My Craziest Transaction Yet – Wholesale #15, Acton

Let me preface this by saying that this was the most insane, roller coaster of a ride closing that I have ever been involved in.

I got another property in Acton under contract back in February. This property is a 1,458 SF ranch with a 2 car garage under and a walk out basement. The property was on the market for $399,000 but I was able to get it for $335,000. The house was overpriced and in disrepair so I felt the $335,000 was a fair price for both parties. My intent for this property was to take off the roof and go up a story to convert it into a 2,900 SF, 4 bed / 3 bath colonial with an additional 500 SF of living space in the basement. The sale was contingent on verbal approval from the town that adding a second floor and additional bedrooms was feasible. Here’s the financial projection of how I was expecting this deal to go:

The house backs up to conservation land but doesn’t have any within its bounds, so the conservation department gave me the green light. Next, the health department informed me that they saw no issue as long as I upgraded the 3 bedroom septic to a 4 bedroom. This seemed reasonable so I called my septic guy who told me that other than the water table being a little high, the soils are actually great on the street. Finally, I spoke with the building inspector about the second floor addition as well as my plan for rebuilding the house. He was extremely reasonable in his approach and did not have any concerns with my ideas on keeping the first floor exterior walls and adding ceiling height for the 1st floor. Ok, so all good news from the various departments so I was pushing through with the deal.

I signed the P&S in the beginning of March and were scheduled to close on April 6th. I had my bank financing in place so I was good to go. However, a couple weeks later, I got a call asking if I would let the seller stay in the house for a month after closing. She would pay rent for the month and I could hold back some money as an incentive for her to actually move out. I found out that the seller fell ill a couple years ago and had to leave her job. And soon after that, her husband left her which put her in a financial burden. I told her I would help her in any way that I could and verbally agreed to letting her stay. In the meantime, I put another property under contract in Andover (details to follow in a later post). Due to time restraints, location, etc it wouldn’t be possible for me to go through with a full rehab on both properties at the same time, so in the end, I decided to follow through with closing on Acton but wholesale it to another investor. Given the choice, Andover is a much better deal all around for me.

At this point, it was a week before closing. I sent a couple of emails out to my buyers list and got a lot of interest. The real estate agent who I was purchasing this property through also reached out to her network. Ideally, I wanted to assign the property so I wouldn’t incur the bank expenses and commitment fee that I would ultimately have to pass on to the new buyer but given the time to closing (under a week), I didn’t think this was doable. As I was marketing the property to potential buyers, I found out that the seller was going to move to Florida but didn’t have any plans as to where she was going to live. I was pretty concerned about this so I set up a time to get into the house to see if she had started moving. To my surprise, a lot of furniture was still in the house. I knew it would take more than 1 month so I was struggling with what I wanted to do. Do I let her stay and have a very high chance that she doesn’t move out or do I tell her that she has to move out at closing? Ultimately, I decided that I couldn’t wholesale this to another investor knowing that there was a possibility of her squatting in the house so I told her that she had to be out at closing or I wouldn’t be able to go through with the deal. Also, it was in her best interest to follow through because she told me she would get a much needed $20k-$30k at closing. If the deal fell through, the bank was going to foreclose the following day.

Fast forward to a couple of days before closing and my real estate agent had already walked some potential buyers through the house who were ready to sign an assignment contract. AWESOME! We signed the paperwork and proceeded to closing. A day before closing and I was so happy that things were working out for the seller, the new buyers and that I was able to step back from the deal. However, when I got the HUD it showed that the seller had to come to closing with $5k. Damnit! Not only was I extremely disappointed that the seller wasn’t going to get any money, but I knew she couldn’t afford to pay the $5k so unless the buyers wanted to increase their offer by that amount, the deal was dead. On Monday (the day of the closing) I get word that the seller’s husband magically appears and is going to put up the $5k difference. 1 hour later, I get an email from my attorney saying the transaction is on record. Holy Shit! What a ride.

Here’s how the financials broke down for me. Remember, I was going to use bank financing on this deal so there were a number of bank expenses that I had to pay even though I didn’t close.

You’ll notice that I barely made any money on this deal, but the fact that I was able to help the seller get out from the financial burden of her house and was able to get a follow investor into the deal who will make a great profit, was worth it to me.