← Real Estate Rookie
Loading summary
Transcript120 lines
- [00:00]
Ashley Kerr
You could offer the highest price on a house and still lose the deal, or worse, win it and deeply regret it because of what was not in the contract. Today, DFW realtor and mortgage loan officer Layla Smith is going to walk us through the 10 things she puts in every buyer's offer to protect her clients. These are the terms most people overlook and the ones that could save you thousands. Today we are talking about one of the most underrated skills in real estate. Not finding deals, not financing them, but actually writing the offer in a way that protects you from the moment you sign to the moment you close.
- [00:36]
Tony J. Robinson
Our guest today is a DFW Realtor and licensed mortgage loan officer who started her career as an investor alongside her husband before earning her license. She knows what it feels like to be on the buyer side and that experience shapes every offer she writes.
- [00:55]
Ashley Kerr
This is the Real Estate Rookie Podcast. I'm Ashley Kerr.
- [00:58]
Tony J. Robinson
And I'm Tony J. Robinson. With that, let's give a big warm welcome. Layla, thank you for joining us today.
- [01:03]
Layla Smith
Thank you for having me.
- [01:04]
Ashley Kerr
Now, Leila, before we get into your list here, give us a 32nd version of your story. So you started as an investor, then you became a realtor and also a loan officer. What made you want to do all three of these things and how does the combination change the way that you write offers?
- [01:22]
Layla Smith
Well, I decided to start all three, really, because I actually started being a lender and then a realtor after that with Investin as well, just because it made it a complete package for my clients.
- [01:34]
Ashley Kerr
I haven't run into anybody else. I know that is all three of those things. Do you know, Tony, especially an agent and a lender, I don't think that I. Unless somebody just didn't tell me that.
- [01:47]
Tony J. Robinson
David Green. No. Oh, David Green, I think is, is checks that box and James D. Jimmy has a lending company.
- [01:54]
Ashley Kerr
Okay, now you're getting ahead of yourself. Okay, I know two people now. Three.
- [02:00]
Tony J. Robinson
Well, let me ask, right, because I, I think that a lot of investors just kind of stay investors, but it does give an agent, I think, a slightly different perspective because there are a lot of investors who end up becoming agents. I think there's fewer agents who are also investors. So how does that background of you being an investor maybe give you an edge or maybe was there a moment that you realized a lot of agents were leaving some of these critical protections on the table for their clients they're working with?
- [02:31]
Layla Smith
Yeah, I think it gives an edge because I know exactly when I go into investment transaction, I know exactly what the numbers are and what is going to be profitable and what's not. So it makes it made it easier to be able to pivot with investing in lending. And then real estate is just being a realtor was just given when I went into that.
- [02:53]
Ashley Kerr
And what about the investing? How did you start? What was your first investment that you did for real estate?
- [02:59]
Layla Smith
So we did a property over here in about 30 minutes away from my house. It was a single family residence that had been vacant for quite some time and came in and we, my husband and I at the time, we gutted it out and then just built it from the ground up. And that was like the first transaction. It was exciting and scary, but exciting at the same time.
- [03:24]
Tony J. Robinson
Yeah, I mean, a full gut on your first deal, that takes some guts. But now you're here, right? And how long have you been in real estate in general now, Leila, in the industry?
- [03:37]
Layla Smith
Total, almost 17 years.
- [03:38]
Tony J. Robinson
Okay, so you've seen some of the ebbs and flows that come along with investing in real estate. Now, you shared a list of the 10 things you include in every buyer's offer to protect your clients. And a lot of these are things that people overlook. So I want to go through each one of those 10 things, starting with number one. So the seller paid home warranty. Most buyers don't even think to ask for this. So what is a seller paid home warranty and why do you fight for it in every offer and what does it actually cover after the buyer moves in?
- [04:11]
Layla Smith
Yeah, so the seller paid home warranty, typically it is a warranty that is given to the buyers, usually is paid for by the seller for about a year. And some of the major items that those things cover is going to be like your appliances, it's going to be a protection for things like your H Vac unit, plumbing, electrical, things that may happen within the first year of moving. That's what it covers for the clients.
- [04:36]
Tony J. Robinson
Ash, have you ever had one of these on a transaction you've done a seller paid home warranty?
- [04:41]
Ashley Kerr
No, I have not.
- [04:42]
Tony J. Robinson
Yeah, me neither.
- [04:43]
Ashley Kerr
I've never dealt with that.
- [04:43]
Tony J. Robinson
Yeah, never even thought to ask for that. Layla, what's the typical cost to the seller? Like, is this, you know, $500 or is it, you know, $5,000?
- [04:53]
Layla Smith
So a decent warranty usually is going to run you about a thousand dollars between like eight to a thousand dollars.
- [04:58]
Tony J. Robinson
And I guess, how, how hard is this to actually get? Like, is this something that sellers are typically open to or is it maybe like a, you know, a bigger fight to get them to agree to this.
- [05:08]
Layla Smith
So most of the time it is more so about just asking. I think a lot of agents miss that for their clients. It's not really difficult to get because most sellers are open to paying that small cost to, you know, in a good negotiation, you know, to sell the home, they're more willing to do that. So not very difficult at all. It's just, it's just about asking.
