Quadruplex in Indy - $58k in repairs. Seller offers only $12.5k in price reduction.

[Michael Romero]

Trying to figure out whether I should walk away from a deal I am currently in escrow for. $476k purchase price with 4% seller concessions. Zero down VA Loan. Closing currently set for July 3. Inspection was last Saturday 5/31. Inspection results came back, and I'd asked for most of the items to be addressed by the seller in our inspection response. Seller fired back that they don't want to correct any of the issues but instead offered a $12.5k reduction in price. Over this past weekend I had a contractor estimate the cost of repairing the inspection items we requested repaired and he came back with it costing around $58k to address the list.

Should I counter with $58k ? I was hoping to use my $100k renovation budget on improvements that would force equity into the property (1 bed to 2 bed conversions of 2 units, HVAC throughout, some energy efficient windows, storage cages in the basement), but spending $58k to fix things leaves me with only $42k for improvements. 

This is my first multi-family investment. The property was not listed "as-is". Isn't there an expectation that inspection items get addressed by seller, potentially paid out through proceeds from the sale?  I thought this was a common thing and was surprised when seller came back that they weren't willing to address the issues. 

Looking for advice here. If we counter at $58k (up from their offer of $12.5k) what "middle ground" figure would make this deal still worth moving forward with?  DM if you care to see more details of the property. I have the listing, full inspection report, and 360 views of the property I can send over.

-Mike

[Bill B.]

How much more could he sell it for if you backed out and he did those repairs? I assume you’re not saying that $58k will add ZERO value. You can certainly ask but I would assume anything about $20k is hard no. I can’t believe he gave you the $12.5K on top of the $20k closing gift. Add that to $29k in commission and they’re already out $50k. 

I assume it’s renting just fine as is. You aren’t buying a new home. USUALLY, 60-80% of inspection “problems” are things you wouldn’t fix on your own home if you lived there. And you asked for 100% of the items to be fixed?  Safety items sure, but those should be fixed because tenants are currently living there. I understand the world is your oyster when you’re putting $0 down. But I can’t believe they’re even entertaining the offer. The market must be tough for sellers. 

TLDR: if you’re looking for a reason to bail without losing your deposit, bail. I assume it was way overpriced or the area is crashing if you think $50k in repairs will add zero value. Get out now. (All this is assuming for the first time ever, 100% of the inspectors problems were real problems and you’re not over reacting.) 

Good luck.