In this episode, a Washington state five-acre property under contract at $70K gets abandoned after discovering unbuildable status, but negotiating a double-close contingency (requiring $100K net to close) and exceptional Textile Services customer service ($1,500 refund on $2,500 deposit) transforms potential disaster into minimal $200-300 loss.
Key Takeaways:
- Double-close contingencies de-risk hairy deals Only agreeing to close if builders provide guaranteed takeout at $100K net eliminated $70K capital exposure on unbuildable property.
- Buildable ≠ economically viable Year-plus approval timelines and extreme development costs made the property donation-worthy per experienced builders, not just difficult.
- Exceptional vendors refund rushed contracts Textile Services refunding $1,500+ after three business days (despite signed contract) exemplifies customer service that earns lifetime loyalty.
Listen to the full episode for the complete save strategy and vendor relationship lessons that minimized losses on a lemon property.
(Podcast transcript below)
Hi, Chris Duff at Serious Land Capital, vacant land funding partner. So today I wanted to do another lesson about that lemon property in Washington state that we narrowly avoided funding and tons of lessons involved there. So to catch you up in case you hadn’t listened to those other properties, this was a narrow five acre property in a premium neighborhood just north of Seattle.
around a bunch of near million dollar houses hadn’t been developed. It was a tax deed sale. A previous buyer had got it for quarter million dollars, let it go at tax auction for around 70. We had it under that contract price, thought we were going to get builder buyers from the realtor we had selected in the area that were going to come in north of 200,000 bucks. And we could set up a near transactional type.
deal, double close situation with equity upside, you really can’t ask for anything better. And then it all fell apart because the property ended up being a lemon. So I discussed a lot of those issues within the previous podcasts related to the seller issues, what lands impact, easement access. so a way that we try to save this deal and still, preserve some type of upside for ourselves and
you know, reduce the downside to basically zero is when I was on the phone with this builder or not builder, but the broker who had a bunch of relationships in the area. we were going over, okay, yeah, there’s clearly a lot of hair here. And when we’re buying this property at 70 K, know, initially we thought, reliably for first we thought, okay, his builders might buy this thing for like, you know, 250, 300 K.
Then it turns out all this hair came up, utilities, water, public water was not available. It was going to be another 30K hit on having to install a well. So the margin started drying up and then we were going to have to consider, if none of it, know, we still have a lot of margin to work with here. Like if we could exit it at 140K, I would have been super happy with the deal, 2X, boom, let’s move on.
you know, let’s see if there’s room to work with these builders or if we’re to have to list the property, could we still reliably get a 2X? And so the broker was indicating, yeah, so far it seems, but then as we really talked it out and realizing, wait, there’s a super crazy easement to access this property, this is going make it a lot trickier. And then all of a sudden the price breaker kept going down and down and down with all this hair and realizing, this thing could move.
like 20K per acre best case, which, you know, at five acres only puts us at like 100K and there’s no way we would fund anything for 70K purchase for a possible best case 100K exit. That’s just way too risky. So we’re like, all right, there’s no situation that we will close on this property at this current price unless we can get
you effectively a double close situation with one of your builder relationships, somebody who, know, if they say they’re going to close on a deal, they are going to close on a deal. And so, you know, the broker was just asking, okay, like what would you guys need to net out to make it worth your while? Like what are, what are we working with here? And so in situations like this, where we could set up a double close, we can be a bit more aggressive on the margins. like, you know, I know there’s no
real guarantees like until the money is in the bank. But if you could get us to net out a hundred K on this deal, you know, net of all closing costs on the buy side, this would still be worth our risk to move forward with this deal. I mean, we’re still going to earn, especially if we could close within 30, 45 days max, the return on my capital from a percentage basis and the reliability of closing.
