would you pay the due diligence fee?

[Janel F.]

We submitted an offer on a quadraplex in NC and it was tentatively accepted. The sticking point right now is the due diligence fee. I'm not accustomed to such a fee and I'm uncomfortable with a non-refundable fee. Here's the breakdown.

Offer: 150k

Rents: 600/unit (currently 100% rented)

Taxes: 1850

Ins: 1300

monthly expenses: approx 1780 including debt service, property mgmt, maintenance and vacancies

Here's the issue, the seller's agent is also the property mngr and has not been very forthcoming with information that we've requested, namely, the leases. The property is poorly maintained and he's clearly charging the seller for services he's not providing, i.e. landscaping. According to their income statement, the income is good, but it doesn't align with what he claims the monthly rent for each apartment to be. When we went to look at the property we already noticed a leak under one of the units and when we met with the tenant she said that her tub doesn't drain well. 

The seller wants us to have "skin in the game" but we think they may be hiding something and want the option to walk away if the "something" is more than we're willing to deal with. We've also made our offer contingent on fully executed estoppel agreements.

Curious to hear your thoughts. what would you all do in this situation? Would you kill the deal over a $500 non refundable fee?

[Jay Hinrichs]

In texas its common for it to be 100 dollars..

but if you think a leaky sink and some other issues are major problems you may want to see if landlording is for you.

tenants ( and how did you get to talk to them if your not in contract) will always say these things to the new buyer.

you need to have a little bit of an open mind when doing these deals.