Deal Falling Apart! ...what are my options?

[Alex M.]

So I have a deal meltdown in process and would really appreciate assistance/advice on what my options are. Here's the scenario:

Day 1. Two homes go on the market 3 doors apart at the same price. I immediately view. 

Day 2. I put an offer on one. Seller stalls past 48 hr acceptance date and accumulates a few more offers. 

Day 6. Seller's agent responds with a counter - there are 3 offers on the table (market is pretty hot in this neighborhood and price is right). I offer full asking price $66k (with $2k seller assist) as the numbers work for me as a long term rental - $5-10k necessary in improvements and $1200 in anticipated rent. FHA 203k financing. Seller accepts.

Day 7. Ask seller to turn on utilities in order to inspect property and determine full work scope to get contractor bids. Seller stalls. 

Day 12. Utilities go on.

Day 16. Inspection happens. SOW developed. Called contractors to start getting bids.

Day 17. Speak with lender and am told that closing date is not possible with holidays and no contractor bids in hand. Discussed options to use conventional loan instead - given that the gas was not turned on (and seller refuses) I could not get underwriting on a conventional loan without knowing if the furnace works, so this is a no go. I ask the seller to extend the closing by 2 weeks. 

Day 19. Seller says no. He still has the house listed as for sale on the MLS and the other home is listed as pending with a cash buyer. Other investors keep visiting this property and I assume more bids are coming in.

Day 20. I offer $1000 more to extend two weeks. Seller still says no.

Day 22. I've talked to other investors, explored private lending, spoken with my lender, and no great options exist. I ask seller if there is anything that can be done to keep this under contract - I am out $395 at this point in inspection costs if the deal falls through. 

Day 24. Seller responds and says increase offer $1000 and no seller assist - for a total price increase of $3000. I consider this. Then I go to a lunch meeting. During this meeting, a colleague of mine offers me 100% cash for this deal with a 5-year balloon and very reasonable terms. Needless to say, I jump on this. My REALTOR tells seller's REALTOR. She says Great!

Day 25. Seller's REALTOR responds that seller is nervous because of the many changes and does not believe this is going to close. He wants an additional $1000 in escrow. I agree after speaking with my new attorney - who I hired to help with title and loan and closing. I am now $1400 into this deal as I am paying costs for drafting a note and mortgage.

Day 26 (today). Seller wants to speak personally. I call him, believing it will be a friendly call and he will leave the conversation feeling confident that this is going to close. It turns out I could not have been so wrong!!!

The conversation: The seller starts by asking what is going on. I explain delays in utilities and having to shift to private lender after he would not extend the date - of course I used a friendly tone while doing this. He immediately responds by interrupting me and stating that he has a cash offer for over $70,000 and wants me to beat this if we are going to move forward. I tell him that I am currently under contract for $66k with $2k assist and that I am keeping this on schedule to close on time, so I do not want to increase my offer, but that I am putting an extra $1000 down. The seller gets angry at this point and starts yelling "you ARE NOT going to FORCE me to sell MY house!". I WILL put a tenant in it now if I have to and GOOD LUCK getting my property!!!". Then he hangs up!?!?

Closing is scheduled for 8 days from now... This is my first investment property.

Has anyone experience something like this? Is there something I can do? Am I going to lose all of the money I have put down on this property? And is there something I could do differently next time to avoid situations like this - one thing I am thinking is not to speak directly to the seller again, as I did not anticipate an irrational person on the other side of the phone.

[Richard Ball]

@Alex M. Long story short as long as you get the money and close within the time you have allowed in the contract you have nothing to fear. This is why we have contracts and why they are in writing. If the seller refuses to close based on the terms in the contract you can sue the seller and you will win. If you do not close in the time allowed you can almost guarantee that the seller will not extend the closing date and you will lose the money you have put in. I would recommend a backup plan. Look into other investments you may have, stocks, 401ks, mutual funds, home equity, etc.... just in case your colleague backs out. You will not get a second chance at this.