What If Your Buyer Doesn’t Buy?

Sometimes, life happens. When problems occur, there’s no need to panic—instead, try to capitalize on the situation.

My number one philosophy with my buying and selling entity is to get the buyers cashed out at the end of their term. I do everything I can to make sure that happens.

But sometimes, life happens. It would be crazy to think that out of the forty or fifty deals we do each year, nothing ever goes wrong. In reality, life events happen and buyers may need to step out every now and then. Whether it’s a death in the family, a divorce, or something else—it’s bound to happen eventually.

My first piece of advice if something like this happens is to not panic. Because there is always an exit. Always. And in most cases, you’re going to make out as well, if not better, than you would have originally.

Let’s take a look at an example.

An unexpected departure

One day, I got a call from someone that had always paid their rent on time. They were coming to the end of their three-year term on a house—they were about two and three-quarters years in—and they had already given us $20,000 as a down payment (which is always non-refundable).

They called us and said, “We’re overwhelmed. It’s just too much for us to deal with right now, and we’re not going to be able to buy the house.”

Fair enough. We tried to reason with them, but it was clear they were not going to stick around. I even told them we’d put it back on the market and try to get some of their deposit back for them. I felt bad for them!

But they ended up skipping their last month and leaving.

So, what did we do? And what can you do if you find yourself in the same situation? Well, let’s take a look at the original deal and how we repaired things.

Cleaning up a mess

This property was an expired listing for $300,000. We agreed to buy it for the remainder of the mortgage ($264,000) plus $36,000 in cash. That’s a total of $282,000.

When we found out the buyer had left, we decided to put it back on the market with a realtor. We had a few prospects come in, but no one bought it. Eventually, I gave it to my nephew (a realtor) and he got a full price offer for $350,000 in one day.

After the commission, we ended up getting around $332,500 for the house. Now, let’s look at all the numbers.

The first payday was the non-refundable deposit of $20,000. And in this case, that deposit didn’t go to the purchase of the house because they left. So it went right into our pocket for payday #1.

The monthly spread on this one was minimal. The mortgage payments were high, around $1,814 per month. We charged $1,900 per month to the buyer, meaning we only made about $85 per month. In the end, that’s a couple hundred bucks—which we ended up using to clean the house before we sold it.

So, in the end, there was basically no payday #2. But that’s not the end of the world, as you’ll see.

The third payday was when we brought the house to market and sold it for $322,500 after commission.

We had been paying down the mortgage for almost three years at this point, so instead of being $264,000 it was now around $246,000. We also still had to pay the seller $36,000, coming to a total of around $282,000 for us to buy the house.

$332,500 minus that $282,000 comes out to $50,500. Add in that $20,000 down payment—which we got to keep, because they left—and that’s $70,500 total profit over two and three-quarters years.

In the end we made out pretty well with a not-so-great situation. In fact, our average total payout is $78,000, so this was right in line with what we usually do. We didn’t panic, we didn’t lower the price of the house to get out of it as soon as possible, we just stuck with it.

When things go wrong, don’t panic. Instead, look at how to capitalize on the situation. In this case, we made out pretty well.

Have you ever had a situation like this? I’d love to hear about it. And if you are struggling with a similar situation, I’d love to see how I can help.