Offer accepted on a property but don't feel good about it anymore

22 Replies

Anyone else feel guilty or bad at the idea of terminating a purchase contract? We have a property that we put an offer in on that was in "fantastic shape" and it got accepted after the seller countered. But after inspection it was found to have active water damage on multiple units(its a 4 unit) and in the basement as well as mold. Its our first property so after talking with the inspector about the extent of the work we told our realtor we wanted to back out. Then the realtor suggested that we see what the seller was willing to do. So of course we got sucked back in and an addendum was written to extend the contingency period. Our understanding from talking with the realtor is that professional companies would come in to assess the damage and give some quotes and we would find out if the seller would lower the price or give a credit or something. We were still apprehensive at that idea being that we don't know the extent of the damage under the multiple bathrooms with spongy wood floors. We don't want to get a 30 thousand credit then end up with 80 thousand dollars of work. So next thing we know our realtor calls us to tell us the seller wants to show us some of the work he has been doing. So we get there and he is doing a lot of the work himself. He seems to be a nice guy and he said he would keep us in the loop of everything he is doing and also let us know when the bathroom floors were going to be ripped up so we could see the extent of the damage. The building is in a high demand for rent area so that is a plus. The work so far that he had done looked ok for the most part but looks and what is up to code and done properly are two different things. But we are just not feeling good about the property anymore. The more we have looked at and adjusted the numbers and accounted for expenses the numbers don't seem the greatest. He is not a licensed contractor. It's been a week since we have heard from him even though he said he would call us on monday(it's now thursday). They were supposed to get someone in to assess the mold damage and we haven't heard anything. So now it just seems like he is trying to do the work himself and we are supposed to trust that he knows what his doing. And if he does change out the floors without showing us how they look underneath how are we to know if the joists/supporting structures were properly assessed for rot/mold if he covers it back up before anyone gets a chance for it to be assessed? So on one hand I get why he wants to do the work himself and he seems like he wants us to be happy.(He said he was shocked when he saw the inspection report) But from an investment standpoint we don't want to go into our first investment feeling uneasy. But as a Newbie it can feel intimidating having to stand up to your realtor and then possibly insult the seller saying we don't feel comfortable with him doing the work as opposed to a licensed person. On top of it we have kind of stalled on the financing aspect feeling like its a joke to keep going with the motions of doing that when we are questioning purchasing. So we know we are probably irritating our loan officer. We plan to talk to our realtor and let him know what we are thinking but kind of afraid he is going to see us as being picky/ungrateful/a waste of time/ and also attempting to suck us back in. I know you're not supposed to let emotion get in the way. But feeling confused, overwhelmed and deflated. Any advice/words of wisdom would be great.

I have included a copy and paste of the summary page from the inspection report below in case anyone is interested:

This is only a summary of the inspection report and is not a complete list of discrepancies.
Section Condition# Comment
Grounds 1 Poor grading near the foundation was observed. We recommend
re-grading to assure all water drains away from the home's
foundation. Currently the whole western side of the building is
sloped toward the building the water is leaking in to the cellar and
basement unit apartment. The water is also causing erosion in the
brick joints and walkway. Regrading and repairs are needed.
Grounds 3 The walkway to the back entrance has erosion and a sink hole and is a

tripping hazard.

Grounds 4 The small retaining wall is leaning over and not diverting water

repairs needed.

Exterior 7 The ramp to unit 2 is leaning and unstable, bracing and levelling is

needed

Exterior 8 The concrete in front of the door slopes towards it allowing water to
get in under the door and cause moisture damage and rot to the joists
and structure in the cellar. Repairs needed.

Exterior 9 The top section on the back of the house was missing siding. The
wrap was missing of a window on the East side allowing water
exposure that caused moisture damage and rot. In the sill and partially
in to the wall. The bump out for the windows and door for unit 2
entry off the ramp is sagging. There is also moisture damage and rot
under the door. Unit 1 has moisture damage and rot under the door.
The front door has a section of sill that is rotted away and missing on
the right side of the door and the left side of the door is spongy. The
vinyl corner trim on the back of the house is open at the top allowing
water to get inside the siding and potentially cause moisture related
issues. The brick has a hole near unit 1 entry and random repointing is
needed. The wrap on all the window trim should be caulked to
prevent water intrusion. It is suggested that a "Licensed General
Contractor" be contacted for repair scopes and estimates.
Exterior 10 Majority of the windows are missing screens and have broken
balances. When the windows open they quickly spring closed. Some
of the windows are held up by after market screens. Unit 2 has
missing glass in a sash that will need to be repaired. The windows
will need repairs and many may need to be replaced. Proper screens
are needed for safety. Unit 4 has broken trim around the skylight and
moss as well on the exterior.

