Why I Had To Walk Away and Make An Offer on a Different Property

June 20, 2015 Posted by Tyler Cruz

It’s crazy… 48 hours ago, I was only hours away from removing the final subjects on the duplex contract I had.

However, the inspection ended up being absolutely horrible! In fact, I had to wait a while for the inspector to finish creating his report as there were so many issues with the property. He ended up inspecting both sides (and drafting the report) over around a 6-hour period, then proceeded to spend 2 hours going over everything with me (and my realtor).

The report itself was 89-pages long – granted this was a duplex so naturally it would be longer than that of a typical house, but still, the majority of those 89 pages were all ISSUES.

While some of the issues were relatively minor cosmetic, cheap, or otherwise simple tasks that I could take care of myself with the aid of YouTube and Googling, a large portion were a lot more expensive and tedious issues.

Here is a list of just some of them:

  • The house is poorly insulated, with R15 in the areas where it is insulated, and with large amounts of other areas without any insulation at all!
  • The attic did not have proper ventilation and needed more vents added (there are no soffits on this older-style house).
  • The water heater and main water shut off were found by the inspector hidden behind an inaccessible wall behind a toilet (he ended up unscrewing the entire wall to get access to it).
  • One of the ovens did not function (the stove worked, but not the oven)
  • A lot of the ventilation in the house is done horribly. For example, one of the bathroom vents just vents straight into the attic and not outside! Two other bathrooms come to a T which will just blow a lot of the air right into the other, etc.
  • Some of the baseboard heating didn’t function, while some other areas of the house didn’t have any baseboard heating at all (although they appeared to be prewired for it).

I thought about all the issues on my drive home and for the next few hours and ultimately decided to just cut my losses and walk away from the deal.

The bank appraisal was set to be done the following morning, so I contacted my broker who fortunately was able to cancel the appraisal in the morning.

89-pages of crap to deal with were just too many – even if they dropped the price by $20,000 I would have walked away as it wasn’t worth the time and money to fix everything up. If they had dropped $30K+ then I may have gone ahead with it, but it was very unlikely that they would so I just walked away.

Legally, I should be able to get my $1,000 first-stage deposit back, and initiated the first steps in retrieving it, so hopefully they don’t try to do anything to prevent it and make me go to court over it.

However, the inspection fee is not recoverable of course. That’s $750 down the drain there. It may sound like a lot, but it’s nothing compared to the time, headache, and costs it would have cost if I had bought the property.

Backups and New Offers

The good news is that I had backups in mind.

If you’ve been following my real estate investor adventure closely then you’ll remember that it was a VERY close decision when choosing between the duplex mentioned above and a new property with a large garage.

So naturally, I went to re-evaluate the other property. I spoke to my realtor a bit about it, but more importantly, I re-contacted all of the property management companies to see what they thought about my rental estimates as well as to "test" them again on their response quality and response time.

It’s a good thing I did too, because I learned a lot.

First, I learned that there are now only 2 property management companies that I like. They both have very fast response times and will actually answer my questions. So now it’s only between them (although I’m leaning more towards one of them right now).

Secondly, I learned that my (and my realtors!) rental estimates on the property were actually a bit high (we had overestimated the value of renting out the garage) and that all of the property managers strongly recommended against renting out the garage separately.

Because of the lower rent numbers as well as the possible difficulties in renting out the garage, I ultimately decided against putting an offer in on this property for now. The numbers just don’t work out at the lower rent estimates. I still like the place, but it does need to drop once or twice more.

And so, I went back to my "list" to look at other potentials and run my latest numbers and analysis on and came back to a house with a suite in an "iffy" neighbourhood that was completely renovated down to the studs and, unlike the duplex, renovated well and professionally, not a crappy homeowner job.

The only downsides to it are the iffy location (I’d rate it a 4-5/10) and the small square footage.

Both upstairs and downstairs are currently rented and would like to renew their leases. This would save me a lot of money on property management finder’s fees as well as "vacancy" high-risk temporary house insurance, as well as actual vacancies as well.

And so, I placed an offer on it already.

The offer was made last night and they’ve already responded with a counter and I responded to their counter and am just waiting for a response. We are close, so the contract will 99.9% go through (I’d be extremely surprised if it didn’t).

Then it’s back to all the other crap I did on the duplex, but namely it will be the appraisal and the inspection. This will be the 3rd time hiring this inspection company (the first time being for my personal residence) – it’s not their fault the duplex sucked. In fact, it only shows they did their job for finding all the crap.

I’d be really surprised if there were any real issues with this new property though since it was renovated professionally and is half the size of the large duplex.

The bad news for you guys is that you won’t be getting a photo and video tour from me on the property since it’s already rented out Sad smile

Anyhow, I’ll keep you guys posted!

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Posted: June 20th, 2015 under Income Properties  

One Response to “Why I Had To Walk Away and Make An Offer on a Different Property”

  1. Graeme says:

    I’ve been thoroughly enjoying all these updates – keep them coming. And this was probably the biggest accomplishment for you – it would have been easy to convince yourself to buy the property anyway. From the sounds of things that would have been a huge mistake, and it’s great you didn’t let emotion get in the way here. Good stuff Tyler, keep it up 🙂

PeerFly

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