De-risked is still going to be worth it. Even if you know, ultimately we net out 10 ish K Something like that So that’s a situation I would want to set up obviously the higher the better but If you could work something out with your builders just hey, there’s obviously a lot of hair here what are you guys willing to do is there any number that will work for you and So that was the strategy that we took
so that we could see, okay, could we still get a de-risk exit on this? And I was already a bit committed because I’m like, man, we already engaged in a $2,500 contract with Textile Services to clear up title on this because we needed to rush delivery or the seller was gonna bail on this deal. And now a whole bunch of hair came up with this property. So I’m already committed with some funds here that I really would have wanted to avoid, but.
possibly we could still earn some cash on this deal. So let’s see what’s possible. But if none of those builders wanted to bite, then there’s no way we would close on the deal. We were just gonna eat the tax title service fee. Plus I had already spent fees with my third party due diligence consultant that we had already paid out. And we were just gonna move on from the deal.
So very fortunately, the broker was able to, again, he knows these builders very well, got in contact with his main one and within like an hour of us having this conversation, like, yeah, this is technically buildable, it’s just gonna take forever, it’s gonna take a year plus to get all the approvals in place, there’s so much hair on it, it is just not worth the time, he was like, yeah, if I have this property, I would just look to donate it to the county tax write-off.
and, and, and move on from it. And so that basically was the death mal for possibly exiting the property. If, you know, builders weren’t even willing to consider any type of offer on it, it was basically a deal. And, so like, I’m very pleased with how we set up that de-risked arrangement. Okay. You know, if a happens, we can go down this pathway. If it doesn’t happen, okay, we’re going to cancel and so forth and move on.
It didn’t end up actually working out for us. but you know, at least it’s way better to figure out, that a deal is not going to work out before you actually get stuck under title with a property and you are dealing with a bomb that might blow up your business. So, a good save from that perspective. And then, you know, I immediately called textile services and I’m like, Hey, you know,
I know we already put down a deposit for like 1,100 bucks with you guys a few days ago, but hey, this property is unbuildable. We’re not going to close on it. there any way I know we’re under contract that we could get? And I know I should be like using negotiation tactics to check with AI inside, but just presented the situation to them and they’re like, yeah, no worries. You’re not going to be on the hook for what was going to be remaining on the contract. We’ll refund that rush fee of 400 bucks. And you know, since we only
You know, we might not have spent anything on the deposit that you put down. You know, it’s been only two or three business days. We’re not going to be refund you everything. Or, you know, if we only spent a portion of it, we’ll get most of it back to you. Like this is really, really good customer service. They could easily have just said, yeah, sorry, tough luck for the entire 2,500 that we were committed to. And I was willing, you know, and ready to eat it and they have a choice.
to avoid that, but the fact that they are like, Hey, we’re looking out for our customers. sorry, this one didn’t work out, but anytime you get something else, that’s possible tax deed cleanup. Come back to us. I’m like, yes, you guys are my first call. This is tremendous, which is just another lesson. Again, key client and customer service is more rare than you think. That’s something we pride ourselves on. I know we probably haven’t been a hundred percent.
positive, but we really strive to be because it just leaves you feeling good when you get, when another business is like, hey, we’re gonna take care of you guys like that. It really makes my day a lot better. So I try to return the favor whenever possible. And it’s like, okay, yeah, it’s a huge relief where, yeah, 2,500 bucks wasn’t gonna kill our business, but it’s gonna hurt. It’s like, damn, know, this.
this deal, this didn’t work out and I’m going to eat this extra cost. And now it’s like, okay, at most we might be paying like 10 % of what I thought was going to be committed to this property. And now I can breathe a sigh of relief because we got good service. so with that in mind, hopefully all of that is helpful to you all, serious land dot capital for any of your funding needs, zero cost review.
land deals at land daily diligence Facebook group and landpricer.ai for the most simple and easy way Simple and accurate way to price land for getting my own marketing Okay, also I’d be remiss without mentioning unconference There’s only nine spots left landunconference.com $200 off your ticket using my last names promo code subscribe and share. Take care. See you next time
