SOS- In over my head

SOS- In over my head

Member since 2023 · 59 posts · 17 votes

I've posted multiple questions about this duplex we are (potentially) about to close on. I am in over my head and need more advice. The duplex was a SFH converted to a duplex. They listed it while the plumbing wasn't finished. We were supposed to close on Monday but the permits are still open. They were supposed to put a firewall in the attic on Monday and we had more inspections Tuesday. When we got there Tuesday, they were still doing the firewall and there was a hole in the ceiling from where they fell through. There were 4 other noticeable ceiling patch jobs and the drywall in between the units was popped out slightly. A toilet was also cracked and leaking. All of this happened since we went under contract. The inspector noticed that the water barely flows through the pipes when multiple things are running on both sides. My realtor told the listing agent everything we found and she drove over to be at the inspection, and then the buyer showed up. Lol

They were supposed to add ventilation to the crawl space, grade the front yard, remove an old brick post and cement slab, add flashings to the roof, and more but he didn’t do any of it (we were supposed to close Monday- he’s had over a month and has gone out of town). 

We told the listing agent that we would not proceed if the water pressure wasn’t fixed yesterday and then this morning they requested that we go ahead and close with the open permits and the promise that he’d complete the job. We told them absolutely not and I started to get concerned. We haven’t even gotten the appraisal. And there’s no certificate of occupancy yet??? The listing agent has lied multiple times about different things, and there are multiple red flags that have popped up. I did some digging and it turns out the seller (he’s a flipper) has been sued at least twice for not paying people back (a contractor and someone for a home loan). And he refused to give me the names for his contractors.

This is our first purchase and I feel like this is just chaos. I really don’t even want to close on it anymore. I feel like he probably cut corners, he’s run out of money, and he’s doing shoddy work to try and get things done. Does anyone have any advice? 

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y

@Katherine Roberts

Walk away which you can do

They were to close on a specific date and did not

If you think those are the only problems with the house you are 100% wrong as for every problem you see now there will be ten more later

If you do go through with it I absolutely would do a home inspection on it. But again walk away

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Katherine Roberts

    Walk away which you can do

    They were to close on a specific date and did not

    If you think those are the only problems with the house you are 100% wrong as for every problem you see now there will be ten more later

    If you do go through with it I absolutely would do a home inspection on it. But again walk away

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  • Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    2y

    @Katherine Roberts

    Definitely just walk away / get out of the contract.  There is too much going on.  

  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Katherine Roberts There will be other properties for you to buy going forward. You do not need this headache.

  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    2y

    I agree with everything said. But I would go a different way

    Looks like you are at the beginning of your REI journey. I would get more value out of this instance.

    First consider your risk reward.  How significantly does this investment impact your wealth?

    Is this property close by so you can learn from nearby versus OSS?

    Options to move forward:

    A.  My momma told me not to touch the fire because it is hot.  I still had to touch the fire.  Think you need to do a deal to move to the next level of investing.  I hate walking away from a deal once I’ve put my mind to it.  Always make an offer that works for you.    If your original deal was &325,000, re offer at $250,000.  Some number to take care of the future downsides on the property.  You can still walk away but get more negotiating experience out of the deal.  Not only get the permits closed but also make sure all subcontractors are paid.

    B. Walk away from the deal. Stop though. Make a Checklist on doing your REI deals.

    From your posts you are overwhelmed.  Using a checklist and a home inspector you should have all of the big things covered.  So you still might fill unsure but you have 100% of the big items covered and you only get bit with the small stuff.  

  • Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y

    @Katherine Roberts, my first inclination is the OPPOSITE of what the others here have said. Warren Buffet said "Be fearful when others are greedy and to be greedy when others are fearful".

    Yes, you have a issues going on here! To me though, the issues combined with the seller's apparent lack of ability to rectify them creates a potentially "distressed situation". That is where opportunities are born.

    If the seller has run out of money and you have them locked into a contract, you have leverage because they cannot sell to someone else and must either complete the work OR NEGOTIATE something with you to make it close UNLESS you give up and walk away. If you walk away, they might have other options.

    So, if these issues are something you can deal with yourself after closing, perhaps look to negotiate a price that makes it a sweeter deal for you to take on that work.

    Or if you don't want to do that work and the seller doesn't want to lose you as a buyer negotiate a reduction for the time lost.

    Or negotiate whatever else makes this deal sweeter for you!

    Distressed situations are often opportunities. Financial distress (tax sales, sheriff's sales, short sales, etc), Physical distress (fixer uppers, handyman specials, etc), Legal distress (divorces, estates, etc). All kinds of distressed situations create opportunities for those willing to take on the work and risks. 

