Need Help with Negotiation

[Angie Anderson]

Hey family,

Need some help from the more experienced investors out there. My dilemma in a nutshell is: I let go of a contract because the seller did not meet my terms on inspection repairs. Now a month later, after moving on, the seller has agreed to meet my terms, only now interest rates have continued to up and stuck. Below are some details.

Original Deal

$345k at 2.75% with $5k in seller concessions

After inspection, asked for $14k in repair costs.

Seller said no.

Current Deal (he's like a bad ex)

$345k at 4.125% with same $5k seller concessions >:/

Now agrees to $14k in repairs

Bottom line, this is appx $250/mo loss in cash flow. The numbers still work above 12% COC but I'm @$$ hurt with the loss because of no fault of my own! The seller is also an investor and I suspect he knows he stepped in poo by letting the contract go a month ago, no he's scrambling. My realtor calculated he would also need to drop the sales price by $40k to break even with the previous deal, which I highly doubt he would entertain. Better to shell out the $14k then deal with the $40k loss.

My question is, how do I negotiate this and what's reasonable? I'm equally not pressed having let the contract go before...I can simply walk and keep searching as I have been since the contract fell thru or I can shoot my shot and I've lost nothing if he says no. Looking for reasonable ways to attack this.

Thanks family!

[Matt Ziegler]

Angie,

I think you need to be clear on your long term goals. Does this deal move you in that direction? Is yes, move forward, if not, keep moving.

The rate change isn’t the sellers issue.
What are the current rents like, market value or below.

How will this property perform I’m 3 yrs., 5 yrs.?

You might ask the seller what concession they will make due to the issues , but I wouldn’t push it too hard. If you plan to keep this property, will it matter in 10 yrs?

Best of luck

[Nicholas J. Hancock]

@Angie Anderson I'm not sure if it would work, or if it's even possible in your situation, but maybe ask for an additional concession amount like @Matt Ziegler said for the inconvenience of delay and say it's to pay some points on the interest rate since you've lost a lot because of his delay, to bring your loss in cash flow closer to your original cash flow estimate (or an additional down payment if it works out for a better cash flow) - if you really want the property. Again - I have no idea if that will work in your situation, but it might be a good negotiation tool to start with. However, I would defer to a Lender in this forum as to the benefits or negative consequences of doing such a thing (or even if it's possible)- I'm not the money person here, but I do like to negotiate!

[Angie Anderson]

Thanks for the response, I appreciate it!

[Angie Anderson]

Quote from @Matt Ziegler:

Angie,

I think you need to be clear on your long term goals. Does this deal move you in that direction? Is yes, move forward, if not, keep moving.

The rate change isn’t the sellers issue.
What are the current rents like, market value or below.

How will this property perform I’m 3 yrs., 5 yrs.?

You might ask the seller what concession they will make due to the issues , but I wouldn’t push it too hard. If you plan to keep this property, will it matter in 10 yrs?

Best of luck

Makes sense. I've considered my long term goal, which was to sell in 5-7 years to spring into a bigger multi. With the loss, it just slows that process, but doesnt derail it. Thank you for the feedback.

[Michael Dumler]

@Angie Anderson, truthfully, if the deal is still meeting +12% CoC and your only real loss is $250 per month, then I don't see any reason for why you would back out. There have already been some excellent points brought up, firmly to reiterate, the $250 monthly loss is hardly going to matter years down the road since the asset is still performing at the current interest rate of 4.125%. If you feel your time has been squandered, as others have mentioned, push the seller for additional concessions whether in the form of closing costs covered or repair credit. Nicholas gives great practical advice, speak to your lender to see what the best scenario would be money-wise and which the lender could act on. Hope this helps!