Seller claimed final offer?
Providence, RI · Member since 2017 · 23 posts · 8 votes
Seller claimed final offer?
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Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votesYeah they threw a verbal offer. Then can do that if they want. Personally I like my stuff in writing then after we have something going on a mutual respectful discussion then we can verbal a bit to hammer out the details and write up a final that is all complete.
As far as a week later giving a final verbal after telling you "no, go home", because theirs fell through..... it's all a matter of style. It sounds like you were not given the respect you feel that your offer deserves which may be a viable feeling. However it is business, do you still like it at 435? Do you like it at 427K? If you want to make another offer they can't tell you what it is (They can ignore it if they choose but ignoring offers coming in at 95% of list is bad business), they only control what they put on paper. You can resubmit your original offer with a new date.
Good Luck and keep emotions out of it and you got this!
35 Replies
- Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes9yJennifer Cheu Run your numbers and see if they work at $435k. If they do, the. The rest is bonus and bickering.
- Providence, RI · Member since 2017 · 23 posts · 8 votes9y
@Aaron Lovett We are still within our inspection period but getting close to the end of it. P&S was signed on 8/4, inspection was completed on 8/12. Agreement states 10 business days for requests and resolve. My last communication from my realtor is we will hear NLT tomorrow morning.
The reason I have all these questions is because I'll direct them at my realtor first, and he will answer high level. I don't have insight into any of the dealings behind the scenes, and with this being my first property, no prior experience at all.
@Kimberly H. No I do not have an attorney. My realtor is my main contact, and he is referring me to his network of pros.
@Nick G. Good point about the ask being a somewhat obvious request to get back to the original offer price. I did do my homework and got a quote to support the request. Responses in this forum points out that these requests should pertain to unforeseen issues, and I would see 3-5 years left on the roof would be 1 of them, though everything is subject to each person's interpretation. Through all of this I am banking on my realtor not doing anything that would jeopardize his cut of this deal, which at 2.5% should be around 10k?
@Celeste Fackrell Here are the numbers for those interested.
Purchase price $435k
3 units, 3 bd per unit, renting at $1000,$1000,$900
Current market units could probably rent for $1500-1650 each
PITI around $3500
By my conservative calculations I would be in the red around $300 a month. Which from everything I have learned through BP so far, makes this a bad deal. Yes, while I owner occupy this place I would likely cash flow while I self manage and pay lower tax. But that's not how you look at a deal right? On the other hand, I will be living month to month at my current apartment paying a fee on top of high rent, so I have an incentive to close on an less than ideal property just to start gaining tax benefits and building landlording experience.
- Investor · Moorpark, CA · Member since 2016 · 248 posts · 191 votes9y
@Jennifer Cheu I can't comment toward your agent, I can only assume they're doing their best to look our for your interests and your interests only, since they have a fiduciary duty to you. On the other topic, in my state, all homes are sold as-is unless otherwise negotiated. It may or may not be the same in your state, but what that means in CA is that requests for concessions following inspection are intended to be for unforeseen issues that were discovered during the inspection period. It also means that whatever price of the home is originally agreed-upon is understood to be the price of the home as-is, including all issues and problems. In other words, the price of the home already factors in obvious things like an old roof, which means asking for a concession for that item would be trying to double-hit the seller for it.
That may not be the case for you, I'm just speaking broadly to how it works in CA. If I were in your shoes, I probably would have at least tweaked the request amount just to avoid it looking the way I mentioned. Lol.
I also agree with your principles on why you're buying a "meh" deal by BP standards. I did the same thing and it was an excellent decision on my part, congrats on almost being a homeowner, and giant bonus points for buying a multifamily to do it.
- Rental Property Investor · Manassas, VA · Member since 2015 · 68 posts · 49 votes9y
@Jennifer
First, thank you for the vote; always nice to get.
Second, and I don't want to rain on your parade, but this would not be an investment I would make.
I don't know your criteria but lets say you have a minimum CAP RATE (purchase/annual NOI) of say 6%.
I'm not considering all the nuances of your negotiation, although important, that is a snap shot in this particular full-length movie.
If my interpretation is correct: Using your CURRENT figures (which is how you need to evaluate, not possible, future numbers)
Purchase Price of $435k
CURRENT monthly rental income of $2900
CURRENT monthly PITI of $3500
IF you're looking for an INVESTMENT, I would not have to go further than this. You already said you would have a little negative cash flow. You have NEGATIVE cash flow before monthly expenses. For me, that means it is time to move on.