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    Stick to your guns.  Have it inspected and give him a deadline.  If it isn't completed by a set day, then lower your offer by $X or get money back from the seller on closing.  I'd also add a hold back for a month after you've moved in to see if there are other problems.  do not close until the work is done, inspected and passed.

  • Realtor · Akron, OH · Member since 2023 · 56 posts · 40 votes
    2y

    Renegotiate the purchase price!

  • Real Estate Consultant · Roswell, GA · Member since 2023 · 50 posts · 26 votes
    2y

    @Katherine Roberts

    Do you have the "promises" that he made in writing as stipulations to the deal? With any outstanding work, temporary occupancy, or open permits, the agent should have written special stipulations that these be completed before closing. If there was an agreeance by both parties for something to be completed after closing, those should have been written as special stipulations to be completed in "X' number of days after closing. IF they didn't meet those conditions, they would potentially be in breach of contract. 

    Feel free to reach out! 

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Mark Faulkner:

    @Katherine Roberts

    Do you have the "promises" that he made in writing as stipulations to the deal? With any outstanding work, temporary occupancy, or open permits, the agent should have written special stipulations that these be completed before closing. If there was an agreeance by both parties for something to be completed after closing, those should have been written as special stipulations to be completed in "X' number of days after closing. IF they didn't meet those conditions, they would potentially be in breach of contract. 

    Feel free to reach out! 


    We said originally they had to have all permits closed and the CO before we closed. The closing date came and went, then she texted my agent asking if we would go ahead and close without them saying that the closed permits and CO were just for our “peace of mind”. And told us that the seller said he’d fix everything after we closed. 

    I think my emotions were getting involved. We met the listing agent and I really didn’t like her. She’s lied on multiple accounts. She pulled the inspector off to the side of the house away from us and was talking to him and he came back very frustrated. I feel like she tried to pay him off or something😂


    I’m thinking we will try to renegotiate. Not sure.

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Theresa Harris:

    Stick to your guns.  Have it inspected and give him a deadline.  If it isn't completed by a set day, then lower your offer by $X or get money back from the seller on closing.  I'd also add a hold back for a month after you've moved in to see if there are other problems.  do not close until the work is done, inspected and passed.


     I like this idea, what is a hold back?

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Kevin Sobilo:

    @Katherine Roberts, my first inclination is the OPPOSITE of what the others here have said. Warren Buffet said "Be fearful when others are greedy and to be greedy when others are fearful".

    Yes, you have a issues going on here! To me though, the issues combined with the seller's apparent lack of ability to rectify them creates a potentially "distressed situation". That is where opportunities are born.

    If the seller has run out of money and you have them locked into a contract, you have leverage because they cannot sell to someone else and must either complete the work OR NEGOTIATE something with you to make it close UNLESS you give up and walk away. If you walk away, they might have other options.

    So, if these issues are something you can deal with yourself after closing, perhaps look to negotiate a price that makes it a sweeter deal for you to take on that work.

    Or if you don't want to do that work and the seller doesn't want to lose you as a buyer negotiate a reduction for the time lost.

    Or negotiate whatever else makes this deal sweeter for you!

    Distressed situations are often opportunities. Financial distress (tax sales, sheriff's sales, short sales, etc), Physical distress (fixer uppers, handyman specials, etc), Legal distress (divorces, estates, etc). All kinds of distressed situations create opportunities for those willing to take on the work and risks. 


    In your experience, are there more problems in situations like this going forward? It was completely remodeled and was supposed to be turnkey. That’s where my issue lies. We were paying the money for it to be done, and done well. I think we might have them fix everything and then renegotiate.

  • Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y
    Quote from @Katherine Roberts:
    Quote from @Kevin Sobilo:

    @Katherine Roberts, my first inclination is the OPPOSITE of what the others here have said. Warren Buffet said "Be fearful when others are greedy and to be greedy when others are fearful".

    Yes, you have a issues going on here! To me though, the issues combined with the seller's apparent lack of ability to rectify them creates a potentially "distressed situation". That is where opportunities are born.

    If the seller has run out of money and you have them locked into a contract, you have leverage because they cannot sell to someone else and must either complete the work OR NEGOTIATE something with you to make it close UNLESS you give up and walk away. If you walk away, they might have other options.

    So, if these issues are something you can deal with yourself after closing, perhaps look to negotiate a price that makes it a sweeter deal for you to take on that work.

    Or if you don't want to do that work and the seller doesn't want to lose you as a buyer negotiate a reduction for the time lost.