- [05:29]
Tony J. Robinson
Yeah. And how, how big of like, like I guess how many things are covered under the seller paid home warranty? Like you mentioned, like the appliances, is it, I'm assuming like larger systems as well, like the H Vac. But what about like, does it include the roof or you know, like if, if, if a window stops, you know, work like, like how, how much wiggle room do we have within this warranty?
- [05:52]
Layla Smith
Yeah, so it wouldn't cover things like the roof or foundation, but it will cover things inside the house. So like we talked about like the fridge or like the oven or just appliances that came with the home. It can also cover things like, you know, if there was any type of like plumbing issue, minor things that you may not need to go to your homeowner's insurance for. The home warranty is going to be covering those things.
- [06:15]
Ashley Kerr
Yeah, I really haven't had any experience at all with a home warranty. I know it's pretty common like with the new builds correctly where it will come with a home warranty. But I never even thought to actually have it, you know, have the sellers get it for you. I just purchased a property that on the day of closing the basement was flooded during the final inspection. And so the boilers underwater, the hot water tanks underwater. And so it was like crunch time, what should we do? And like we just kept thinking like, oh my God, thank God this happened before closing. Like this could have happened after. And we would be buying a new boiler, a new hot water tank, new sump pump. So draining this out. So like it definitely puts it more into perspective of like things that can happen after closing. But what we ended up doing was they gave us a seller credit and that, you know, that's how we ended up working it out. But if you've already closed on the property and something breaks or dies right after, then you can't get that.
- [07:18]
Tony J. Robinson
Yeah, now, now it's yours right now you've inherited that issue. But actually it actually does because we, we bought our primary home as new construction and it did come with a one year warranty from the builder. And I'm so glad that came in. Because there was one day I was sitting in my. My. My, like my dining room area, and my sister was. Was there with me. And she kind of looks up and she's like, hey, your. Your ceiling's wet. I'm like, what do you. What do you mean? And I look up and, like, there's this big wet circle on my ceiling. And it turns out that my son's bathroom is right above. And there had been some kind of leak in the plumbing in his. In his sink, and it had been dripping, dripping, dripping. We were in the house for maybe six months at that point. So it had been a while. And this water had just been dripping for six months. Now, luckily, because it was under warranty, they came in, they cut everything out. They literally had to rebuild basically his, you know, whole portion of his bathroom, redo all the drywall in the ceiling up there, and, and, you know, obviously remediate whatever mold had happened during that time as well. But it was all covered. Right. All we had to do was make. Make a phone call. Now, to your other point, Ash, about, like, finding surprises before you close. I was buying a home from a. From a wholesale. From a wholesaler. And, you know, obviously we expect these homes to be in, like, disrepair. Like, it was a home that needed a lot of renovation. But we. We walked the property, we got our scope of work, and the day before, or not the day before is like maybe a couple of days before closing. For whatever reason, we had to go back, just like, get one additional measurement. And when we walked back in, the entire ceiling had collapsed inside the main living area. And, like, talk about a big material change. Right? So luckily we found it beforehand. But, yeah, things can get crazy if you wait until. Until you. If you wait until afterwards.
- [08:55]
Layla Smith
Yeah, definitely.
- [08:57]
Ashley Kerr
Okay. Now, another thing that you like to put in is mentioning that the repair deadline is in writing. So what goes wrong when repair agreements are vague? And what does it look like when you write repair deadlines the way.
- [09:11]
Layla Smith
Well, we definitely want to have a clear language requiring the repairs to be completed and also be able to do a reinspection prior to closing. And most of the time we try to create a deadline where it's like, if we're going to be having repairs done, we want to make sure that we have a date set so we can be able to renegotiate with the seller.
- [09:32]
Ashley Kerr
I was selling a property and there was a telephone line down and they wanted the cable, like, taken off the property or fixed or whatever before closing. And so I had my assistant take care of it. And she called and one company came out and said, nope, that's not our line. It's this company. Whatever. She's like, don't worry, I'll take care of it. Whatever. The day of closing, when they're going to do their final inspection, they're like, this line is still down. And it was kind of to the point. The two agents were like, well, it's not like we're not going to close over this, so, you know, we'll still continue to close or whatever and just they'll have to figure out whose line it is and call and get it done. So it wasn't that big of a deal. But if the buyer in that situation, like, I would be kind of upset. Like, you asked for this to be done. It was in the contract to be done, and yet it wasn't done and there was like, no repercussions at all. And I do like the idea because I don't think in any of the contracts I've ever done, there's like a date as to when the repairs had to have been done. But I'm also buying a lot of dilapidated properties where I'm not even asking for repairs to be done. So. But that, but I think that is such a good idea of, like, to even give you time to inspect and make sure it's properly done. So it's not the day of closing and you're frantic and panicking. Like, I was correct.
