving. And so we said, sure. We gave him a percentage. We did the same with this house because the buyer in this house was actually a past associate, had a divorce, had some things go on, life events that he couldn't really help, but he did default. So we could have said, hey, sorry, buddy. But instead we gave him a little bit of the proceeds. Not a whole bunch, but a little bit. We ended up selling this conventionally to get that done. Now remember, I bought it for $219,000, sold it to the tenant buyer for $249,000, took in a $25,000 deposit and sold it conventionally for $305,000. So remember, when a buyer has a default, as long as your terms are set up with them and the end date on the seller, you have plenty of wiggle room. You could put another tenant buyer in this house, which we could have. You can sell it conventionally, which we did. $305,000. Okay. Here's what the HUD looks like on this. This closed out in December of '24. So that was about 3 years later from the time we spoke to the seller till we sold the buyer, took in a deposit. They defaulted. They never missed a rent payment, by the way. So we were never carrying any expense on this that wasn't covered. They paid their last rent payment in December and moved out with a new spouse. Okay. New— yeah, new spouse, a new girlfriend. And then left us with the house and we sold it. Boom. We timed the two of them to happen together. Here's the HUD. We sold it for $305,000. Bottom left payday is $88,000. Payday 3. Payday 1 was $25,000. You saw it come in. Payday 2 was a spread between the rent. Gosh, I think it was— I don't want to go back to— I want to say $1,000 or $1,100. And then we paid $700 out. So $300 or $400 a month and then paid it for 2 years, 3 years. And then payday, $388,000. So this deal went over 6 figures, right? So I want to show you how a little house purchased for $219,000 eked out 3 paydays that went over 6 figures. That's super important for you to know. And I want to make sure that any one of you have access to this type of training. There's no reason why you can't. When would now be a really good time to capture the creative financing real estate niche. Okay. It's awesome right now. In my 34 years, I'm going on 34 years now. I used to say 33. My goodness. 34 years as of the fall of '25. And I haven't maybe seen 2 pockets where things were really cool to operate in the creative real estate space. And now not only is it economically really advantageous, but the public is— I won't say more aware. They're becoming more and more and more aware of making it more and more and more accessible. Acceptable for creative financing outside of banks. So it's a really cool time to be part of this. So I want to make sure you guys had access to just a different deal. I hope it got you thinking just a little bit. If you have any questions, again, you can email support@smartrealestatecoach.com. You can show up on the Wicked Smart Sit Down every Thursday at 4:00. It's free on Zoom. I would love a strategy call with you. If you want a personal call with me, get on my calendar. Let's brainstorm how we can get you to where you want to go in creative real estate. Go to smartrealestatecoach.com/ Chris Pre Call. I'll talk with you personally. We'll see what we can dissect and get you rolling. See you at the next event, the next virtual event, or the Wicked Spot Sit Down. Make it an outstanding week, guys.