Backing Out

[Oliver Posewitz]

I had recently got in contact with a real estate advisor and they got me to find a property on their site and it seemed like a good deal. It was 70k fully rehabbed in Memphis. It would've rented for about 850 a month, so not bad with conventional financing. I then found a duplex selling for half of what it's worth, and would rent for $1700 a month! There's some small things wrong with it, including a crazy "nut" of an owner as my agent describes, but she's practically giving it away! I don't want to let this opportunity go, but I feel like like I'm screwing over my advisor. I didn't sign anything but there was a lot of talking. What do you guys think? Am I in the wrong on this?

[Michael Seeker]

Hey @Oliver Posewitz - it might  help for you to consider both the legal implications as well as the personal implications of backing out.  As it relates to the adviser (sounds kind of sketchy by the way) - if you are burning a bridge then you might want to ask yourself is it a bad bridge to burn?  It sounds like you might be putting too much faith in this "adviser" and they may be in a position to take advantage of you.  If that's the case, then burning the bridge shouldn't be that big of a deal.  On the other hand, if this is somebody who has a great track record and access to awesome deals that you'd like to participate in going forward, then you might want to consider how you approach it.

From a legal standpoint, you haven't really given enough information to determine where you stand.  If you have a property under contract and are within the inspection period, then you ought to be able to walk away no questions asked.  If you are beyond the inspection period then you ought to be able to forfeit any deposit and walk away no questions asked.  In either case, the most you'd likely be on the hook for is any good faith deposit you've provided.

Are you familiar with Memphis and the rental market?  I ask because I know of several "advisers" in the Louisville market that took advantage of unscrupulous buyers and I'm quite certain the same opportunity exists in Memphis.  If you know the city and the rent dynamics well then this shouldn't be an issue.  If you're going by what one person/company has talked to you about then you should broaden your horizons quite a bit before doing a deal.