- [10:52]
Layla Smith
Yeah, we definitely don't want to do that. And usually we'll have an initial date that the repairs after we submit an amendment for the repairs to be done and then we have a follow up. And usually I try to get it done a week before closing because you don't want to wait until closing and be surprised that you're excited to sign these papers. But all the repairs that were, you know, requested were incomplete. So try to make sure that we're kind of looking at the property one more time before going into closing. And that way everyone's happy, the client's happy, and I walk into it and
- [11:21]
Tony J. Robinson
surprises Leila for that reinspection clause. You know, you said like, like a week prior to closing. So since your due diligence period has already ended, if you get to that date of the reinspection and they're not completed, does the buyer now have the ability to walk away and still get back their earnest money deposit? Is that how you structure it? Or, like, what happens if the work isn't done?
- [11:44]
Layla Smith
Correct. Yeah. Because when we, when I submit an amendment for the repairs to be completed. That also said in my, my report, I am putting in there that it has to be done prior to closing. So depending on the amount of days, depending on when closing is happening, we're going to have a set date that the repairs has to be completed by whether it's three days or it's five days, depending on the length of type of work that's being done to make sure that it's done. If not, then, yes, they will be able to get their earnest money back.
- [12:12]
Tony J. Robinson
I love that I've never included a reinspection clause into any, any contract. So, you know, I love this because I'm picking up some things for myself. So the third point you had, Laila, was that window coverings convey, and this one sounds small, but it can actually save you thousands of dollars. And I think a lot of people overlook this. So walk us through why window coverings matter and how buyers get burned when it's not actually in the contract.
- [12:37]
Layla Smith
Yeah, I mean, you definitely want to have those things written out. So if you walk into a home that has blinds, shutters, things are going to be a little bit more of an expense. It's not just your typical blinds. You know, basic builder grades blinds in a house, you know, you want to make that. We have that in the contract. So even like drapes, like the buyer walks in, they fall in love with the drapes. We want to make sure that we include that in a contract. So that is something that if it is present, I will include it to make sure that if the seller is going to leave it behind, we want to make sure that happens and not again walking in after you close. And then where is the beautiful drapes or the nice shutters that was put in? They've taken it to that, to the next home. So those are things I would definitely want to make sure that is included and I make sure that it is.
- [13:19]
Tony J. Robinson
Yeah. And you don't realize how expensive those things are. But it's like if you have a lot of windows in your house, like, it adds up. And we again, my wife and I, when we bought our first home, biggest investment we'd ever made. This is before we were real estate investors and it was new construction. We just got like builder grade everything. And because of that, we got no window treatments at all. Like, there was nothing on any window. And we lived like that for like two years before we even bought, like blinds because we were just like doing the math. It's like, man, there's so much money for blind. So I Love this.
- [13:46]
Ashley Kerr
Did you hang up sheets like college kids do hang up sheets?
- [13:51]
Tony J. Robinson
In our, in our bedroom, we had like temporary shades, at least for the one by our bathroom because, like, we get out the shower, there's this big window there. So we have to figure out something. But. But Layla, what does the actual language look like to make sure that there's clarity? Because I feel like it, you know, maybe there can be some ambiguity there or signals get mixed. So what does the actual language look like?
- [14:12]
Layla Smith
The language is going to be specifically like the fixtures convey. So we want to be very specific because if they want to be able to keep the shutters and not really caring for the drapes, we want to be able to write that out. So that's something that I will write out specifically for the items that are going to be left behind, because most of those things are personal items to the seller and sometimes they feel like they can take the drapes with them. But I do write it out specifically for my clients to make sure that the buyers are fully protected in that aspect.
- [14:41]
Ashley Kerr
Now, what about seller paid closing costs? This is your fourth item in here and you negotiate seller credits that actually reduce the buyer's out of pocket expenses. And this is kind of what happened to me on the day of closing unexpectedly is I got a $25,000 credit at the closing table and actually took a check home. So how do you frame that ask without like killing the deal? And what does it actually mean for a buyer's bottom line?
- [15:06]
Layla Smith
Yeah, so the closing costs on average can run anywhere between 2 to 5% on the purchase of a home. A credit that can be given to the client, you know, especially for first time home buyers that could be given to them to help out with closing costs. I usually go in with that negotiation as far as, like, how long the property has been on the market, how eager, you know, my clients are. And that would help me determine, you know, the amount of closing costs that I'm asking for my clients. But try not to kill the deal because you want to be fair as well. You know, you're working, you know, for a buyer's agent, but you want to also be fair in looking out, you know, the seller, where they stand with the property and make sure that we are kind of fitting the right numbers and which also kind of run into the type of loan the client has as well, can determine how much of a concession that I'm going to be asking for.
- [15:56]
Tony J. Robinson
Layla, can you elaborate on that? Like, what do you mean by the type of loan they have and what are the restrictions? Depending on the loan type?
- [16:01]
Layla Smith
Yeah. So the difference will be between FHA and conventional, for example, and also depending on how much you put down. So FHA, you can go up to 6% in concessions. Conventional you can start at 3%, all the way up to 9%. But that really just depends on how much money they're putting down. So it's going to be anywhere from depending on the loan size. And we can start at 6% and try to negotiate to work our way down. But I always, always go in for the max. So full protection. Yeah.
