When would you back out of a deal?

Question

Real quick and easy here. What would be a reason for you to back out of a deal during due diligence? Example: Foundation issues, electrical, plumbing, crazy neighbors, etc. What’s the line you aren’t willing to cross when it comes to buying a property?

Anson Young · Answer

Got it, your numbers are a little more forgiving, then.Still, make sure you understand the extent of what you are getting into 100%, $30k discount might not be enough.

Kenan Heppe · Answer

Great question! Many of these issues translate to a certain cost. For a majority of the issues, it would simply be if something makes the deal not financially sound anymore. Huge headaches like crazy neighbors or title problems that waste lots of time would probably be high on the list as well. I'm eager to see what other people write!

Anson Young · Answer

Nicholas,As they say "price cures all", any of those issues can be dealt with at the right price.  I mean, the house could be so bad that it needs to be torn down, but if the seller is selling the property for land value, you could knock down the house and build a new one for the right price.Typically, for me, it comes down to condition vs price, and the seller not accepting a lower price to account for the things found during due diligence.There of course are other specific examples, like buying a condo or townhome only to find out there is a special HOA assessment coming for $50,000 per unit, etc.

Nicholas Glatter · Answer

@Anson Young

House Hack

Nicholas Glatter · Answer

@Craig Curelop

Hey Craig, good to hear from you again.

I sorta came to the same conclusion. I figured if I couldn’t get the owners to cover the repair, my money could be spent better elsewhere.

Craig Curelop · Answer

@Nicholas Glatter - Usually if there are foundation issues or anything that jeopardizes the safety of the tenants, I am out. Unless of course, the sellers are willing to fix it or reduce the price enough for me to fix it.

Anson Young · Answer

Is this for a rental or househack or flip or ? If the numbers work for the property for the first two, great!

Nicholas Glatter · Answer

@Anson Young

Yes, pretty close.

It’s about 20/30K from the highest priced home in the area.

Anson Young · Answer

Thats a tough one for sure...  the answer is "it really depends".  Depends on how much work is needed, if its reparable, etc.  Is the current price at the top of the market/neighborhood?  In a neighborhood where houses top out at $300,000, this one with foundation problems is $300,000?

Nicholas Glatter · Answer

@Kenan Heppe

Would you go through with a deal that needs “bone” work but not cosmetic work?

When would you back out of a deal?

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