Seller Has Counteroffer, How Should We Negotiate?

[Diana Tran]

THIS WILL BE OUR FIRST HOME PURCHASE (3 CO-OWNERS). WE ARE REMOTE BUYERS. THE SELLER HAS A REPAIR COUNTEROFFER.
We're not sure how to proceed, any advice would be greatly appreciated.

About the house: It's in Tampa, a duplex. Unit A is about 100 years old and Unit B is almost completely new.

Pros:
-The duplex is in a very desirable neighborhood with home value appreciation year over year at about 50+%
-Rent is also in high demand within this area
-Cash flows well even with high interest rates and increasing property taxes
-Home is price below average cost per sq ft
-The house has been renovated and some parts of it has been remodeled

Cons:
-All issues are with Unit A, the 100 year old unit.
-Has no crawlspace (common for older properties) so we couldn't see the foundation
-Drywood termite/wood decaying fungi damage seen on all the windows/doors/parts of the beam on the exterior, parts of roof decking and rafters in the attic
-Old leaks/moisture damage seen in the ceilings and attic
-Parts of the roof has patch work
-Roof doesn't have any permits on record (don't know how old it is)

Seller's offer to me:
-Fumigation treatment for drywood termites (tenting the house)
-Replace and repair all damage wood throughout the house
-Replace the entire roof with a new permit
-Replace one window in every room (not all)
-Pay for a structural engineer to inspect the foundation
-Offer to get quotes for repairs and have a 15-20K budget to make all repairs, house is 500K.
-Will be open for us to extend our inspection period

The counteroffer sounds attractive since he's offering to pay for most of the repairs, even for an engineer to properly inspect the foundation. However, there's still hesitation from my side. What do you think? How would you proceed?

[Abel Curiel]

Quote from @Diana Tran:

THIS WILL BE OUR FIRST HOME PURCHASE (3 CO-OWNERS). WE ARE REMOTE BUYERS. THE SELLER HAS A REPAIR COUNTEROFFER.
We're not sure how to proceed, any advice would be greatly appreciated.

About the house: It's in Tampa, a duplex. Unit A is about 100 years old and Unit B is almost completely new.

Pros:
-The duplex is in a very desirable neighborhood with home value appreciation year over year at about 50+%
-Rent is also in high demand within this area
-Cash flows well even with high interest rates and increasing property taxes
-Home is price below average cost per sq ft
-The house has been renovated and some parts of it has been remodeled

Cons:
-All issues are with Unit A, the 100 year old unit.
-Has no crawlspace (common for older properties) so we couldn't see the foundation
-Drywood termite/wood decaying fungi damage seen on all the windows/doors/parts of the beam on the exterior, parts of roof decking and rafters in the attic
-Old leaks/moisture damage seen in the ceilings and attic
-Parts of the roof has patch work
-Roof doesn't have any permits on record (don't know how old it is)

Seller's offer to me:
-Fumigation treatment for drywood termites (tenting the house)
-Replace and repair all damage wood throughout the house
-Replace the entire roof with a new permit
-Replace one window in every room (not all)
-Pay for a structural engineer to inspect the foundation
-Offer to get quotes for repairs and have a 15-20K budget to make all repairs, house is 500K.
-Will be open for us to extend our inspection period

The counteroffer sounds attractive since he's offering to pay for most of the repairs, even for an engineer to properly inspect the foundation. However, there's still hesitation from my side. What do you think? How would you proceed?

 Hello Diana and congrats on taking the leap!

In a low-inventory seller's market, it is a good thing to have a counteroffer like this especially since you're describing a high-demand area in Tampa. Properties in highly desirable neighborhoods during a seller's market can often result in buyers taking a property as-is with little/no room for negotiation.

The fact that they're agreeing to: a lengthier inspection period; paying for a structural engineer's assessment (Roughly a $1,200 value in my market); account for a repair budget; etc are all good signs.