- [16:29]
Tony J. Robinson
And, and why a credit versus a price reduction from the buyer's perspective? Because for the seller it's the same thing, right? Like whether they give a credit or they reduce the price, like a lot of it kind of works out to be the same in terms of cash to them at closing. But why, why is maybe one more beneficial for the other or over the other? For the buyer?
- [16:47]
Layla Smith
Yeah, for the buyer, the credit actually makes more sense because it helps them with their bottom line as far as what they're bringing to closing. And most people are going to be first time homebuyers that I want that I'm working with. So usually they need more help with the amount of money they're bringing to the closing table. So if we can get a credit to help out with that overall cost, that's going to reduce their closing by, you know, 10 or 15,000 is more, you know, advantageous for them than just getting a price decrease, that they're still going to come up with the same money anyway at closing. So it's actually better for them to bring less money to close in that they can put into their home when they first move in.
- [17:22]
Tony J. Robinson
And as you just said, you got to, you got to check it closing because of this credit, correct?
- [17:25]
Layla Smith
Yeah, yeah, yeah.
- [17:27]
Tony J. Robinson
That's crazy, right? And like think about that.
- [17:30]
Ashley Kerr
I mean, yeah, they have to go and buy a new H Vacs. Yeah, yeah, I get to shove under my mattress.
- [17:40]
Tony J. Robinson
But it's still a crazy concept, right, that you can purchase a piece of real estate that's going to produce cash flow, appreciate over time, give you tax benefits and that if structured the right way with your loan, your down payment, your credits, that you can actually walk away with money in your pocket. Like Ash, we interviewed someone and it was a, it was a while ago, I believe his name was Andre, but he used the NACA loan. And I've talked about NACA before, but it's a 0% download that you can use on your primary residence up to 4 units and he bought a 4 unit. I was able to negotiate some credits at closing and because it was a zero down payment loan, I think he walked away with like 20 grand at closing for this four unit property that he was unable to house hack. So it's like my mind is blown that more people aren't trying to leverage seller credits to help reduce the cash they need to actually get into some of these deals. Especially if you're doing it for a house act.
- [18:32]
Ashley Kerr
Yeah. Because like your loan is like set. So like especially me getting a credit like last day, your loan amount is already like fixed. You're approved for that amount for that house and they're not changing and saying, oh, you're getting a seller credit today, we're going to take that money off of your loan and now you, you know, have a lower loan or whatever. So that's like part of the reason as to why you walk away. Walk away with the check and. But yeah, it can be. So maybe it's even better just to negotiate the seller credit at the last day.
- [19:02]
Layla Smith
Oh yeah, no, it's so much better. And even on the loan side, I've been able to use some of those credit because we have a max amount that we can use. But on the lending side we can use some of that credit to even bring that interest rate down, which reduces their payment as well. But the credit is always great to have for sure. And I've had several clients actually walk away with, with money at the end of the, at the closing table. They've actually gotten a check because we were, we have so much more. So.
- [19:29]
Tony J. Robinson
Yeah, and that's a great situation to be in. Getting paid to buy real estate. All right, Leila, so your fifth point is clear possession terms. Right. So move out dates and penalties spelled out in writing. Why does this clause matter and what does it look like when possession terms are left? Maybe more vaguely than they should be.
- [19:45]
Layla Smith
Yeah. So I mean, the nightmare scenario could be on closing day, your seller has not moved out and you, you are now roommates. So you definitely want to, you know, have that written out and have a clear possession date and which is, is always going to be on closing date for me when I do a contract. So we need to make sure that we don't have any issues as far as like, you know, come in, they haven't completely moved out, whether it's their personal items or anything else, or if they need to, you know, have a leaseback agreement, you want to have that clearly written out as well.
- [20:19]
Ashley Kerr
One of the. Actually, it was the first ever house that I bought on my own without a partner. And it was like it might have actually been the first house that I bought that didn't have tenants in it or wasn't already vacant. But it was a family that lived there and they were moving out and we were doing a double closing. So they had to close on their house. And then within that hour, they were closing on their new house. Well, when I went to do the final walk through inspection, they were literally still moving stuff out of their house. And this was like I was on the way to closing. So, like, I didn't even get to see the house, like completely moved out. So when I actually we went to the, like the actual county clerk's office to do the closing and we sat down at the table and my agent actually negotiated a credit for me because it was not clean at all. Like it was supposed to be like broom swapped or whatever. And it was not like the fridge, I threw it out. It was so disgusting. And so in like they were kind of, their hands were kind of tied because they were, they needed to close to close on their new loan. So it gave me a little bit of negotiating power, but that was like one thing I never wanted to do again is like do the final inspection and they're not even completely moved out yet. Okay, so that's five down and we've got five more to go. And the next batch is where. Layla, get into the clauses that most rookies have genuinely never heard of. So the appraisal protection clause alone could save you from one of the most common and most painful surprises in a real estate deal. So stay with us. We'll be right back.
