First Deal Turning Sour

8 Replies

Hello Everyone,

I trying to get started in the buy and hold rental property arena.  I had what I thought was a good deal until the seller's started changing things.

Basically I made an offer on two properties, being sold as a package for which I was going to pay cash.  The whole deal was for $27k.  One property was empty and the other one had a tenant.  The seller is supposed to have the tenant vacated and cleanup the property to the same condition as the empty unit.  In speaking with my realtor we agreed on a $1000 escrow. 

Now here is where things start to go south. I'm supposed to go and sign the contracts and my realtor calls me up and said that the seller's agent said they want $2000 escrow per property for $4000 total. Now this is on a $27,000 deal. This irks me but I say ok. I get to the Real Estate office and look at the contract. First thing I notice, it states the properties are being sold "as-is" and buyer is responsible for all CO inspection, etc. The MLS listing did not state that the properties were being sold "as-is" and when I first spoke with my agent it was never brought up regarding the properties being sold in an "as-is" condition.

They also did not have both properties lot and block numbers on the contract.  They only had the lot and block number for one of the units.

Needless to say I did not sign it.  When my realtor got in touch with the selling agent, they said they thought they had discussed all of this with my agent but they had talked about it with another agent who was looking to make an offer.

Now they want me to do the Home Inspection first and then if everything is alright then they will go through with signing the contract.  At this point I'm thinking of just walking away from this one.

What do ya'll think?

No way in hell i'd do the inspection if I didn't have the properties under contract. You should be the one sitting with your agent and your agent should be the one drawing up your contract to send over to them for them to accept or counter.

Walk away from the deal and count this as a blessing.  Your realtor isn't doing his job.  He is responsible for looking out for your interest.  it sounds like he is just looking out for his commission.  Here is the process I use when buying a property:

1. Make sure you have the terms clearly specified in the purchase contract including the Earnest Money Deposit amount (payable in 3 days from signing the contract and fully refundable if you don't remove the contingencies), an appraisal contingency, a home inspection contingency and a clear title contingency.

2. Perform you due diligence in the 3 days before you give them the EMD.

3. Upon the completion of your due diligence, schedule the appraisal and the home inspection.  My contracts give me 14 days to remove the appraisal and home inspection contingencies.  During this time the seller has to complete and provide certain reports and disclosures such as the termite inspection and hazardous disclosures.

4. After I remove the appraisal and home inspection contingencies (assuming the house appraised for the value I'm paying and the home inspection didn't reveal any surprises), I have the title company order the title report (I would have already pulled a title profile on the property as part of my due diligence).

In CA we use a standard California Purchase Agreement and Joint Escrow Instructions provided by the California Association of REALTORS(R), Inc.  I would imagine that your state has a standard form.  Take this is a learning experience and move on to the next deal.

God Bless You!

@J. Brian Walters  

  when your buying low end assets you should expect to buy them as is.. that's why they are cheap and low priced.

just have your contract be subject too your inspections its no big deal.. if they will not let you go into contract and want you to do a home inspection first.. I would think there are major issues with the home and you should just go through it with your realtor first and see if you see anything glaring that stands out. But it is not customary to pay for an inspection without a signed around contract as others have stated.

but if your going to play the low end game then its buy as is and set your price accordingly.

@J. Brian Walters , why do you want these properties. I'm sure there must be a compelling reason that you haven't discussed. Why is there anything in the contract that you are unaware of? Have you made a formal offer yet? Remember, in real estate everything is negotiable and nothing is settled until the contract is signed.

Why don't you take a step back. Figure out what you're willing to pay and under what conditions. At what point does this project stop making sense? Has the seller already crossed that line? You need to know what your maximum allowable offer is. Your offer is not just a price, but price AND terms. 

I suspect that you've been talking to the agent who has made you promises. The seller is probably just starting to negotiate and you're thinking the agent is "on your side". Normally, the agent is paid by the seller and so has a fiduciary to get the best deal for the seller. You're on your own, so don't fall into the trap of thinking your agent is your buddy.

Only you know what you need to make this deal work. Once you draw that line, stick to it. Make the offer so that you understand and agree with every part of it. If you can't get the deal you need, be willing to walk. Another deal will come along.

I hope this helps. If you have any questions, feel free to contact me.

All the best.

@Michael Evans    How do you pull a title profile on a property?

@Tom Mole   I interested in these properties in that is a low barrier to entry into the rental market.  I can pay cash and depending on how things go will move forward with bigger and better deals.  On inspecting the units again and speaking to the tenant in the occupied unit I decided to pass on that.  Basically the unit had water leaking in from the unit upstairs and the owner has not been able to resolve the issue with the owner of the other unit.

Currently I'm waiting for a response to my updated offer from the seller.

We use the services of a title company, who gives us access to free title reports. In exchange, we use the title company for our deals. You scratch my back, I scratch your back. Connect with a title company officer at your local REIA meeting or through a trusted realtor.

God Bless You!

Originally posted by @J. Brian Walters:

Hello Everyone,

I trying to get started in the buy and hold rental property arena.  I had what I thought was a good deal until the seller's started changing things.

Basically I made an offer on two properties, being sold as a package for which I was going to pay cash.  The whole deal was for $27k.  One property was empty and the other one had a tenant.  The seller is supposed to have the tenant vacated and cleanup the property to the same condition as the empty unit.  In speaking with my realtor we agreed on a $1000 escrow. 

Now here is where things start to go south. I'm supposed to go and sign the contracts and my realtor calls me up and said that the seller's agent said they want $2000 escrow per property for $4000 total. Now this is on a $27,000 deal. This irks me but I say ok. I get to the Real Estate office and look at the contract. First thing I notice, it states the properties are being sold "as-is" and buyer is responsible for all CO inspection, etc. The MLS listing did not state that the properties were being sold "as-is" and when I first spoke with my agent it was never brought up regarding the properties being sold in an "as-is" condition.

They also did not have both properties lot and block numbers on the contract.  They only had the lot and block number for one of the units.

Needless to say I did not sign it.  When my realtor got in touch with the selling agent, they said they thought they had discussed all of this with my agent but they had talked about it with another agent who was looking to make an offer.

Now they want me to do the Home Inspection first and then if everything is alright then they will go through with signing the contract.  At this point I'm thinking of just walking away from this one.

What do ya'll think?

Asking you to pay for a home inspection before the property is under contract is a ludicrous request. I would just say no, counter with the terms you want (maybe even demand they sign a contract you draw up) and see where they go with it. These guys sound a little questionable, so be careful. Remember, you can always walk. 

So Brian sounds like he has a buyers broker on his side from his post.

The person commenting about the buyers agent out for commission I think that is funny from the perspective of there really isn't ant money on this deal.

The agent gets 3% commission say on 27,000 so that is a whopping 810.00. Take away the brokerage split of 30 to 50% or the minimum 250 to 300 trans fee regardless of purchase price and the amount is down to 500 bucks. Add on gas, dues, time etc., taxes and the agent might be able to supersize the fries at Mickey D's and get a large cola to go with that value meal............. : )  

So I don't think the buyers agent is out to pull a fast one on the buyer for such a small fee but none of us knows because we are not there.

Brian if you buy in that range expect as Jay said that the properties will not be that great. "Cash for trash" as I call it but that's just me and I don't play in the residential space. I know what kind of crap you have to endure owning those properties and what kind of headaches they have.

The low price pulls people in but many times it's not what they thought it was. If you have limited capital I understand why people have to start somewhere.  

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