HELP!!! House under contract pipe burst $10,000+ DAMAGE!

[James Wise]

HELP!!! House under contract & the pipes burst damage in excess of $10,000!

I may have told a little white lie to get you to open this thread. I don't really need help. This situation has already happened to me, but there are a lot of you out there that it hasn't happened to yet. Don't worry there is a good chance it will.

The question is what do you do? The answer isn't always cut and dry.

The scenario.

We purchased a single family home last winter for $95,000. While it was under contract the owner turned the gas off and the pipes froze then later burst causing damage in excess of $10,000.

The background.

We have done many deals with this seller. Before we did this deal with this seller I had written an article titled 5 Things new investors should never do and # 3 was about this seller. 

Make sure you read that section of the article which I have pasted here below before you provide a response to this thread.

3. Be difficult to work with.

The real estate business is not about houses, apartments, or strip malls. It is about people and relationships.

You have to cultivate relationships.

It's not what you know, it's who you know.

You don't create relationships by always second guessing whether or not you squeezed every single penny out of every single deal. You make them through doing business with people in the industry. In the beginning the deals and terms are always going to be the worst. With a quality relationship they will just continue to get better and better.

Example: I met this local lady. She had some properties she wanted to sell via owner financing. She's getting out of the rental game and she did not want to pay capital gains taxes. To avoid capital gains taxes she wanted to sell her houses on 10 year terms.

She owns around 20 houses. Mostly all of them in the heart of my investing area. At this time she wanted to sell me two of them. She told me what she wanted for them and I bought them.

I could have countered her and got a better deal but I didn't.

Why? THE RELATIONSHIP.

She owns 20 of these things and does not want all the cash at once. I wanted to be the first guy she called because I was the easiest guy to work with.

Fast forward a few months later. Guess who calls me and wants to sell two more houses? Yep, same lady. One house was great. The other I really didn't want. Bad neighborhood. She just wanted it off her hands.

So guess what I did? I bought the darn thing anyway. I never even went inside. Actually I never even went to the street it's on. My partner John did do a drive by and was not impressed. This house was a dog, but we are cultivating a relationship here.

Fast forward again. Guess who called me with another great house to sell in my prime area? Same lady? Nope. Her daughter this time. Guess what, her daughter owns 40 homes in the area and wanted to start unloading some as well.

So who was the first person she called? Why of course the easiest guys to work with.

RELATED: How to grow your business using Bigger Pockets

We bought that house on owner financed terms with a Joint Venture partner and it was a pretty great deal. It was cheaper than anything on the MLS and it was owner financed.

Guess what my reason was for taking this great deal to this particular Joint Venture partner? Our Relationship. I have about 30 people who would have done that JV with the terms I got. I could have even offered it to all of them and worked out even better joint venture terms for myself.

I did not do this. Instead I ran it past his desk first. Why? Our relationship.

Continuing to show this investor whom I have a great relationship with the value that I can bring to him is much more important than trying to save a couple bucks shopping the deal around to everyone and anyone.

I Have done many deals in the past with this investor and he's always been the easiest guy to work with, has treated me fairly and understands that our relationship is more important than any one deal.

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The Questions.

If you put this house under contract and this happened to you, what would you do?

• Would you make the seller pay for it before closing?
• Would you split the costs?
• Would you just buy the house anyway and pay for it yourself?
• What do you think I did?