- [21:57]
NREG Representative
You've upgraded how to buy properties, but did your insurance get the memo? When investors start scaling, insurance can't be an afterthought. Most policies were designed for a single property, not multiple rentals. LLC ownership, short term stays or properties mid rehab. That's where blind spots can creep in. NREG works exclusively with real estate investors. They understand understand portfolios, how risk compounds as you grow, and why insurance should protect your upside. Not just the checkbox. One uncovered claim can undo years of progress. Before your next acquisition, review your insurance, talk to NREG and get investor specific coverage from specialists who actually understand real estate. @nreg.com bppod that's N-R-E-I g.com bppod Most
- [22:37]
BAM Capital Representative
investors spend all their time talking about their high level returns, but that's not the number that actually matters. What actually matters is what you keep after taxes. And that's where multifamily real estate quietly stands out. With built in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. BAM Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long term approach. This isn't about chasing hype or guessing market timing. It's about building durable tax aware wealth over time. Learn more@biggerpockets.com Bam the rise of the
- [23:17]
NREG Representative
tech savvy investor is here. You don't need a huge team or tons of overhead to manage rental properties, just the right tools. So I want to tell you about how I use Rent Ready to get ahead. For landlords who treat their time like capital and recognize the cost of sweat equity, this tool gives you everything you need to scale rent collection, tenant screening, maintenance, accounting so that you're organized come tax season. And you can run numbers in preparation for future deals and more all in one platform via a mobile app or desktop. Modern landlords don't just own property, they optimize it. Rent Ready will keep you organized, running leaner and ready to grow. Start with rent ready. Visit rentready.com biggerpockets that's rent r e-I.com biggerpockets and use code BP2025 to get RentReady's six month plan for a dollar.
- [24:02]
Ashley Kerr
Okay, welcome back to Real Estate Rookie. We just went through the first five things that Layla has every buyer put into their offer. Now let's finish the list with five more protections and these ones get into some territory most buyer's agents completely ignore. So Layla, our next one, number six is appraisal protection. You're using contingencies or capped appraisal gaps to prevent overpaying if the value comes in low. So walk us through what actually happens when an appraisal comes in under the contract price and how this clause protects your buyers.
- [24:38]
Layla Smith
The appraisal gap scenario, you know, that I can think of is, you know, you offer 350,000 a property, but it appraises for 330. Without this protection, you're going to be owing the difference. And typically I make sure that that is written out for my clients to make sure they're, they're not in that position, position to have to come out of pocket with that extra money. So we definitely want to have that written out in the contract.
- [25:06]
Tony J. Robinson
And what are the different ways that a buyer can go about protecting themselves if there is any sort of appraisal gap like, like what are you, what are you writing into the contract to give them some flexibility there?
- [25:16]
Layla Smith
So there is a contingency document that, that I usually add to every contract that basically saying that if the house does not appraise it for the offer price, then my buyer can choose to walk or they can choose to renegotiate. So usually that's the option that I have for them.
- [25:32]
Tony J. Robinson
This was like a really big thing.
- [25:34]
Ashley Kerr
Have you ever bought a house that didn't appraise?
- [25:37]
Tony J. Robinson
The only time I bought a house that didn't appraise. This is kind of like a crazy story. I think I showed this in the podcast before we were buying a new construction and it was supposed to be a four bedroom, but it ended up being a three bedroom.
- [25:46]
Layla Smith
Oh yeah.
- [25:48]
Tony J. Robinson
So that was, that was one where it didn't quite appraise. But luckily, you know, you know, we were able to get the builder to rectify. But aside from that, we haven't bought any property that didn't actually appraise. But, but it was a, you know, I think like coming, coming out of COVID when the market was going crazy, there were so many people buying properties, you know, way above appraised value. And it was like you had to almost include in your contract how big of a gap you're willing to cover. But I've personally never done that. Ash, what about you?
- [26:15]
Ashley Kerr
The only one was new construction also, and it was my primary. And it was when we did all of our blueprints with the architect, we did a finished basement so that we would have the plans and the drawings for whenever we did decide down the road to finish the basement. And when we went through like our final draw to like close out our loan, they flagged it and said, and had sent the inspector out and said, no, like you're, it's not finished. The basement needs to be finished. That was what was in your drawings. And we were like, that was like panicking, like, oh my God, we don't have another $50,000 to like finish off the basement. And like it had a bathroom and a bar, like, you know, all this stuff, all these rooms. And so what I ended up doing was I fought it by saying, here is my contractors contract, his scope of work that you reviewed and you approved and you set the draw schedule to. And nothing in that contract shows any finishes to the basement. So they actually honored it and they, they agreed and they said, yes, like, it wasn't in the contract, it wasn't in the scope of work. You're fine, you're good. We can close out the loan. You're okay. But that was definitely like a really panicky situation there.
- [27:33]
Tony J. Robinson
Look at you, Ash, like mini lawyer over here. And this is like pre AI days you have to do all that sleuthing on your own, you know.
- [27:41]
Ashley Kerr
And that was like, I probably only like two properties investments at that time. So very, very. And I hadn't even. This was my first ever loan that I ever got from a bank to this. So it made it even more SC feel like.
- [27:55]
Tony J. Robinson
Well, on that point, let me ask. Right. Because I feel like the, the appraisal gap was a big thing. Like I said, coming out of COVID Are you seeing that as much of a necessity today? Like, like have market conditions maybe shifted how often you're including this one or is this one that you just always include no matter what?
