All Forum Posts by: Chris Kennedy

@Tom Keith Thanks. Yes, I have quotes for a typical builders risk policy, and GL, but neither of those will cover me in event of tenant burning down the house. The issue is that I can't get a landlord policy without a 4 point inspection, which I cannot get due to no access to the house. So, I figured there might be some alternative - but all my research thus far suggests not. 

I appreciate everybody's input nonetheless, and will keep you all posted as this unfolds.

@Steve Babiak Thanks. That's along the lines of what I was thinking for plan B if I can't find an insurance company that will work with me. I was considering leaving half the funds in escrow to be given to me in event tenant burns the place down, then I still have a lot in a nice neighborhood...

Thanks everyone for the responses. Some good ideas here.

@Troy Fisher I'm going ahead with it because there's an excellent profit potential - or I will hold it as a rental in a worst case. I have an excellent evictions attorney that I can work with if needed. Yes, it could be a headache, but it's a risk I'm willing to take. It's in a solid neighborhood. Haven't been able to get a landlord policy for it yet, all the agents have told me they can't provide it, I guess I need to make more calls. 

@Marcia Maynard I am working on getting background on the son (who is a fully grown adult by the way - I believe he is in his forties). And yes, my goal is to do this the easy way and offer him some cash to move out. This would be preferable, but I like to be prepared for worst case also! I am inquiring about a standard fire policy, thanks for the suggestion.

@Jassem A. Thanks for your reply. House is free and clear. Trying to avoid bringing the owner into the eviction process at all since she is already tired of this and is giving me a good price in exchange for not dealing with eviction.

Hi fellow investors,

I'm in a unique situation I have not had to deal with before and would like to get some opinions on the best way forward. 

Here's the deal:

I have a single family home under contract for $25K, with an estimated ARV of $120-130K. Estimated $35-40K in rehab required. I plan on closing on the property to rehab and resell.

Here's the issue: 

The owner lives out of state and her son lives in the subject property. He is not paying rent, and has fallen out with the family. They are not speaking to each other and there is a lot of animosity. He has threatened to burn the house down if she sells it. This is why we got it for a good price - the owner just wants to be done with the situation. There is no lease, and we cannot gain access to the property.

I am fine purchasing the house as-is without seeing the interior as we are planning full rehab anyway. My concern is that the tenant follows through on his threats of burning down the house and then I have lost $25K overnight. I have contacted numerous insurance agents and nobody can give me a policy to cover this. I cannot get a traditional homeowners policy without a 4 point, and I cannot get access to the house to get the 4 point inspection done. The GL policies I have been quoted for only cover the house if it's vacant at time of closing.

The current owner is selling it to me because she does not want to handle evicting her son, which I understand, so giving me the house vacant is not an option. 

Does anybody know what sort of insurance policy I can get, if any? Or do I have to take the risk of closing without insurance? I know we could ask seller to leave some funds in escrow until the son vacates, but I don't know if she'll go for it. 

Thoughts? Advice? Thanks in advance! 

@Terry Hershberger agreed. Win-win is the way to go, and I definitely agree that doing all you can to build the relationship and get the seller to see logic in order to settle on a fair price is sound advice. That being said, not everyone is a fair or logical negotiator - some people are out to win no matter what it costs the other side. In those cases it's definitely good to know some negotiation tips/tricks. 

having said that, lawyers are "worst case scenario" people. Your job as the entrepreneur is to decide whether to listen to them or not :D 

why not just get your RE license and not even worry about this? It will cost you $500 and some time, and you'll probably learn a thing or two in the process. Plus you can list those deals from motivated sellers who don't need to sell at a discount but are still willing to sell at reasonable market value - if you're generating leads anyway, why not maximize what you can do with them. iIt's no brainer to me. 

I agree with @J Scott it doesn't matter what market value is if the property meets your criteria. That being said, it's always worth trying to save some extra cash if you can. Here's what I would do:

1. Try and get a face to face appointment with the seller to sign paperwork and lock down the deal - if you're already happy with the $56k, then worst case you sign for that price and move forward. You've already got the deal in hand. Be confident.

2. When you meet, tell the seller that you're VERY close to agreement. You're at $50k, he's at $56k - you're so close, how can you guys reach agreement? Try to get the seller to suggest splitting the difference (you're only $6k apart!) - don't offer to do this yourself or you just reset your offer to $53k. If you can get the seller to suggest splitting the difference, you just got him/her to agree to $53k. 

3. When he/she suggests splitting the difference then say "goodness, so if I can get you $53k then we have a deal?" They will say yes. Then you can defer to higher authority for the final decision - "well, let me call my partner and see if we can make that happen". Then go outside and spend a few minutes on the phone - with anyone! give your mom a call and say hi :D 

4. Come back in and say "you know, my partner is the numbers guy and he just can't get our price up to $53k, he says the numbers just don't work at that price. We are SO close that it would be a shame to put in all this work and not make a deal. I may take some flack for this, but since we're only $3k apart,  how about I come up to $51,500 and we split the difference? I think that's fair don't you?" 

I have used this tactic many times and it works - all part of the negotiating game. Even if you get them to split the difference once you just made $3000, which is awesome. 

I'm sure I'll get some negative comments from folks about this, but negotiating is a game and you have to treat it that way. 

Just think - if you make 5 deals this year and you leave $6000 on the table each time, you just lost $30,000. It's always worth trying for a better deal!  

You can make your offer - but it will be subject to the lender's approval of the offer price. If you have the cash and are patient then this is a great way to get deals. You need to work with a knowledgeable realtor or a title company that specializes in short sale negotiation in order to be successful. So many investors don't want to be bothered with these leads because they can take 3-6 months to close. But really, if you have the right team in place then you can make your offer and let it sit there until lender approval, so it's not much work on your part. And you can really get good prices.