So this is my first post in the forum's as a member of the BP community. I'm a first time investor looking to purchase a vacation rental in Cape Coral FL. My wife and I have run into a situation that is a bit out of my comfort zone so I thought I'd send it out to the forum's for feedback. We've identified a 3 bed, 2 bath sfh (w/pool) in Cape Coral that we're interested in. Seller initially listed the property for $243k, reduced to $238k; which is when we made our initial offer ($223k). The seller's (agent's) response was:
"owner is willing to go to $235k, it's 5% down within 24 hours, a 5 or 7 day inspection...appraisal ordered w/in 10 days business days from effective date."
We walked away at that point to look for other properties. No luck for 3 weeks so we revisited this home since it was pretty much exactly what and where we were looking for. The price is now reduced to $229k and the owner is still asking for 5% down within 24 hours. That is the portion of the deal I'm concerned about or better put unfamiliar. My issue with this request is what recourse do I have if I provide 5% upfront if the inspection comes back suspect or have other issues after the fact.
Has anyone in run into this request before? If so, can you please educate me on how you responded or if you just went forward with an offer that met your needs instead of the sellers? It would be nice to have the proverbial 'win win' but the sellers agent won't divulge the sellers need for the upfront payment. My assumption is he's in a situation where he needs funds quickly and feels this is a last ditch effort. maybe I'm wrong. Any and all constructive advice is welcomed. Thanks for reading and I look forward to learning a bit more from the community!!!
With the 5% down being sent to the escrow company (not to the seller), and standard inspection and appraisal contingencies, this seems like a very standard contract albeit with some quicker then average timeframes. Just make sure you can get your inspection and appraisal done within that timeframe, and if for some reason you can't send a cancellation prior to your contingency period expiring. You could also put a 30 day loan contingency into the contract.
Perfectly reasonable....you still have your inspection and finance contingencies. I rather like the “appraisal within 10 days”.....avoids the “hoping I can squeak by and get approved for the loan” buyers who are still trying to get approved 30 days out.
You live in wintery Wisconsin, this property is in sunny Florida. I see this is your first post. How are you going to manage this vacation property as a first time investor?
My gut feeling is to walk away from this deal. You already have some red flags, that's why you are posting here.
I've had red flags before when considering a purchase of a house. I walk away. Something better always comes along.
It's kind of like dating. You meet someone, date for awhile. Things go crappy, even though you think they are great. But eventually you meet someone better. Same story with buying rental houses. You should meet my cleaning lady. She does it for free and I get to sleep with her.
Honestly, it's not a terrible counter, but its not exactly what I'd consider a good counter, either.
I'd assume they are either staunch and firm sellers (and causing their realtor a bit of a headache) or the realtor is trying too hard to lock a deal. Could end up hurting the sellers in the long run as they may be increasing exposure and reducing prices.
It's not uncommon for sellers to request larger escrow deposits on vacation homes. Inspections, appraisals, etc can disrupt the business a bit (who wants to rent a vacation home while a home inspector is crawling around???) so they want to be sure you are a serious buyer.
That said, I'd think a more reasonable counter offer would have been $5000 deposit, 5 day inspection period + rented days (gives you 5 unoccupied days to inspect) and application for mortgage within 3 days. The bank has a lot more control over the ordering of the appraisal than you do (trust me, I hold that license too) so I personally hate seeing things like that in the contract.
When your realtor writes your offer, make sure you have a long enough inspection period and a financing and appraised value contingency and you should be able to walk away with your entire deposit back if conditions aren't met.
Thank you to all that responded so quickly last night. I feel a bit more comfortable with the sellers terms but am still planning on flexing my offer to represent my needs a bit more than the sellers. For my first post, this was a great experience and it's good to know there are people out here willing to share their experiences and knowledge.
@Nick Shuber This isn’t really a question for the ST/VR forum I think you’d get better answers on a bigger more general forum.
Sounds a little sketch to me. I’d get down there to personally inspect but that’s just me I’m not crazy about home inspectors. So I went to home inspector school. Which proved my point that it’s a gimmick lol.
You know where to find us when you have your first 4 star review panic attack!
Keep us posted on the matter love to hear if you pursue and what happens!
Welcome Nick. Are you using an agent yourself or going through the listing agent? It sounds like they are trying to control your offer. Its been on the market and dropped price. You have some strength in this.
I don't find the 5% deposit that objectionable for an escrow deposit on a short term rental vacation home. On a home priced around $230K, I have seen deposits ranging from $5K to 10% down. Your escrow deposit will most likely go into the title company's (that will be handling the closing) escrow account. Your escrow will be returned to you (assuming no unusual factors) if your financing falls through or if you exercise your right to cancel the contract "for any reason" based on your home inspection. The "for any reason" clause comes from the FAR/BAR contract that is almost always use for Florida residential transactions, so I assume your realtor will be using it. Your realtor should confirm all of this to you.
Regarding the 10 day time frame on the ordering of the appraisal - I would make sure that your lender knows this. I personally would make the financial contingency period be based on when you receive final approval or denied - not when the appraisal must be ordered. The FAR/BAR is written this way.
Regarding the inspection contingency - As stated above, with the home inspection contingency, you can end the contract for any reason. You don't even have to get a professionally done home inspection. This unilateral control is very clearly worded in the FAR/BAR contract. I would make the home inspection period as long as the seller will accept. This way, if your financing is approved but you decide you don't want to close, your inspection contingency will give you an out.
Good luck with it.
Lots of tire kickers! I have felt like that seller-just make sure your bases are covered. Personally as a buyer I like that kind of a hurdle because it scares away the majority of potential buyers!
@Nick Shuber I don't dare to give you advice on a deal in FL, there are too many differences on whats is requited by State law and what is considered normal and reasonable. What you do need is a local team and that starts with a local buyers agent. Preferrably one who is an investor as well. Most agents have a very superficial understanding of investing. An experienced agent who has vacation rentals of his own has a network of contacts you can use. They will know the best local lender, the best local property managers, contractors and all other ressources you need. Starting with a property is really putting the cart before the horse. Working with the listing agent means that you have are working with someone who's feduciary duties are with the seller. On another note, if the property has not been sold in three weeks it's probably not that good of a deal. Speaking of local Milwaukee experience: every deal that hits MLS get's looked over by literally hundrets of local investors in the first 24 hours. If they all decide it's not worth it it will sit. A local agent will be able to provide more context to that. Good luck!
@Nick Shuber So did you buy the house??
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