- [28:10]
Layla Smith
It's one that I always include no matter what. Just because. And we don't, we're. We don't have a whole lot of homes that we're dealing with that right now. Especially like you said after with COVID homes were inflated so much. And I think as the market's starting to adjust, we just want to have that for protection because the house that was appraised for, you know, increased in value 100,000, you know, four years ago is not going to be the same today. So just to make sure that my clients are fully protected, that is something that I always include in every contract. There is also a difference with fha, it's automatic with the appraisal that it has to meet that. But with conventional, definitely I always include that into the contract.
- [28:51]
Tony J. Robinson
Your seventh protection here is the option period leverage. Now, this is basically an inspection that allows you to renegotiate credits or termination if major issues are found. How do most buyers use the option period and how should they actually be using it?
- [29:09]
Layla Smith
Yeah, so the option period is a paid time that I usually discuss with my client. You're paying for the house kind of like you're renting a house for X amount of days to have the right to terminate if inspection does not go the way you want it to go. And there is a difference between the option period and option fee with option money with earnest money and also leveraging that as far as how much money they can put down for the option for us to buy those limited amount of days to have enough time to do inspection and then renegotiation after that.
- [29:43]
Tony J. Robinson
So let me ask, because I just want to make sure I'm tracking when you say it's paid Time. What do you mean by that?
- [29:48]
Layla Smith
Yeah, so option period. Typically you're paying per day. So it can range, you know, whatever you and your client talk about and feel like it's the best fit for you. So anywhere from two to $300, like $50 a day, for example, that you're paying per day for you to do your inspection. So you're asking the seller, basically, take your house off the market for five days or 10 days so we can do the inspection. We'll pay you $50 a day as an example, to do the inspection. And if it doesn't work in our favor and we cannot come, you know, to an agreement for negotiation on the repairs, then you take, you owe, I owe you that money, and I can walk away free and clear. So it's just really buying my. The client's buyer's protection at that time, but also giving the seller something back just in case, you know, it doesn't work out for, for either parties.
- [30:37]
Tony J. Robinson
I've never heard of this before, but, like, so what, what's the timing on this? Is this before you have an actual purchase and sell agreement accepted? Because you said take it off the market. So, like, but if you're already under contract, and technically it's still on the market, but it's listed as is, like pending or under contract. So, like, what's, what's the timing of this paid period?
- [30:55]
Layla Smith
So the timing usually is this after the contract has been executed. So usually in Texas, when the contract's executed, we have an option period. So the option period, again, it can be, depending on how aggressive the, the offer is, it can be two days. It can be, you know, three days. It can be, on average, it's about seven days, seven to 10 days that you're technically asking the seller to remove the house off the MLS and say, you know, the house is technically on a contract, like a contingency contract, so you're pulling it off the market. No one else, you know, can put a contract in at that time until the option period is over.
- [31:32]
Tony J. Robinson
That's interesting, Ash. Is. Is it like that in New York? Because I feel like for me, whenever I sign a purchase agreement, I have my due diligence period, which sounds option or similar to this option period, but we don't have to pay for it. It's just like, like a, like an understanding that, hey, we need the opportunity to, like, get into the property and do our inspections. Is it like that for you in New York to Ash, or do you have something similar to this?
- [31:52]
Ashley Kerr
Yeah, it's the same, like you have your inspection period and like, sometimes it's actually very vague. It's just like, okay, once the inspection is done, like, you have to let them know if you're going to make any changes or things like that. Like, it really depends on the timing as to when your agent thinks that they can get an inspector out there. So, you know, like, sometimes it's as fast as, like two days. So it's like three days is your inspection period. Could be seven days, but usually not over that for single family or small, multifamily at all.
- [32:26]
Tony J. Robinson
All right, so the eighth thing on your list is survey responsibility. So responsibility for the survey, existing or new, is something most buyers never even ask about upfront. So, Layla, what is a survey? Why does it matter for an investor? And what happens when this is left too vague?
- [32:41]
Layla Smith
Yeah, so the service basically kind of like you're looking at a map of the property line. So it shows anything like from the encroachment easements, flood zones, any destination with the, with that property that has to do with it specifically is what the, the service shows as far as foreign investor. You can't really build on, on a lot if you don't have a survey to know how to expand and where your fence is going to be. You know, you need to know your exact property lines. So the survey is usually something that is the seller's responsibility to have it. However, if the seller doesn't have the survey, there could be negotiation as far as them purchasing a new survey for the buyer. And if they cannot purchase it in the buyer, that's going to be the buyer's responsibility. But that is something that the seller usually will always have for.
- [33:33]
Ashley Kerr
I've done it a couple times and I haven't done this in a while, but a lot of times I would write into my contract that I would accept an existing survey as long as it was done within a certain time frame. And I, I can't even remember what the time frame was, but my attorney, you know, would advise me on that. But that actually did help me, like, get some offers accepted because they don't have to pay. I mean, now it's like, I think I'm seeing, like thousands of dollars to get surveys done. So that is something I've done. And I've also, when I've accepted an offer on a property I'm selling, I also have asked sometimes if they will take an existing survey too, because it's worth asking. But honestly and probably in the last couple years, like every deal I've Done. My attorney has just. They take care of hiring the surveyor, they take care of getting it done. Or if I have an existing survey, I just give it to them and I don't even know if it ends up getting used or they use a new one. I'd have to look at my closing statement.
