OT - Backed Out Of Real Estate Deal Today

Hey guys. Some of you know that I invest some in rental real estate. Well, last week I put in an offer on a property in a good location that on the face value looked like a good deal. I walked through two of the three units, the third tenant had the flu so I stayed away.

I'm working with a realtor on this one and he put in a clause that the deal was subject to inspection. I did the inspection myself and found consistent construction quality issues from poor insulation in the attic, to horrible drywalling in the "remodeled" unit, to trim pieces falling off. Plus there were windows that wouldn't open, among other things. They also listed one of the three units as rented for more than they are now trying to rent it for, which has a negative impact on the deal for me.

I felt so nervous (sick to my stomach feeling) last night, and again today. I just felt vulnerable to be going in at the price I was for a property that seemed to be thrown together in many regards.

I emailed my realtor friend who was working with me on the project as my agent to let him know I'm not wanting the deal now. Haven't heard back from him yet.

I hate to be a person that jumps out of the deal after signing up, but the property was just not in good enough condition to be worth the money after closer inspection. I could use a little support that I'm doing the right thing for myself. I am always hard on myself with situations like this... but I don't want to be taken advantage of either.

It's always best to go with your gut feeling.

Is it going to cost too much to repair the problems?? In my time, yes. I would have to do the work myself to keep costs down, and I do not have the time.

The guy just finished things very very sloppily on the things he did do. An attic is supposed to have R 38 insulation in it. He threw a lower value insulation in most of it, and didn't even have any in some spots. Based on that alone I am hesitant to buy it given his lack of care for the place.

I talked to my realtor and he is telling me how I am not going to find a better deal. This guy is my friend in ways (my dad's friend, but has helped me out often). I however have found better deals than this, twice, within the last year. He keeps telling me that the rents need raised, but the rent actually got lowered in one and has taken over a month and still isn't rented. I just don't know how to feel. I feel like this realtor is telling me things that are not true based on my extensive time looking things over.

Isn't it a good thing that I decided the property was not as good as advertised, and in the interest of my own finances I withdrew the offer because I felt I would be being taken advantage of at this price?

My dad is telling me that I am doing the right thing, and that it would be stupid if I didn't stand up for myself in this situation.

I just feel kinda crappy about it all.

Thanks, Imagardener.

Live and learn. If my realtor hadn't led me to believe things that weren't true I wouldn't have put the offer in on the property in the first place. But after seeing the repairs needing done I just saw my whole summer being eaten away there instead of enjoying my first year of marriage... and I know that would be a huge mistake.

Thank you for your post.

That's what those clauses are for! So you can really get a look at a place before making the ultimate decision. If it doesn't meet your standards for the price, then that's that. It's your business, your money, and your time.

Your realtor friend, no matter his intentions, is going to be out for commission. His standards are going to be different.

Freakanomics discusses the selling price of a realtor's home in relation to comps that s/he sells. A study found that realtor's take more time to sell their home, but that they sell for on average $10,000 more on a $300,000.00 house. It's not because they are bad people, but because they work on commission. If they get a 5% commission (I forget the exact numbers) then the sale of a $300,000 house gets them 15,000 commission while a $310,000 house gets them only $500.00 more. That $500.00 is not worth spending an extra 20 days to sell a house when they could book another client and sell another $300,000 house. If they sell their own home, then they recoup the entire $10,000.

The realtor may not be ill-intentioned in selling your house sooner, but their motivation may color their judgement differently.

12 pages of things wrong in the inspection on last home including radon in the basement which is really bad for kids.

I ended up getting the same house 2 years newer with solid slab basement, walkout to sunny southern exposure and open SPACE instead of homes behind me plus hardwoods in kitchen for just 10k more.

Best decision I ever made was to demand my money back on that first one. Daughter instantly made life long friends next door. Other house ended being kind of a run down street.