Exterior 11 The entry doors for units 1 and 2 need to be replaced. The moisture

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damage and rot beneath the door has caused the sills to separate and
damage the doors. The door in unit 2 has a broken jam and missing
hardware, neither unit 1 or 2 doors operate properly. The door to the
back entry also has lack of support causing the sill to pull off the jam
and will need repairs or replacement as well as framing work.
Roofing 13 Tree branches / leaves were close to or in contact with roof surfaces.
Recommend trimming branches back to prevent potential roof
damage.

Roofing 15 The built in gutters on the back section of the house need to either

have a downspout or be reworked and eliminated.

Roofing 16 Unknown, not entered no access
Roofing 17 Unknown, no access
Heating - Air 18 Units 1 and 4 were operable at the time of inspection. Units 2 and 3
when turned on had an error code of 11. This error code indicates
there is an issue with the ignition and the unit will not light. The units
were last serviced in 2014 according the the writing on them. Units 2
and 3 will need repairs or replacements, and units 1 and 4 will need
servicing.

Electrical 20 The seal at the top of the meter were cracked and need to be redone.
Electrical 21 Some Knob and Tube wiring was observed and being used in the
cellar. Although installation and usage of this wiring was typical at
the time of installation, today's construction no longer uses this out
dated system. Since this older wiring exists with open splices and
limited wire insulation, client is advised to consult with a licensed
electrician (prior to close) for further information on this wiring and /
or upgrading. Client should also contact their insurer (prior to close)
to inquire whether the presence of this wiring affects home insurance
coverage.

Electrical 24 The majority of the electric has been updated, when spot checked it
tested correctly with a ground indicator present. Unit 2 had a
receptacle in the front bedroom that tested as ungrounded. This
receptacle either has a loose wire or is fed from a knob and tube
circuit. It is suggested that a "Licensed Electrical Contractor" be
contacted for further evaluation and repair.

Plumbing 27 The drain lines in the cellar are poorly supported, some of the lines
are pitched up hill. There is still an old gutter drain that dumps in to
the sewer line. The gutter drain should be eliminated and the sewer
line reconfigured without it. It is suggested that a "Licensed Plumbing
Contractor" be contacted for further evaluation and repair.

Plumbing 28 The water heater is located in unit 1's master bedroom closet. The unit
should be moved to the cellar, the unit should be accessible without
entering someones apartment.

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Apartment
Conditions

29 The front bedroom was extremely musty smelling. When the exterior
walls were checks with a moisture meter it detected 73%-93%
moisture in the walls indicating there is water present, water trapped
withing a wall can cause mold and moisture related issues.
Recommend a mold professional be brought in for further testing and
evaluation prior to closing. The master bedroom door is falling off the
hinges.

Apartment
Conditions

31 The range top burner elements have separated from the holders and
are coming off. New elements are needed. The flooring has a lot of
moisture damage and lifting, repairs needed. The Faucet is loose,
sprayer is broken and leaks, missing its mount. The sink base cabinet
is broken at the bottom.

Apartment
Conditions

33 The Tile shower surround has failed and has loose tiles and mold, the
bathroom entry door will not close, the floor tiles are lifting due to
major moisture damage to the sub floor, the faucet is missing an
aerator and sprays water everywhere. Significant repairs needed.

Apartment
Conditions

34 The sink base is damaged and caved in due to moisture. The faucet

and sprayer are broken. Replacements are needed.

Apartment
Conditions

36 The bathroom is located in the room that juts out from the back of the
building. When inspecting the exterior it was noted that water was
continuously dripping out of the bottom of the room indicating a
plumbing leak. When the bathroom was inspected the floor was
spongy and lifting, there was black mold like staining under the
vanity and shower, behind the shower and the toilet was also loose.
The continuous dripping can cause mold and moisture related
structural issues. Due to how and where the building was built any
structural damage could present a safety concern as well. Immediate
repairs are needed. The concentration of the moisture damage and
staining would indicate a leak under the vanity.

Apartment
Conditions

37 The kitchen faucet is loose, moisture damage at the backsplash

behind the sink, repairs needed.