- [34:34]
Layla Smith
I don't know. Yeah, so the survey in Texas usually have to go through title and everything. In Texas, every closing has to be reviewed by an attorney. So we have to. When I put that clause in the document in the contract, basically I'm saying that if the title company does not think the survey is fit, then that's what a new survey has to be purchased. So you would be surprised. I had a client that has lived in a home for 26 years and they presented a survey that was in mint condition, so we had no issues. But then you have people who live in the house for five years and the survey have coffee stains on it. Right. So then it's all ripped up and they have to order a new survey. So usually we have to get over to the title company. If the survey has. If the client has the survey, the seller has it. And then the title company has to make sure that it has the right stamp on it and has to be reviewed by the attorney. And then that's when we determine who pays for it within the contract.
- [35:25]
Ashley Kerr
I. I gotta ask you guys because I think about this all the time and I never actually ask anyone. How are you guys storing your title of abstracts in your surveys? Like. Cause they don't like fit in a standard like filing cabinet or like they don't scan easily. Like, how are you guys storing them? Like, Tony, where do you put all of your title of abstracts?
- [35:48]
Tony J. Robinson
Anything that I get back from title? Well, first I always ask to get everything just like, like emailed to me. Right. But if I ever do get anything that's like physically sent. I don't think I've ever gotten anything that couldn't scan into my scanner before. So I don't know, maybe it's just like a New York thing. Actually, they blow it up for you too big. That's for me. I just scan it all in the Google Drive.
- [36:06]
Layla Smith
Yeah, same here. I think usually I just get emails on everything and then.
- [36:09]
Ashley Kerr
Yeah, see, like this right here, like
- [36:11]
Tony J. Robinson
it's on legal size.
- [36:12]
Layla Smith
Yeah, legal size.
- [36:13]
Tony J. Robinson
Yeah, yeah, that's true.
- [36:15]
Ashley Kerr
I do clip together and like the original.
- [36:19]
Tony J. Robinson
Yeah.
- [36:19]
Ashley Kerr
When I close on a paper. So I just have like tons of them just sitting in a bucket, basically.
- [36:25]
Tony J. Robinson
That's true. I Do have several of those and like the legal size paper and yeah, I haven't found an effective way to like they're just sitting in my closet actually. So
- [36:36]
Ashley Kerr
editors, if an address or something on that showed, if you could please blur that out. I tried to bloom it, but I think they probably showed like the exact parcel or not cover.
- [36:45]
Tony J. Robinson
Well, Layla, let's talk about HOA review rights. Again. It's something I never really ask about. I haven't bought too much in HOAs, but like HOA documents, you know, reviewing timelines, termination rights. This is one Ricky Skip probably all the time when it comes to hoas. What are you actually looking for inside of the HOA documents and what could potentially make you walk away from a deal.
- [37:05]
Layla Smith
So for the HOA documents, I think specifically we want to make sure that the property is in good standing with the hoa. So if I have a client moving into a subdivision where the HOA also include restrictions as well, but if the HOA have issues with any type of like legal issues, if they have any pending lawsuits, if they have litigation going on or you know, the HOA is not paying their dues, those things can affect, you know, our current buyer, you know, coming into the subdivision. So that is something that we, I have to make sure that is always covered, that we have a clear, kind of like a clear title, but it's like a clear HOA that when the client's moving in and also looking for any type of restrictions. So if the, if the buyer is also thinking about possibly renting this property, we, you know, as an investor, I should say we have to think about what the restrictions are for, for an investor if they're purchasing a property that have really stringent, you know, rules as far as like how many rent, renters can be in a community at a time. That's something that we want to make sure that we are reading through the contract to make sure that that's not going to affect my investor once the properties property is purchased. Now they're like, oh, I can't even rent the property out because we are over the percentage of renters that we can have in this neighborhood. So we want to make sure that that's also clear too.
- [38:23]
Ashley Kerr
Okay, so we're on to number 10, our final one, which is also the final walkthrough and utilities. So this one you require that utilities stay on through closing the keys transfer and a final walkthrough is completed before any funding. Why is this important and what happens when agents skip this or treat it
- [38:41]
Layla Smith
as optional well, the final walkthrough is not more sub courtesy. It is a contractor agreement to protect the buyers to make sure that everything stays on onto the day of closing and also that the buyers can be able to transfer it in their name after the day of closing. So things like you want to make sure like things like your you know that the water is still, you know, you don't have any leaks in the house the day of closing or you want to make sure that nothing's wrong with like the units in the house turning on the H Vac unit, making sure that it does work. Make sure electricity on that is something that you want to make sure that the electricity or utilities are kept on until the day of closing until the buyer can actually transfer in their name.
- [39:24]
Ashley Kerr
And you want to remember to call to switch the utilities in your name too.