Just to complete the exercise. Some of your current monthly Operating Expenses: (estimated)
*Long Term Maintenance (Escrow if you will for Roofs, Furnaces, Flooring, Appliances, etc.) $150/month/unit = $450/month
*Management Fees (@ 8% of Rental Income) = $2900 *.08 = $232/month
*Vacancy @ 5% of Rental Income = $145/month
*Normal Maintenance @ 7.5% = $217/month
*Snow Removal (in R.I.) = 300/year = $25/month
* There are others
These are only estimates mind you, but probably not bad estimates. In Providence, if it is a 75+ year old place, the escrow and maintenance expenses are probably low Together these expenses add up to roughly $1069/month.
Combine the $1069 monthly expenses with the exiting $600/month PITI vs Rental Income deficit, and you are substantially more than a few hundred dollars a month cash negative.
I'm sorry, but as an investment, this is an easy no for me at $435k or $410k,, or even $350k . (PITI goes down approx. $550/month)
Perhaps there are other criteria more important to you than strictly dollars. If this is about ROI, then I would keep looking for a sound investment.
- Providence, RI · Member since 2017 · 23 posts · 8 votes9y
Update for those interested.
The buyer did not budge from his $3k offer, and I accepted. We have signed documents now and I'm moving forward to the financing aspect of this purchase.
Regarding income/expenses:
My FHA interest rate is locked at 3.875%, a bit better than my expectation of 4%. I believe I might be able to take care of the smaller repairs within units with tenants' security deposits (I agree with you all, not really a big deal). I ran rentometer for my area, and should be able to get $1650 per unit fairly easily. This is definitely a risk to assume, but I think the rent amount will make or break this deal. I could possibly get $600/bed/unit 1 month into owning this house, bringing up my rent to $1800 per unit - $5400 total. Brown and RISD charges $1-$1.5k for a dorm room, and I've got contacts to find interested grad students or young professionals. I'm keeping my fingers crossed!
- Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes9yAre you intending to use the tenant's security deposits as capital for improvements? I don't know the laws there, but in TN that isn't allowed. I'm not a lawyer, so I could be mistaken.
- Providence, RI · Member since 2017 · 23 posts · 8 votes9y
@Richard Elvin My intent was to fix the minor issues - bathroom floor tiles, bathroom wall water damage, door panel of glass broken, section of baseboard heat not functional. I was thinking all of this would be classified as repairs...
- Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes9y
@Jennifer Cheu I don't see the relevance to what you intend to repair. I don't believe it is legal to use the security deposit money until after the lease is terminated. Maybe I've missed something; are the current tenants vacating?
I'm not an attorney. I strongly encourage you to check with an attorney before using any of the tenants security deposit money.
It's this sentence that raised my concern, "I believe I might be able to take care of the smaller repairs within units with tenants' security deposits". Are you intending to use the security deposits of the current tenants, or will they be vacating and you intend to keep part of the security deposit to repair the damages they've caused? I'm not sure I've got a clear understanding of what you are planning. :)
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
Originally posted by @Jennifer Cheu:
Hi all,
Thank you for the responses!! It's amazing to be able to get instant feedback on something that's been bugging me for days. I am actually asking the question now after agreeing. The way the situation was presented to me, was take the $435k offer, or selling agent will allow the 7 other interested parties to view the house and allow for other bids. The first 2 offers including mine was made after 2 days of the house on market. I panicked of sorts, and went ahead and signed the P&S at $435k.
The strategy my buying agent said was, accept the $435k purchase price, and we will get some money/value back at the inspection. Inspection took place last Saturday. Below is my request.
From inspection report, in order of safety,
1. Electrical breakers2. Roof
3. Railings
4. First floor bathroom broken tiling, wall water damage, baseboard heating broken5. Retaining wall
6. Vacuum breakers on 2 units
7. Driveway
8. Water damage throughout house noted in report.
Asking for $15k price reduction, see high cost items quoted total $14.5k, asking another $500 for all minor repairs.
About 2 hours ago, my agent emailed me, seller offered fixing electrical breakers and $3k for the roof.
This is way lower than I'm expecting, working with my agent to ask for a better deal, but his response is basically seller knows he has hot commodity...
What's the best way to get the most out of this situation?!
If any buyer asked me for $15k back after an inspection Id simply say no. Zero subsidy. It is an incredibly highly absurd number to ask for. As a seller or agent, Id take your home inspection report and shop it around to see who was willing to take the property as it is, and would likely get a taker from those who had remorse from not buying it the first time around.
District Invest Group546 Reviews - Pawtucket, RI · Member since 2016 · 10 posts · 2 votes9yIt sounds like you've taken a little heat here but all in the interest of advisement. I am a newbie who is very familiar with the area and it has seen an uptick in value of late, benefitting in my opinion from other, once down,areas of Providence. Thank you everyone for the input you gave, it benefits all of us. And best of luck with your new purchase! Keep us posted of your progress.
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