Back out of sale or??

Question

Currently in a tricky position and looking for some advice/ different perspectives.

Purchased a home that we completely renovated over the past 6 months (our first reno). Bought for 430k, invested about 160k cash. Listed in early March for 680k and accepted an offer for 750k.(home appraised at 750k) Netting about 280k after all fees.

We were supposed to close a week ago but the buyers lender was dragging their feet so we got additional earnest money and delayed closing. Their lender is now no longer able to make the next deadline and they will be falling out of contract a second time. We will be able to walk away with just under 30k in earnest if we decide not to extend further.

We’ve moved to St. Pete, FL for work and the house is completely empty. We’re considering walking away at this point, holding onto the property and furnishing it for AirBnb. We have a 2.75% rate and would love to hold onto the property as it continues to gain equity/making money via short term rental.

1) Would you walk away at this point knowing you have nothing to lose and have already been cooperative with the buyers who are not pushing on their end to get their lender to close?

2) Would it be better given the market to have the 280k cash that we can reinvest into a multi-family in FL?

3) If we keep the property what’s the best way to tap into the equity for our next purchase/renovation? Never done a heloc or cash out refi. Really don’t want to cash out refi and lose our 2.75 rate. HELOC seems like it might be an okay option but not sure if there’s another option out there given our plans.

Account Closed · Answer

Think about it this way, if you paid $30k in earnest money to someone and they didn't continue to work with you to get the sale completed, would you sue ?

People don't normally walk away from that kind of money without at least a fight. I don't know what your contract says or what has occurred. I just know human nature.

I would get a letter, in writing, from the buyers or their agent on the current status, explaining why the sale has been delayed and then present that to an attorney for review. Let the attorney advise you.

JD Martin · Answer

What's the arbitration process in Florida? It seems to me the buyers showed some good faith effort by increasing their earnest money in order to make the deal work. What are the reason(s) for the delays in funding? Is this a cash deal with no financing contingency?

Steven Foster Wilson · Answer

I would let your buyer go and keep the earnest money.  I would do a cash out refinance. You can buy down your rates and also compare with other lenders to get a competitive rate. With her extra money you could invest. I would look into how much rent is in that area and see if you could get a steady income of a high rent. But then I would also compare Airbnb.

I would consider where are you invest next. Look at population growth, look at where companies are coming, and look at what you could do with the money that you get from the equity.

I personally think you should consider investing OOS here in Columbus or Cincinatti. The price to rent ratio makes for great investments. Not to mention our appreciation has been 8% higher then the US national average, because of the high demand for affordable housing. We have a lot of big companies that have moved here and are moving here. Like chipotle, the Limit, Amazon, Intel, and more.

Theresa Harris · Answer

What is the problem with the lender?  I'd give them one last extension of a few weeks and tell that is it and if they can't get it done, you're keep the deposit and are done.  If they've had the appraisal done and everything thing else, what is causing the delay?

Rodney Sums · Answer

After discussing with your realtor and attorney, at most if you're going to cancel the deal only keep in earnest money what it cost you to hold the property and list again. Is there a financing contingency?

My next concern for you is are price drops happening for comparables in your market in response to rising rates? If so, it may be worth closing on this deal if the appraisal sticks.

As for taking your money and running or holding and renting, what's more important to you having the lump sum or money over time? I concur with you that a Refi sounds bad at current rates. 280k cash can cover all or most of the cost of a MF in some markets giving you monthly income from long term rentals. When you do your math see if your would be MF cash flows better than your single that you're thinking of keeping.

Which strategy you use depends on your lifestyle choices at this time in your life. What's your goal?

Celine Crestin · Answer

I'm interested in the reason for the delay as well. Some things are outside of buyer and lender control (such as appraisals) and some things are not (are the buyers dragging their feet getting docs to the lender? are they not committed? seems less likely since they put up additional earnest money for the inconvenience).

Based on the little info you provided, the buyers sound committed and are also at the mercy of the lender (and they may not have known any better and switching this far into the deal isn't really an option without considerable delays).

If the roles were reversed, what would you hope the seller would do? I'd encourage you to stick with the deal unless it seems that they won't close at all.

Eliott Elias · Answer

I always tell people they should keep their property here in Austin, but it sounds like you've built up so much equity it makes more sense to sell it. If you keep it as a rental it's going to be tough to break even your mortgage, depending on where the house is located. You could airbnb it, make sure your'e outside the city of Austin or else you'd have to mid term rental it.

Your'e locked in at a good rate, it depends what your goals are and if you need the cash for your next investment.

Jonathan Stone · Answer

@Skylar Romo

As @JD Martin said, what is the issue with the lender? Did they have a loan contingency? Are they willing to double down on the deposit again and give you a solid close date with a stronger clause for you to back out if they don’t make the date?  What is your risk staying in escrow?  If you have a low fixed rate mortgage, it sounds like the earnest money would cover any loses from holding costs.