- [39:28]
Tony J. Robinson
Also that and when you sell, remember to switch them out of your name because I've had some issues forgetting to do that as well. Now Layla, we just went through all 10. Now the last question because knowing what to include is only half the battle, but how do you put a fully protected offer together and still actually win the deal? So Layla's going to show us exactly how she does it right after a quick word from today's show sponsors.
- [39:50]
BAM Capital Representative
Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multifamily real estate offers structural advantages many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues. BAM Capital builds its investment with that reality in mind. They are focused on solid operators, tax efficiency and long term performance. For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more@biggerpockets.com Bam. Damn real estate investors. The April 15th tax deadline is coming fast. If you own rental property and haven't visited cost segregation.com yet, you could be handing thousands of dollars to the IRS that you don't have to. Costsegregation.com is self guided software that helps you write off up to 25% of your building to generate huge tax deductions. With pricing under 500 bucks and average tax savings of $25,000, costsegation.com is fast and affordable, making it perfect for single family rental properties, condos, townhomes and even ADUs. What's more, audit Defense is included in the price and backed by KBKG, the number one cost segregation company in the U.S. cost segregation.com was launched over 10 years ago and has a 100% success rate under IRS audit. You heard that right. A 100% success rate. And that's over 10,000 studies. Studies. Go to costsegregation.com and use code taxdeadline to get 10% off your first report. Don't overpay the IRS. Head to costsegregation.com before April 15th.
- [41:30]
NREG Representative
There are two kinds of real estate investors. Those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short term rentals, or LLC held properties. These gaps surface only when filing claims. That's why investors work with nreg. They specialize exclusively in real estate investors understanding portfolios, risk at scale and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing@nreg.com BPPOD that's n r e I g.com BPPOD tax season reminder
- [42:07]
BAM Capital Representative
for all the real estate investors listening. If you own rental properties, short term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS compliance strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal. Cost Segregation guys is the go to firm having done over 12,000 of these studies with 500 million in total depreciation identified. Head to costsegationguys.com bp to get a free proposal and see your potential tax saving savings.
- [42:45]
NREG Representative
When I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms and checking who was late on rent. I kept thinking if this is one unit, how do people run 10 Baselane changed that. It's BiggerPocket's official banking platform that handles expense tracking, financial reporting, rent collection and even tenant screening all in one place. It's the system I wish I had from day one. Sign up today@baselane.com biggerpockets and get $100 bonus. Baselane is a financial technology company and is not an FDIC insured bank. Banking services provided by Threadbank Member FDIC
- [43:16]
Tony J. Robinson
all right, welcome back. Now we've got the full list, the 10 protections all explained. Now let's kind of bring it home, right? Layla, the question everyone's thinking Is can I actually include all of this and still be competitive? Can I actually still get my offer accepted? So we want you to walk us through how you write a winning offer that keeps every one of these protections intact. So you've said that you can offer the highest price and still lose or you can win and regret that you actually won't. So talk to us about what winning and regretting looks like. What is the version of winning a deal that maybe actually hurts a buyer?
- [43:50]
Layla Smith
Yeah. So I'll just give you some example. I mean, winning with no contingency, what happens with that is an inspection reviews that, you know, there are issues with the house and now you're purchasing the home or winning without the appraisal protection, and now you owe 20,000 over the appraised value. Those are things that you want to avoid. And just having clear possession. So winning without that specific language with clear possession with a property, now you're a landlord to your, your seller. So we want to make sure that, you know, even though we're making this emotional decision that we are not trapped in, you know, something because we decided not to add these protections for the buyers.
- [44:29]
Ashley Kerr
Now, before we wrap up here, the last thing I want to know is as both a realtor and a mortgage loan officer, you are seeing the full picture before an offer is written. What is a conversation most buyer's agent are not having with their buyer that you always have before that first offer even goes out?
- [44:49]
Layla Smith
Yeah. So the financing reality check what their rate will look like, what the payments look like, what their, you know, cash close will look like, you know, at the price that they're, they're wanting to purchase the home. We talk about things like rate buy downs versus, you know, closing costs, credits and how, you know, offering, making a good offer can structure them to where they can be able to see their full buying power. Right. Walking away with price and not selling because they have an emotional attachment to this house and just making a sound decision that is based more on, you know, the actual like numbers at the end of the day.
- [45:25]
Ashley Kerr
Well, Layla, thank you so much for joining us today. We really appreciate you taking the time to share your experiences with the rookie listeners. Where can people reach out to you and find out more information?
- [45:36]
Layla Smith
Yeah, so I am on Instagram at Liladallas underscore Realtor.
- [45:41]
Ashley Kerr
Well, thank you so much for joining us today. We loved going through your list of 10 things to help everyone listening write a better offer. I'm Ashley, he's Tony and we'll see you guys on the next episode.
- [45:57]
Tony J. Robinson
Hey rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener
- [46:15]
Ashley Kerr
as a rookie investor, especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.
- [46:28]
Tony J. Robinson
So head over to biggerpockets.com guest if you want to be a part of our show again. That's biggerpockets.com guest and we'd love to have you on.