    Or negotiate whatever else makes this deal sweeter for you!

    Distressed situations are often opportunities. Financial distress (tax sales, sheriff's sales, short sales, etc), Physical distress (fixer uppers, handyman specials, etc), Legal distress (divorces, estates, etc). All kinds of distressed situations create opportunities for those willing to take on the work and risks. 


    In your experience, are there more problems in situations like this going forward? It was completely remodeled and was supposed to be turnkey. That’s where my issue lies. We were paying the money for it to be done, and done well. I think we might have them fix everything and then renegotiate.


    You don't have any leverage to renegotiate once the work is done. If you back out at that point, you forfeit your deposit and they have a turnkey place to sell to someone else. 

    When the work is finished there are no impediments to closing and no more distressed situation. So, the opportunity is gone at that point.

    If you want to negotiate anything I would do it now. If the seller is unable to complete what they are required for the contract you can walk away, BUT you may be entitled to liquidated damages to cover the costs of things like inspections, appraisals, title searches or more. Perhaps consult a lawyer about that.

    This is a potential negotiation point because if you threaten to walk away if they don't negotiate you could potentially threaten to also come after them for liquidated damages and slap a lis pendens on the property to prevent them from selling it to someone else until that's resolved.

    As for whether you should be concerned about shoddy work, whomever you trust to examine the property should tell you that whether that is a home inspector, contractor or even yourself if you feel confident in your ability.
  • Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Katherine Roberts:

    I've posted multiple questions about this duplex we are (potentially) about to close on. I am in over my head and need more advice. The duplex was a SFH converted to a duplex. They listed it while the plumbing wasn't finished. We were supposed to close on Monday but the permits are still open. They were supposed to put a firewall in the attic on Monday and we had more inspections Tuesday. When we got there Tuesday, they were still doing the firewall and there was a hole in the ceiling from where they fell through. There were 4 other noticeable ceiling patch jobs and the drywall in between the units was popped out slightly. A toilet was also cracked and leaking. All of this happened since we went under contract. The inspector noticed that the water barely flows through the pipes when multiple things are running on both sides. My realtor told the listing agent everything we found and she drove over to be at the inspection, and then the buyer showed up. Lol

    They were supposed to add ventilation to the crawl space, grade the front yard, remove an old brick post and cement slab, add flashings to the roof, and more but he didn’t do any of it (we were supposed to close Monday- he’s had over a month and has gone out of town). 

    We told the listing agent that we would not proceed if the water pressure wasn’t fixed yesterday and then this morning they requested that we go ahead and close with the open permits and the promise that he’d complete the job. We told them absolutely not and I started to get concerned. We haven’t even gotten the appraisal. And there’s no certificate of occupancy yet??? The listing agent has lied multiple times about different things, and there are multiple red flags that have popped up. I did some digging and it turns out the seller (he’s a flipper) has been sued at least twice for not paying people back (a contractor and someone for a home loan). And he refused to give me the names for his contractors.

    This is our first purchase and I feel like this is just chaos. I really don’t even want to close on it anymore. I feel like he probably cut corners, he’s run out of money, and he’s doing shoddy work to try and get things done. Does anyone have any advice? 


    Walk away and get your money back. The other side has breached the warranty of habitability and it isn’t fit for purpose on a multitude of grounds. You are a complete idiot if you go forward. 

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Henry Clark:

    I agree with everything said. But I would go a different way

    Looks like you are at the beginning of your REI journey. I would get more value out of this instance.

    First consider your risk reward.  How significantly does this investment impact your wealth?

    Is this property close by so you can learn from nearby versus OSS?

    Options to move forward:

    A.  My momma told me not to touch the fire because it is hot.  I still had to touch the fire.  Think you need to do a deal to move to the next level of investing.  I hate walking away from a deal once I’ve put my mind to it.  Always make an offer that works for you.    If your original deal was &325,000, re offer at $250,000.  Some number to take care of the future downsides on the property.  You can still walk away but get more negotiating experience out of the deal.  Not only get the permits closed but also make sure all subcontractors are paid.

    B. Walk away from the deal. Stop though. Make a Checklist on doing your REI deals.

    From your posts you are overwhelmed.  Using a checklist and a home inspector you should have all of the big things covered.  So you still might fill unsure but you have 100% of the big items covered and you only get bit with the small stuff.  


     It’s in a decent area and we could make between $100-400 a month on it. Most of the value would be in equity. I have been overwhelmed. My realtor said this is the most complicated deal she’s been apart of and most of her team said this is way too complicated. 

