Today’s REI Classroom Lesson

Today, Brian Meara discusses how you can analyze a short sale deal in 30 seconds by finding out answers to 2 questions.

REI Classroom Summary

In order to quickly analyze a deal, you don’t need to know the backstory or ask a ton of questions. By knowing answers to 2 quick questions, you can quickly determine if it’s worth pursuing or not.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Brian: Hey, guys, Brian Meara here from the Investor Entourage, today’s host of the REI Classroom. And the topic we’re going to discuss today is how to analyze a deal in 30 seconds.
Mike: This show was sponsored by
Brian: Okay, guys. I know what a lot of you are thinking, “How is that possible? There’s no way. What are you talking about, 30 seconds?” Here’s why, in the world of short sales, in the distressed market in general, we can analyze a deal in 30 seconds. Because everybody, and even investors know what I’m talking about, who have experience, a lot of times, you’re going to get realtors bringing you deals, you’re going to get other investors who don’t know how to work short sales bringing you deals.
And what’s the first thing that they’re going to want to do? They’re going to want to tell you the whole backstory. They’re going to tell you, “Well, let me tell you about this deal,” and, “There’s this divorce,” and, “There’s this, and the mailman . . . and the wife ran off with the mailman,” and all this crazy stuff.
And listen, there’s a time and a place to hear the story, specifically like written in the hardship letter, but we don’t need to know that up front. So to better protect your time, we’ve come up with a questionnaire. So we’ve come up with an actual analysis sheet. It’s 14 very detailed questions, which takes about five minutes for them to fill out, and we ask for two very specific sets of comps. But, before we even get to there, you can analyze a deal in 30 seconds because in the world of a short sale, we want to know two answers to two questions.
Number one, is there negative equity? Do they owe more on the house than it’s currently worth? And number two, are they in default? Are they at least one full payment behind? If they answer yes to both of those questions, you can then proceed and do a proper analysis using the qualifying questionnaire and the two sets of comps.
But, guys, what that does is, that cuts off all that initial conversation. I can’t tell you how many times people that I’ve been working with will say, “Hey, listen, I spent 20 minutes on the phone, I met this realtor for coffee, we were there for an hour,” and it turns out, you had no business meeting them there, unless you just want to go hang out and drink coffee, because in 30 seconds, you could have determined whether that was a potential deal or not.
I’ve had people I’ve worked with, former students, etc., going out to houses. Now, they’re getting in their car, they’re driving, going to properties, and walking through properties, and they didn’t even qualify it. In 30 seconds, you would have determined that there was no need for you to go to that house.
Now, there is an alternative, and here’s what it is. You know, for years, guys, next week is actually 10 years that I’ve been doing this, and I’ll tell you what. We used to have those two questions, and if the answer was . . . in other words, if they weren’t negative equity and they weren’t behind, I would say, “No deal. Move on.” Sometimes, though, and what we’re doing more recently is, looking at an equity position.
So what I mean by that is a high-equity pre-foreclosure, which we’re going to be discussing in the future in greater detail. But, just know this, if someone’s behind on their mortgage and they have equity, there’s an option to help them. There’s an actual option to keep them in the house. We basically do a sell or lease-back with a future option to purchase.
And, again, that’ll be a different topic for another day, but we don’t always shut it down at face value. In other words, if we know they’re in default, if we know they’re behind on payments and they’re losing their house, and, in fact, it’s kind of interesting because, for the last 10 years, in a short sale, we wanted to get to them as soon as possible. Don’t wait until there’s an auction date, it gets kind of late, everybody’s got to scramble. We’d get a million calls. “Hey, I don’t know what your next week . . . can you help me?” “Well, no, not really.” Right?
So this is the exact opposite. We want it to be close to an auction date. We want it to be at the tail end where they’re basically out of options and we’re the only ones who can come in and help them. And that’s exactly what we do, but we look for certain equity spreads. And like I said, that’s based on another topic for another day.
But, guys, that’s how you can analyze a deal in 30 seconds. Protect your time. It’s worth something. So, until the next time, get out there and make some money. We’ll talk to you soon.
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