walking away from a deal

11 Replies

I'm new to investing...I have a property under contract, inspection has been done, and my financing is in process.   I've asked the seller to fix several items in the home.   I'm still about a month away from closing.  I'm getting cold feet.  It's my first rental property, I'm wondering whether I'll be able to rent it out.   I do have funds to pay mortgage if the place sits vacant for a few months, but not sure I want to do that.   My question is whether I can back out or not?  If the seller fixes everything on the inspection report, can I still walk away?   Am I obligated to close if my reason for backing out is simply 'cold feet'???

I doubt your sales contract has a cold feet clause. If it doesnt work out, just turn around and sell the house if you decide this isnt for you. You will be able to get the house rented out, the question is just for how much.

Originally posted by @Nick Taskani :

I checked, no cold feet clause. 

So no one has done this before?  Can I say his repairs are not satisfactory to me?  

thanks!

I say you back out now rather than waste sellers time and money. I know it's a big step to get into REI, there is a lot to think about. Lying to get out of a contract is not a good way to start a business.

I agree with Mike. I'd get out now, not after you waste money and time. If you're going to be a REI for the long run people will remember. Interview a few RE agents in your area just incase you decide to sell it afterwards. Good luck and just remember no guts no glory.

If you back out you will surely lose all your earnest money. 

I have heard of buyers calling their lender and telling them they dont want to buy and ask them to provide a letter of financing turn-down.  This is a super shady thing and your lender may not go for it. 

What is causing you to get cold feet?  

A first time investor can get nervous but need to remind yourself why you are interested in RE and why are you on this site. Look at the bigger picture and what you want out of it.

If its cold feet because you're not to sure if you can rent it out. Take photos to a few RE agents and get their opinion of what they would rent it for and how quickly.

If you back out now ,[ which is still OK ]. What's going to happen when the next deal comes along.

DON'T make the seller make repairs if you are thinking of backing out. What does your contract say about defaults? Are you limited to losing your earnest money deposit? If the seller makes the repairs and you back out, it may  not matter what the contract says. You have been dealing in bad faith. 

Thank you all for the replies.

I've decided to move forward and buy.

my question is about the repairs...the seller is obligated to make all repairs that he agreed to before closing correct?  One clause in my contract says the seller has 30 days AFTER settlement to make repairs.   I'm a little confused about this process, never done it before.  I would think that after closing, I can't count on seller doing anything...

thanks. 

I would suggest you get estimates to see what the repairs are going to cost. Then have that amount put in an escrow account from the seller's proceeds. When the repairs are completed, the seller gets the money from escrow. The title company should be able to take of this for you.

Nick,
First things first. Know why you decided to get into buy and hold property. You have to know the area (comps, rents, if it needs repairs- how much, ARV - to see if your purchase will gain equity upon repairing it, neighborhood (schools/markets/roadways) etc. this will give you an idea of persons to target your rental property.
Anyways, I understand your hesitation; however, it is my opinion that you always shop for a deal in good faith with an exit strategy. So do your analysis as if you are going to buy, rehab, rent, or flip. Anyways, honesty is the best policy. Best to you.