Need Urgent Advice - Complex Situation with Duplex Offer
Hello BiggerPockets Community,
I'm in a predicament regarding a duplex offer, and I'm in dire need of advice and insights from experienced investors like you.
I recently placed an offer on a duplex from the 1900s, which I believed had been on the market for over 45 days. However, it turns out there was a previous offer that fell through due to a septic tank issue. The inspection revealed cracks in the septic tank, which is undersized by code for the 4-bedroom duplex. As a result, the city now mandates switching the duplex to the city sewer system. Initially, the seller agreed to cover the costs of septic system decommissioning and sewer connection, which sounded great.
The seller's agent contacted my agent late last night to inform us that our offer had been accepted. This morning, before heading to my W2 job, I contacted some local electricians and building inspectors to assess the situation. One electrician, who had been part of a previous inspection, got back to me and provided an estimate for fixing electrical issues, including addressing the knob and tube wiring. Then things took a surprising turn when, while processing this information, my agent informed me that our offer wasn't the only one accepted; it was one of six that the seller accepted simultaneously.
Here's where it gets even more complicated: the seller's agent suddenly dumped due diligence from two years ago, the last time the duplex was sold, and from a few weeks ago, on us. They expressed concerns about accepting an offer, undergoing inspections, discovering more issues, and the buyer backing out, similar to their last experience. They've given us a tight deadline to respond tonight.
The issue I'm facing is that the electrician's quote to address the problems from two years ago is significantly lower than I received today. This price difference is primarily due to the increased costs of materials and labor since the end of the COVID-19 pandemic. I suspect this may have been intentional on the seller's part to limit my ability to obtain current quotes before tonight's deadline, as I don't have access to the duplex for an inspector to assess the situation.
Based on the inspection report, my revised estimates of the work indicate that the property's cash-on-cash return would drop from 25% to 17%. While it's still a good deal, the upfront costs are considerably higher than I initially anticipated, especially since the seller is backing out of covering the costs of septic system decommissioning and sewer connection.
I'm at a crossroads and unsure of the best course of action. Should I proceed with my offer, requesting credits based on the higher quote, or should I reconsider my offer altogether? Your insights and advice on navigating this complex situation would be greatly appreciated.
Thank you for taking the time to read about my dilemma, and I look forward to hearing your thoughts.