Apartment
Conditions

39 The bathroom floor is soft and spongy and lifting. There is significant
moisture damage to the floor. The toilet is loose to the floor. There is
quite a bit of mildew and mold on the walls and ceilings. When the
lights were first turned on cockroaches were seen scurrying around
the top of the shower and 2 were photographed. It is highly likely that
there are many more then 2 present and a pest control professional
should be contacted for further evaluation and repairs.

Apartment
Conditions

40 There was moisture damage and black staining to the backsplash

behind the sink.

Apartment
Conditions

41 The railings in the front stair well are too low. Recommend covering
the lower units in the stair well with a plexi glass or barrier to prevent
an injury if someone was to fall on the stairs. The back stair well has
a broken stair tread.

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Apartment
Conditions

43 The amount of moisture damage and black mold like staining in the
bathrooms and cellar of the building are a major concern as they can
cause structural as well as health concerns. As well as the high
moisture readings in the unit 1 front bedroom. These items should be
addressed immediately.

Basement 45 The insulation and plastic on the ceiling was full of water and likely
mold on the west side of the cellar. Recommend calling a water
damage or restoration company to remove the insulation and plastic
to let the cellar dry out. Mold remediation may also be needed.
Basement 46 The floors were wet from water intrusion through the foundation and

brick walls. Repairs needed.

Basement 47 Knob and tube wiring present, wires unsupported and hanging from
the ceiling, open electrical splices, missing box covers. It is suggested
that a "Licensed Electrical Contractor" be contacted for further
evaluation and repair.

Basement 48 The lights were not operable. Repairs needed.
Basement 50 There is an old oil tank in the cellar that needs to be removed. There
are pipes in the floor that should be capped or eliminated. Debris
should be cleaned out of the cellar.

Laundry 51 The washing machine pvc drain pipe was leaking at the time of

inspection from recent laundry.

Foundation - Crawl
Space

52 Due to poor exterior grading mostly, the foundation is taking in a
good amount of water through the stones. After the exterior grading is
fixed, the bricks in areas will need repointing on the exterior. The
interior stones will also need pointing to help with stopping the water
intrusion. Continued water intrusion can result in deterioration and
failure of the foundation.

Foundation - Crawl
Space

53 Due to the water leaking into the cellar at joist height many of the
joists and some of the sub floor has moisture damage and rot.
Structural repairs will be needed and joists will need to be replaced.
Any time you have moisture damage and rot mold is also a concern.
Recommend testing for mold prior to work being done.

View report

*This link comes directly from our calculators, based on information input by the member who posted.

If you are going to back out during your inspection time frame get it done. Send them written notice that you are withdrawing the offer.

I recommend you cancel your contract and maybe look at investing in the stock market instead.  Most investors that get emotional over some water damage are not going to make it long term. 

@Keri J Perez

I have backed out on deals in the past, it isn't the end of the world. I will say one thing though. Seeing as how this is your very first deal, do you think you may be over analyzing it? No property I have ever bought has been perfect. There is always something wrong. My wife freaks out when she sees the inspection reports for the houses I buy. She always is encouraging me to back out. She is scared to death of some issue that will somehow bankrupt us. 

After we close and do some basic repairs, she always comes to realize that had we backed out we would have missed a good deal.

I didn't read the entire inspection report, however you need to get your own licensed contractors in their to provide their 'unbiased' advice to you and not someone that the seller has provided. Suggest you link up with a Mentor in your area to help you out on your first deal. Did the seller disclose many of the significant visible issues that you feel they would have known about?  You should have criteria on what you want on a return and if it doesn't meet your criteria, then back out of the contract before assuming someone else's problem/mistake.

If your intent when looking for properties was to buy something turnkey or close to turnkey than the inspection you received is 100% grounds for termination. The report reads as a complete gut rehab and if that was not your understanding I would walk away quickly. Big project if this is your first time. 

If the work is properly accounted for in the purchase price than it may make sense but hard to say based on the info given.  Rehabs are tricky because you never know what you will find when you start peeling back layers of the structure. 

Sounds like years of deferred maintenance leading to failure of parts of the structure. 

Probably need to have a discussion with your realtor explaining what you are looking for and why this is or is not a good fit for you. If you're looking for turnkey then this probably shouldn't have been an option. Many posts say look at and analyse 100 properties before you make your first offer. There is a big learning curve that goes into figuring this stuff out. 

And no.. I wouldn't feel guilty at all. End it sooner than later if that is what you want to do. 

I’m just going to echo the consensus here. I wouldn’t back off personally, I’d have my contractors come in and see what we are working with and then change my offer based on what they said. If they take the offer, I buy it and fix it. If they don’t, or counter, I move on.

