How to negotiate AS IS Duplex after Inspection?

Question

Hello everyone, Newbie here. Needing your expert opinions.

My spouse and I are under contract for a 1942 Duplex in FL. Yes it is old and we are wanting to BRRR this in the future. This is our first time in real estate and we are both overwhelmed.

The price we agreed before inspection was 192k. We are also expecting a lot of issues and things that will needed to be repaired and addressed. We are not sure if it is still wise to pursue this deal with the overwhelming defects & issues. Please help & guide us.

The pros:

1.) It is already rented total of $1975 for both units. Unit A is 3bed/1bath; Unit B 2bed/1bath.

2.) It is already cash flowing.

3.) According to the inspector, since the lot is huge, we can still add another duplex in the future.

The cons:

1.) Unit B is grandfathered, if it is destroyed it cannot be rebuilt. (But per our real estate agent, we can still repair)

2.) Lots of repair needed which we know it will have (but we are overwhelmed).

_______

Here are some of the issues:

Main Concern- The toilet drain pvc to cast iron connection is leaking under the home. This has raw sewerage emptying onto the ground (poop & pee). Noted a cesspool drain on the right side of the home.

-Active termite, termite damage in Unit B. Treated Termite in Unit A

- Both units have some sub floor joist sagging

-Both Units does not have vents in bath & kitchen

- Exposed electric wirings

*** Some are not priorities...

If you were us:
1. Can we still negotiate the price and by how much? Or do we just walk away? We are still under Inspection Contingency.

2. Any idea on how much we're going to spend on the major issues listed?

Thank you so much in advance everyone!!!

Chris Pasternak · Answer

Cons:Three different species of feces. Pros: You can still get your EM back.Advice: This is a pay me to take this junker off your hands scenario or walk away.Question:How many deals have you looked at to get to this point of writing an offer and getting under contract? I'm guessing not enough.

Steve K. · Answer

@Catherine Javier Chris is right: Adding up all the repair costs they’re easily more than your purchase price. You could get bids for everything before making your decision, but I have a feeling contractors won’t be able to give you any accurate numbers without opening some walls to see how bad the termite damage is and find out what they’ll be dealing with. Trying to work on this property will definitely be a can of worms/ total money pit. It looks like a tear down/ redevelopment play so unless that’s the plan and you have the budget to take on a major project, and the surrounding properties/ after rehab value support it, I’d walk away.

David Avery · Answer

No other offer is big for you. The deal will fall apart if your not happen with inspection issues.I would and I am a contractor. That plumbing issue may be $10K. $2 K to fix and $8 K to clean up sewage). Would you like to do this? ( board of heath could shut this down in 24 hours).Is this section 8 tenants?I would offer them $178,000 and nothing less, but contigent on your contractor looking at issues.My thought so far

David Avery · Answer

Everything is negotiable . Even the big items on the inspection concern. Your biggest tool to get the best deal with these issues the the ability your agent has to negotiate and talk to the sellers agent. If they can get on the phone and just talk about things. It can save you so much hassle. Make your agent keep the deal together and negotiate this out.Certain banks would not loan on the conditions.At least have the owner give you full one year service on Termite Treatments. Plural several treatments. Have a General Contractor and pay him $100 to go and check the above items and tell you his thoughts. He knows ten times more than the inspector. Just tell him can you go over for 10 minuets and look at these issues. Your RE agent should know of one and if they don't then tell the agent to have the broker tell them. Have your agent earn their commish!Look at the roof line. Is it level! Have your agent send you some pictures.Flooring issues $2500Plumbing issue $3000Termite damage issue $7500Get your agent to call the sellers agent today and work some of these out.The sellers agent has to deal with these issues with a new buyer also so both have the agents need to deal with them or the deal will fall apart.I like the property because I can fix anything and to build additional income is big.The inspector advise on a new lot, clarify that with your agent it is a bid Pro if you can and it is a big Con if you can't.Have your agent call me!!!! I will take half of that comish!!!!!!!

David Avery · Answer

Had a husband and wife team (both doctors by the way) make an offer on a tri plex with similar issues and about the same age as you house.The termite issue can be bigThe sewage issue is bigDoes the bathrooms and kitchens have windows? If not, can still be vented fairly simple.Is there much space underneath the house for floor joist area?Were there other offers at the time your offer was accepted?I can help you with cost and direction at this point.what is your agent thinking about the repairs/inspection?

Catherine Javier · Answer

@Steve K. & @Chris Pasternak & @David Avery,Thank you so much for your wise opinion, this will definitely help us on hpw we will proceed!!!

Catherine Javier · Answer

@Chris Pasternak 2 condos which fell off contract due to HOA, 1 duplex that got away who has higher bid :(

Catherine Javier · Answer

Thanks @David Avery, I am going to share the photos here… so others can learn too.. you’re a big help.. FYI everyone, this is not a wonderful sight…..

Catherine Javier · Answer

@David Avery no there was no other offer.

Catherine Javier · Answer

@David Avery Thanks so much for you reply.We are Travel Nurses.I do not remember seeing any windows for both kitchen & bathroomIs there much space underneath the house for floor joist area? I can share pictures on the next reply or thread Were there other offers at the time your offer was accepted? Posted for 205k, we offerred 188k, they countered 198k, we countered at 192k then seller agreed after a long discussion with our what is your agent thinking about the repairs/inspection? Given the age of the building, he said that there were really ware and tear. Since the duplex is not in the nicest neighborhood, he said that lower rates & lower income families are needing this. I want to share the reports for the inspection....