Seller raises the price on you while you're driving over--how to react?

Question

Of of the wholesalers in my mastermind group agreed to a price on an apartment building and started driving over to see the apartment. Midway during the drive the seller called and told him he couldn't let it go for any less than $5,000 more than the price they agreed to on the initial call. The wholesaler was upset that his margin dwindled but said it was still a profitable deal, and kept driving.

While I agree with his logic, my gut tells me something was wrong here. It seems like a pretty clear gambit by the seller to extract more money from a buyer who committed and was driving to his property. What would you have done in this situation?

J Scott · Answer

You guys are nicer than I am...

I'd agree upon the new price, but negotiate in as long of a due diligence period as possible.  Then, at the last minute before the expiration of the due diligence period, I'd let the wholesaler know that my due diligence indicated that I could only pay $5000 less for the property.

Hopefully he'll see the parallel...

J Scott · Answer

@K. Marie Poe -

Yup, you're exactly correct, and I completely misread/misinterpreted the original post...

I take back what I said above.  Sellers are not professionals in this business and shouldn't be held to the same standard as investors/wholesalers.  Never fun when they change their mind after a verbal agreement, but it's part of the business and most likely it was an "innocent" thing, not a hard-nosed negotiating tactic.

Account Closed · Answer

The OP was talking about a seller changing his asking price, and the buyer is a wholesaler.  Wholesalers without their own cash to close are in a different boat than you are. The reason you would/could work the seller that way is because 1) you are a true cash buyer, 2) you don't need to find an end buyer in order to close, so 3) if the deal went bad, you wouldn't have set up an end buyer that was ready to close and with whom you have a binding contract.  Wholesalers don't get to teach sellers a lesson.

I sure I'm not nicer than you are.

Kim Hicks · Answer

It seems like there is a bit of confusion going on in the thread about what is happening.

Since this is an apartment building there is normally a due diligence period that all kinds of information from the due diligence itself may change the terms of the deal--specifically any repairs concessions that are negotiated.

Depending on how big of an apt building this is,  the amount paid is probably going to be dependent on how much income it brings in ...not comps.  Unless of course it is a small building.

Dont let your pride ruin a good deal just because they raised the price.  Still a good deal--move forward.  Not-dont.

Rick H. · Answer

Verbal phone agreement? Handshake? Letter of Intent? Signed contract?

Do I have a seller who is unsophisticated, confused or untrustworthy?

Wholesaling is all about control and market knowledge. Lack of the former won't compensate for an abundance of the latter.

How badly did the buyer (wholesaler) want the deal? Once I know how the seller operates, I've been put on notice.  Once someone has lied to me or broken a promise I know that they have that capacity and will likely continue in that same fashion or at least repeat that characteristic, if pressed.

I can outmaneuver the best and stay at least a few steps ahead of an opponent however these kind of people are "drain people" and, if allowed, will suck energy from your life if you let them.  Better be worth it before you let them enter your life.

Jerry W. · Answer

It is always a point of concern when a seller asks for more than you have already agreed upon.  You really only have 2 choices, say no we had a deal or negotiate further.  It seems like saying hey we had a deal so I won't pay more sounds right, but unless you have a signed contract you run the risk of losing the deal.

I had this situation happen on a purchase deal.  We agreed on price and I started arranging for the money and he calls and said I have someone willing to pay more.  I went and met with him and asked him about it he eventually told me he had called another guy and gotten a better offer.  I told him I would get back with him in 2 hours.  I called the other guy, who I actually knew, told him I had an accepted offer and the guy was backing out for his.  I suggested if we got in a bidding war neither of us would win.  He said he was unaware there was an accepted offer, so he was no longer interested unless I did not get it bought.

I met with the seller again and agreed to pay slightly more than the new offer and told him I would be back in 1 hour with a contract and a check, but the check would be written to the title company and he could have it as soon as I had proof of clear title.  He did call the other buyer back when I left who told him he was not interested.  I showed back up with a contract a check and a deed.  We took them to the title company who told him they would have the info by tomorrow and we signed the documents.  Ultimately in less than a week he had his money I had the property.

I bought the property for about 15K below what I could resale it for so it was a good deal, but I paid 4 or 5K more than what had originally been agreed upon.  I would have lost the deal if I refused to pay more, but I never trusted the seller's word again without a signed document.  If it came to a bidding war I would have gone up 5K more if needed because it was a good deal.  I had to get a SIGNED agreement ASAP.  In most states there is a statute of frauds law that requires certain types of contracts be in writing to be enforceable.  real estate is usually one of those items.

Lamar Cannon · Answer

Seller figured they could get more. I would still go to home, talk to seller  & look at the home. Who knows , it might be in better condition than we thought.  If not, which is likely the case, I would tell seller: " I'm not sure if we are going to be able to make this work. I like your price, but based  on the condition of this, this, and this , the most I can pay is (original price) like we discussed earlier. What caused the sudden price hike sir/ma'am?"

Seller  will realize you are indifferent and willing to walk over the increase.  If seller is motivated, this will work.

Seller raises the price on you while you're driving over--how to react?

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