    We have had our inspector come out twice. I think I need to buy a property to actually learn more. I’ve learned tons through this process, it’s just been one headache after another. We just got the second inspection report and it shows that the wood directly on the CMU is untreated and there’s no moisture barrier. We’ve asked them to put a moisture barrier in and they said no. That combined with all the other things they’ve already told us they won’t fix, makes this a no go now. Thank you for taking the time to give your advice!

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y
    Quote from @Katherine Roberts:
    Quote from @Theresa Harris:

    Stick to your guns.  Have it inspected and give him a deadline.  If it isn't completed by a set day, then lower your offer by $X or get money back from the seller on closing.  I'd also add a hold back for a month after you've moved in to see if there are other problems.  do not close until the work is done, inspected and passed.


     I like this idea, what is a hold back?


     It means when the sale closes, a set amount is held in escrow until whatever conditions you set are met.  Eg within 1 month of closing, if there are no major issues, the seller gets the money that was held back. If there are major problems, then that can be used to cover them.

  • Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Walk, or cut the price in half. You'll never get a cert of occupancy. Did this buffoon change the water line out to the street and signed off by water district? New code (for occupancy) will require it, for starters. Walk, or cut the price in half, and hire what you need to do the job right.

  • Investor · Beaufort, SC · Member since 2020 · 33 posts · 12 votes
    2y

    I skimmed through other peoples post and not sure if anyone mentioned this but here's something to think about. If you do end up closing regardless of what all is fixed, not fixed, price reduction, etc. and it turns into a nightmare one of two things could happen: you'll burn yourself out and walk away from ever touching RE again or you'll learn a ton and be a better investor for it. We've all heard countless stories from both sides and ultimately it's your choice. If it was my first purchase I would have walked away without a doubt and looked for those kind of deals after gaining some traction and experience. Best of luck! 

  • Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Jeff Dawson:

    I skimmed through other peoples post and not sure if anyone mentioned this but here's something to think about. If you do end up closing regardless of what all is fixed, not fixed, price reduction, etc. and it turns into a nightmare one of two things could happen: you'll burn yourself out and walk away from ever touching RE again or you'll learn a ton and be a better investor for it. We've all heard countless stories from both sides and ultimately it's your choice. If it was my first purchase I would have walked away without a doubt and looked for those kind of deals after gaining some traction and experience. Best of luck! 


     That's a good point. But my first was a tear down, which I rehabbed. I was young, had the energy, and learned everything from it. It all depends on the investor I guess. Today, my worn out body would walk away, but it could be opportunity for the right, savy, energetic person.

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Jeff Dawson:

    I skimmed through other peoples post and not sure if anyone mentioned this but here's something to think about. If you do end up closing regardless of what all is fixed, not fixed, price reduction, etc. and it turns into a nightmare one of two things could happen: you'll burn yourself out and walk away from ever touching RE again or you'll learn a ton and be a better investor for it. We've all heard countless stories from both sides and ultimately it's your choice. If it was my first purchase I would have walked away without a doubt and looked for those kind of deals after gaining some traction and experience. Best of luck! 


    I think we’re going to walk away. I have 3 children under 3, and run another business. I was hoping to find something relatively simple for right now and this seemed like it fit the bill until we got under contract. 

  • Insurance Agent · Phoenix, AZ · Member since 2014 · 148 posts · 66 votes
    2y

    @Katherine Roberts this is only difficult for you because it’s your first purchase. Walk and be done with it. Great learning experience.

  • Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    2y
    Quote from @Katherine Roberts:

    I’ve posted multiple questions about this duplex we are (potentially) about to close on. I am in over my head and need more advice. 

    Cut and run. Why are you dealing with this character? I do't know him personally, but I can provide more insight if you want to DM me.

  • Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes
    2y

    @Katherine Roberts Welcome to real estate investing! :-) 

    I can understand how emotionally difficult this situation likely is. But I actually think there is a massive silver lining here which should ease your mind. First things first, don't close on this home. I'm going to make the assumption that the repair items you are referencing were agreed to in a written purchase and sale contract. If not you'll likely need to consult professional legal help which is beyond the scope of what I can provide. But if this was all agreed to, in writing, there isn't a lot to get worried about here. Cancel the contract and get your earnest money back. You may lose a bit of money from inspections, etc., but losing 500 or $1k is peanuts compared to the tsunami of expenses that could come your way if you move forward. 

