I’ve had a bad feeling about what was-to-be House #13 for a couple weeks now. I think the biggest issue I’ve had is that the listing agent for the property has been making it very difficult for us to get through the purchase without making us jump through hoops.
First, she submitted the buyer information incorrectly to the seller, and made us create paperwork to fix her mistake. Then she had a big issue with a stipulation we included in the contract that stated we could use financing instead of cash to purchase the property if we so chose; she claimed the bank would have an issue with this stipulation, despite us using the same bank and the same stipulation on multiple past properties. Then, when we did try to amend the contract to use financing instead of cash, the listing agent wanted us to jump through a ton of hoops to get it done.
On top of that, while the numbers meet our criteria, it’s not what I would consider to be a great deal. It looks like we’re going to come in around our worst-case rehab estimates, meaning there won’t be extra profit, and comps in the neighborhood are hard to come by.
Lastly, none of us (me, my wife, my project manager, or our partners) are particularly excited about what this house will look like in the end. It will be nice, no doubt, but I don’t think it will ultimately be our best work (given our budget), and what we have to work with is average at best.
So, we’ve decided not to move forward on this project. We’ve canceled our lender’s appraisal, and we will eat the inspection costs on this one.
I always hate to back out of a deal (especially after getting inspectors, contractors, lenders, etc involved), but sometimes it’s necessary. In this case, I think it was the right decision…
It’s always hard to back out on a deal, but trusting your gut is important. Banks sometimes take issue with us bring in financing versus cash, but typically, if you explain to the agent you’re willing to remove all contingencies and will close on time still, they usually deal with it.
Oddly enough, the one we backed out on sold to another investor for $25,000 more…
If it makes you sleep better at night then backing out was the correct thing. As steve said, always go with your gut.
JScott, No harm in backing. I’ll back out of a deal if there is something I don’t like. I’ve eaten a couple of EM’s, but it sometimes cheaper than proceeding. Question: Why do you use a house inspector? Most are buffoons, not worth the fee you pay, and try going back on one….. If I have any questions a structural engineer is the one my $$$ go too.
Jingle
Sounds like a good call for you. Skip the 13th floor and go straight to the 14th.
Jingle –
We’ve been moving away from using inspectors over the past 5 houses or so, but when I get a house with any potential structural issues, I like to bring our inspector out. He’s not a typical inspector (he has great real-world experience with building houses), and he knows the structural stuff very well.
While I could pay a structural engineer, for the same price I can pay my inspector, and have him also give me a run-down of any other issues I might have missed (i.e., I can get him to go through the crawl space, attic, and other details I hate dealing with).
But, I agree that it’s becoming less and less necessary these days, and I really like you idea of just using an engineer when necessary.
Good in theory, but now the next house will be #13! 🙂
Why don’t you keep a photos up and make it House #12.5!
Alex –
Great idea!