This is a numbers game. If the numbers work, even after all the fixing, then go for it! If they don’t, back out but don’t give up.

Sounds like from reading this post you are mentally checked out on this deal and it just isn't for you. That's OK, it happens all the time. Just terminate the contract and move on, if your agent has been doing this a while they will understand. 

Thank you to guys who gave some constructive responses.  We bought the property with no water damage disclosed and in "fantastic condition". This is not a discounted property factoring in any repairs needed in the selling price. We already expected and budgeted for improvements and repairs that we wanted to do to make the place even better. But when you have a very reputable inspector telling you the bathrooms alone could be 40 to 60 thousand to rehab not including mold remediation, joists being replaced, tenants needing to be put up in a hotel or rehoused while work being done ect and everything else ...that is significant to us. Our understanding when talking to the realtor initially was that a contractor and mold company was going to be going in to assess the cost and damage. And then go from there in terms of the seller doing a repair credit and or lowering purchase price depending on the results of that assessment. So now the train has been taken off in another direction with the seller fixing things himself(literally himself not a contractor he hired). So really we know what we need to based on what has happened so far and we have room still in our contingency period so we were trying to give a chance to see if we could be satisfied before jumping the gun. Its just nice to have confirmation and feedback about the situation from people more experienced.

@Emilio Ramirez Thank you for fully reading my post and your feedback. We are not necessarily looking for turnkey. This property was just listed and presented to us this way during the walk through. And no this was definitely not reflected in the purchase price. The seller himself said he was "shocked". We expected to have repairs and upgrades. But like you said its turning into a full rehab which is not what we purchased this for.

@Mark Rechkemmer Thank you for your feedback! No like I said the inspection report was a "shock" to the seller. So none of the items/issues in the inspection were on anyone's radar as a part of this purchase. We discussed with our realtor what we wanted in terms of a contractor coming in of our choosing...So like you said now that the seller is rectifying stuff in his own way we don't want to inherit problems he didn't address properly or is covering up intentionally or unintentionally that will bite us in the bite down the road.

@Anthony Gayden Thank you for your feedback. We definitely don't expect the properties to be perfect. We live in a home built in 1900 and so far we have done all the plaster repairs, painting, wall repairs, porch repairs, ceiling repairs ect on our own...by nature we are DIY's. This property was also built in 1900 so we expect there is always work that needs to be done. I would agree when you are new you are definitely are going to be more cautious. But based on talking with the inspector who is also a rehab consultant we are not over analyzing this one.

@John Thedford Thank you for reading my post and your feedback.

Originally posted by @Derrick White :

I’m just going to echo the consensus here. I wouldn’t back off personally, I’d have my contractors come in and see what we are working with and then change my offer based on what they said. If they take the offer, I buy it and fix it. If they don’t, or counter, I move on.

This is a numbers game. If the numbers work, even after all the fixing, then go for it! If they don’t, back out but don’t give up.

 Bingo. 

I think you will look back on this one day and laugh at yourself for over analyzing this. I know my wife and I do this from time to time.

I would run away if the seller is going to perform the significant repairs you have identified and not use a licensed contractor getting permits.  The sellers surprised reaction to the report could be a bluff and looking for a newbie to take over his problem.  

@Keri J Perez For your first deal, I'd recommend you guys back out. 

Without a doubt, for the seasoned investor, there is THE VALUE ADD, but for you guys, it can quickly be the nightmare project, which can sour your love for Real Estate Investing pretty effectively.

Buy something with a light value add such as paint, changing floors and/or kitchen countertops after tenants move out...

Oh, by the way, welcome to BP! 🤗 

Quit this deal . In this business you have to do what’s in your best interest . It’s not about wanting to feel good or  bad .

 it’s a business , so it’s all about the numbers . 

As others have said in the past - if it makes dollars , it makes cents.

Do the math and decide. 

Just remember at the end of the day all the issues found equate to numbers. If you can make the numbers work... proceed. If not, walk away.

