​ UNDER CONTRACT and FALLING APART

Have had the Riverside house under contract for about a month. I didn't want to post until we got the deal firmly in hand. And that, honestly, didn't happen until the day after our closing was to occur!

We were very close to the finish line. Tension was building. We'd gotten all of our required paperwork to the lender, had our credit run. The inspection period had passed uneventfully about three weeks before. And yet the lender wasn’t able to get an appraisal ordered until the last moments of the week prior to closing. There was not enough time to get the appraisal to underwriting and still make it to closing.

The family were losing confidence in our ability to close with that lender. Our appraisal contingency passed by, so we felt that the deal was falling apart. In that manner of thinking, we sent them a release, letting them know that we were walking away from our obligation to buy in accordance with issues with the financing contingency. Additionally, we indicated through our Realtor that we wanted to be the back-up offer to their back-up, as we hoped to renovate the house and bring it back to its former glory. The back-up offer was from a builder who wanted to knock the house down and build two new properties on the site.

Back to the bank and the much-delayed appraisal: the appraiser told the lender that there was black mold, loose wires and termite damage.  By the end of Friday, the appraisal manager recalled the appraisal for revision, and left us all hanging over the weekend.

Monday, our closing day, came and went without any communication from the lender. I felt panic. What to do?

On Tuesday, underwriting came back and said we’d have to source bids from contractors…but we were out of the inspection period and now past our contracted close date, so that wasn’t going to work. Our inspection period was over by several weeks! While the lender would allow a “hold back” of funds to pay for the renovation, our time period for closing would start back up again at about a month.

The sellers communicated that their frustration was mounting. We sent word through our Realtor that we were still interested in the house, and intended to renovate it and turn it into a family house again. Another day passed while the 8 other parties discussed their end of the transaction. When we received word back, we were floored:

The 84 year old owner and her 7 kids countered us with more time, something that I hadn't seen before. And so they didn't sign the release. The family wanted to give us time to work it out. We decided to go back to the drawing board, and contacted a number of hard-money lenders, a Line of Credit outfit, and family members, hoping to get a fast closing. Nothing was solidifying, and again I felt panic. We were challenged with finding a way to make the deal work, combined with the seller frustrations and the time horizon.

When we thought that all was lost, all eight of the the family members agreed to offer us a deal whereby they hold a mortgage for us: half down now, and 1/4 due in six months, and the last 1/4 due in a year.  In my years of investing, this is perceived as a once-in-a-blue-moon event: owner carry on an expensive house.  We signed two pages at the title company.  This purchase was done and dusted.  

And that is how we came to own an extreme fixer in one of the nicest old neighborhoods in Indialantic, Florida.