If you're getting this below the average value of comparable sales, it cashflows, AND you'll have peace of mind with necessary repairs & inspections, I'd say go for it!

One potential red flag : allowing seller to make repairs. I am not clear on this from your notes but in my market this is not something you want to entrust the homeseller to take care of. They're incentivized to make/save as much as possible from the deal so I wouldn't be surprised if they aimed to cut costs in a situation like this. 

I could be wrong here so I'd hope for you that the repair estimate is being used to negotiate the purchase price down.

Curious to know what other members of the BP community feel about this.

All the best to you on your first deal!

Abel

[Evan Polaski]

@Diana Tran, in reality this is a pretty good counter offer.  That being said, I am never a fan of the seller doing work for my properties.  Typically, the seller wants it done fast and cheap, which often does not equate to the quality you would look for as the owner.

But, it is possible he wants to do the work because he has top quality contractors that will do the work well and for less money than you could yourself.  It is a bit of a gamble, but personally, I always get my own bids from people I will hire and either take a credit on price or have title issue the checks directly to those contractors to get work done as soon as I close.  But at least this way, I know the work was done how I want it done versus how the seller wanted it done.

The structural engineer part, since this is an inspection prior to closing, I would want seller to pay the engineer of my choosing.  And not only extend inspection period, as you noted, but also clearly state that further negotiation can be done based on any issues outlined in report.

But overall, based on what you wrote, this sounds like a pretty reasonable seller.

[Bruce Woodruff]

Don't know the exact property or numbers....but that is a very very good counter from the Seller. IF everything else lines up then I'd jump on it.

[Diana Tran]

@Account ClosedWe were able to get home owner insurance quotes on the house. It's in Tampa. But the house doesn't have any permits on record...the only one that we'll get is from the seller replacing the roof.

[Michael Haynes]

Hello Diana Tran and two partners is a Duplex in Tampa. You are trying to do a Deal for a 100 year old, fixer-upper, Duplex in a "desirable neighborhood." You are doing this with 3 Co-owners? And this is sight, unseen, Absentee Owner. Are you kidding? Can you line up any more ways to lose Money on a Real Estate Deal? If, you give me the address I can go to Zillow and find out what a Vacant Lot in that area is worth. Then, you add on the Square Footage Cost of New Construction and compare it to what you would pay for a Heartache. I had Rental Duplexes and some Houses in South Tampa for 30 years and the kinds of damage and rot you are talking about with the 100 year old side of the Duplex need to be shown to Code Enforcement in case they would consider it a Tear Down structure. Mold damage in Florida is considered Environmental Hazardous. I just watched a Youtube video of a lady who bought a House on the East side of Florida and when she received the updated Property Tax bill that tripled, she put the house up for sale and is moving back to North Carolina. Do you know what the Worst type of Business is? A Partnership. Here in Florida we warn Newbie's not to get a "Gator." I would say that you are looking to grab a Gator by the tail!

[Gino Barbaro]

@Diana Tran

I would think of what my exit strategy is if I buy this deal? Will it cash flow? Am I going to be able to refi it? Or Sell?

This may be too much work for too little return. Be careful with insurance in Florida as well. 

If you can cash flow, and are able to find third party management, it may be a deal. Just be careful also for the repairs the seller has recommended. I would get my own quotes and make sure that their work is going to be up to par

Good luck

Gino

[Jorge Vazquez]

Hey Diana, it sounds like you've got a potentially great deal on your hands with that duplex in Tampa, especially with the seller willing to handle major fixes like the roof and termite damage. Your caution makes sense, given the property's age and the listed issues. From my experience in Florida real estate, I'd suggest confirming the repair budget is realistic—costs can often exceed initial estimates. Maybe get a second contractor's opinion to back up those numbers. Given the location's high demand and appreciation rates, if everything checks out and you feel confident in the repairs promised, it could be a solid investment. Good luck navigating your first home purchase