@Keri J Perez Normally, I would say that you have to consider the fact that an inspector’s job is to find stuff, and inspection reports often do sound ominous by design. Some of the things listed here I see on nearly every inspection report, like poor exterior grading for example. However, when the poor grading has lead to major water intrusion, rotten joists, damage to the basement, foundation issues etc. then that’s a whole different story. Combine the extensive water intrusion (an owner’s worst enemy) with knob and tube wiring, plumbing leaks under the bathrooms... you’d be very unwise not to have major concerns at this point considering that it seems you were given the impression that the property was in decent enough condition. Your agent should be advising you to have professionals provide quotes for all the needed work in order to draft an inspection objection asking for a major price reduction based on the estimates you get. It’s worth noting that if you did a walk-through with your agent prior to making your offer, they should have seen most of this stuff then and advised accordingly before putting an offer in. At this point, unless you’re feeling confident you can get enough of a price reduction to gut the place and rehab basically everything (do not have the seller do the work), I’d walk at this point. Budgeting a project like this accurately is extremely difficult and executing the rehab will be challenging and will consume a lot of time. It’s a whole different animal than what you were expecting so nobody should be surprised that you’re having second thoughts. Personally I love value-ad deals like this (if the price is right of course) because I have a background in the trades and I’ve done dozens of full rehabs, but it’s extremely risky to take on a distressed property if it’s not your niche. If you’re not ready to pivot into that mode, and you don’t have a sizable cash cushion, and the deal isn’t priced right for the actual condition, don’t be shy to tell your agent that you’re backing out based on inspection results. Better to not make a deal than to buy a money pit.

@Keri J Perez do t worry about other people’s feelings. Your realtor has clients back out all the time and your loan officer is just doing their job. They make money when you make money and this does not sound like the offer for you and you should feel good about walking away.

@Keri J Perez

Legally required to perform on the contract and buy it unless you have an escape clause.. or if you can get a lender to send you a denial letter for a financial reason then you can get out and get your earnest money back.

Kim

Hi Keri - it looks like you have already received a lot of good info concerning moving forward or not .. I'm going to address your question about "feeling bad" for backing out.  The inspection period is your opportunity to uncover as much information as possible about your purchase. As an investor - the only thing you should be concerned with is whether you are going make money or lose money on this deal. If the seller was truly unaware and "shocked" at the findings then he will understand your hesitation since this was a  surprise to both of you. When buying properties - you cannot feel bad for passing on a project that is not profitable - it's a numbers game and you are going to look at a lot deals that don't make any sense - and you are going to see deals that look good on the surface but start to unravel when you peel back the layers - that's OK . You have to make deals that make sense to you first and foremost - if your numbers indicate that the purchase price plus repairs is going have too thin of a profit margin or even no profit at all... then you have to back away from it - regardless of any perceived "bad feelings"  because you are going to feel a lot worse when you're staring at your mortgage statement and you can't pay it because the property isn't producing the income it needs to. Moral of the story - DO NOT FEEL BAD IF YOU HAVE TO BACK OUT OF A DEAL THAT IS BAD FOR YOU - real estate agents deal with this kind of thing all the time - your agent needs to know exactly what properties work for you and which don't - it's not about being too picky - it's about setting parameters and using those as a guide to identify cash flowing properties. As a newer investor - it may be able a little harder for you to determine what is a big deal and what is not  - but if you use trusted contractors to give you quotes and timelines - you will start to get an idea about how much money and time it's going to take to get up and running with a project - cross check that with your numbers and before long you will get better at recognizing good deals and passing on bad deals with no guilt. Best of luck to you - I look forward to seeing your updates on this project. 

thats why the call it due diligence and contingency period.. no worry about feelings..

We get buyers do home inspections on our new builds and there is always a punch list ALWAYS.

figure out what is critical.. grading slope away from house unless its weird situation is nothing.

but this just comes with the territory you have critical things and you have honeydo on going maintenance.. 

its your call though

@Keri J Perez don't feel bad, it's business. I backed out of a property 2 weeks ago. It was a BRRRR property that needed cosmetic repairs. After inspection turns out the HVAC is completely dead and needed replaced. I asked for a 5K reduction, the seller wouldn't budge and we walked away. The deal pencils out or it doesn't.

Thank you all for the great responses. Thank you for your professionalism and actually reading what I wrote and taking the time to look at the inspection report and not minimizing the problems associated with water damage like a previous poster did. We finally had two mold remediation companies out to the property the other day(after having an earlier appt. cancelled by the seller without us knowing) to officially confirm the extent of the water damage and mold issue. They both came back with at the least 75k but more likely over 100k to remediate this property. And these quotes are just based on what is seen they both stressed it could be whole different story once the floors are uncovered and behind the walls. Also they are concerned with the air quaility for the tenants that are currently living there.  The original inspector was also there and saw where the seller tried to "clean up" some of the visible mold that was originally listed on the inspection. So we wouldn't buy from this seller at this point anyway because it seems he thought he was somehow going to outsmart the professionals. And we don't know what else he may have covered up. So on to the next property!