    Real estate is a people business and it's important to keep your word. But don't go through with a bad deal just because you have a contract and are close to closing. Trust me. I've been there, done that. In my case I ended up putting in $200k all-in on a home now worth $190k which doesn't cash flow now. Lots of trapped equity and stress along the way. 

    The silver lining in all of this is that you're now learning so much about real estate from contractual agreements, trust but verify, what to look out for on the next deal, what to look for in an agent, and much more. 

    Some of the more experienced investors here are recommending you try to re-negotiate which you totally can. However, I would try and cut my teeth on something a little more simple for your first one. Yes, negotiating is an important skill, but your mental capacity and enjoyment of the game counts for a lot too and you've probably learned enough already on this experience. 

    I would cancel this purchase and really spend some time thinking about what you can learn from this experience, and what you can do differently next time to get a better outcome next time. Checklists are your friend. 

    As far as real estate troubles go, this one is pretty simple. Read your contract to find out your rights/obligations and don't close. You're taking action which is more than most, so be proud of yourself. Something that I tell myself often "Everything is fixable". And in this case, there isn't anything to fix.

    Best of luck!

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Account Closed:
    Quote from @Katherine Roberts:

    I’ve posted multiple questions about this duplex we are (potentially) about to close on. I am in over my head and need more advice. 

    Cut and run. Why are you dealing with this character? I do't know him personally, but I can provide more insight if you want to DM me.


    I’ll be honest… before this post I thought this was always the kind of stuff that happened. We bought our personal house with cash so it was super easy. I always hear people talking about the work involved in buying investment properties so I just thought this was normal.

  • Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes
    2y
    Quote from @Jeff Dawson:

    I skimmed through other peoples post and not sure if anyone mentioned this but here's something to think about. If you do end up closing regardless of what all is fixed, not fixed, price reduction, etc. and it turns into a nightmare one of two things could happen: you'll burn yourself out and walk away from ever touching RE again or you'll learn a ton and be a better investor for it. We've all heard countless stories from both sides and ultimately it's your choice. If it was my first purchase I would have walked away without a doubt and looked for those kind of deals after gaining some traction and experience. Best of luck! 


     Yes, couldn't agree more! The biggest risk is getting taken out of the game mentally. This is a hard market to get started in and it can feel like deals are scarce, but I would still look for something with a more clear path to success on the first go round. Live in house flip, or house hack. 

  • Member since 2023 · 59 posts · 17 votes
    2y
    Quote from @Timothy Howdeshell:

    @Katherine Roberts Welcome to real estate investing! :-) 

    I can understand how emotionally difficult this situation likely is. But I actually think there is a massive silver lining here which should ease your mind. First things first, don't close on this home. I'm going to make the assumption that the repair items you are referencing were agreed to in a written purchase and sale contract. If not you'll likely need to consult professional legal help which is beyond the scope of what I can provide. But if this was all agreed to, in writing, there isn't a lot to get worried about here. Cancel the contract and get your earnest money back. You may lose a bit of money from inspections, etc., but losing 500 or $1k is peanuts compared to the tsunami of expenses that could come your way if you move forward. 

    Real estate is a people business and it's important to keep your word. But don't go through with a bad deal just because you have a contract and are close to closing. Trust me. I've been there, done that. In my case I ended up putting in $200k all-in on a home now worth $190k which doesn't cash flow now. Lots of trapped equity and stress along the way. 

    The silver lining in all of this is that you're now learning so much about real estate from contractual agreements, trust but verify, what to look out for on the next deal, what to look for in an agent, and much more. 

    Some of the more experienced investors here are recommending you try to re-negotiate which you totally can. However, I would try and cut my teeth on something a little more simple for your first one. Yes, negotiating is an important skill, but your mental capacity and enjoyment of the game counts for a lot too and you've probably learned enough already on this experience. 

    I would cancel this purchase and really spend some time thinking about what you can learn from this experience, and what you can do differently next time to get a better outcome next time. Checklists are your friend. 

    As far as real estate troubles go, this one is pretty simple. Read your contract to find out your rights/obligations and don't close. You're taking action which is more than most, so be proud of yourself. Something that I tell myself often "Everything is fixable". And in this case, there isn't anything to fix.

    Best of luck!

     Thank you for this! It’s very helpful. Like I mentioned in other replies, I thought this was normal and I was just failing. It’s very reassuring to know that I didn’t utterly screw things up, I just missed some red flags. I have learned tons from this experience and will make sure all permits are closed before I make an offer on a house again. (They didn’t tell us there were open permits until after they accepted our offer, but I digress.) My husband has said the same thing about checklists and they will certainly be implemented the next time around. Thank you so much for the encouragement!

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