All Forum Posts by: Rob C.

Rob K Good question and good point. Although I don't know for sure, I like to think I read people well, and to me the listing agent and the estate seem to be good, genuine, honest people. Again I could be wrong, but I do genuinely believe the estate doesn't have the money.

David Egger I like your thought process. However, as stated above I'm not sure it makes sense for me to go any higher in price than the originally agreed $82k. And unfortunately the seller doesn't have much risk because they can just let the property go into foreclosure. It won't affect the credit of the seller (i.e. sister of the deceased) because title is currently in the name of the deceased as I understand it.

Chris Weiler That's a great idea in regard to buying the property sub2. Based on my limited understanding of "subject to" purchases, I'm not quite sure whether it would make sense on this property. For starters I'm not sure what the loan payments are currently but let's assume they are small enough for the cash flow numbers to make sense. Given that I already qualify for bank financing, the only advantage I can think of that I'd get from a sub2 deal is a low down payment. However, I'd probably need to come in with at least $6k to cover the bank fees, and then there are about $15-20k worth repairs that the property needs. So it would appear to be about the same as a 25-35% down payment. Not much of an advantage there. Is there another advantage I'm missing out on? Perhaps it would be easier to resell later to someone who can't get bank financing? Is it worth it though? Thanks again for your advice.

Thanks everyone for the invaluable feedback! To provide a little bit more background and perspective, the agreed upon price was $82k. The story as it has been relayed to me was that the listing agent told her client to keep making the payments on the loan, but for whatever reason she did not and therefore ran up the $6k in late fees. And although $6k may not seem like a lot, it is relative to the sales price. And I personally don't think the property is worth $88k in its current condition. In fact, I'm not even sure the property was worth $82k. Quite opposite to the impression I gave Jon Holdman and Charles Perkins, I was actually kind of hesitant at one point to pull the trigger on this one. As discussed in an earlier post of mine (https://www.biggerpockets.com/forums/88/topics/78539), it has been very difficult for me to figure out what market value is for this property. In the end I kind of thought I may have been overpaying relative to market comps, but from a cash flow perspective it still made just enough sense to me to pull the trigger (10% cash-on-cash). It was far from a love story between me and the property, but I'm not going to lie, I was (and still am) anxious to start actually taking action in this industry. I've been actively putting in offers for 9 months now and this is the first property I've gotten under contract. The market where I live in San Diego is down to about a month's worth of active inventory, and the competition appears too intense for a small rookie investor like me to acquire any real deal. I started turning my attention to metro Atlanta (where my company has a satellite office, and I go for business trips from time to time) hoping I'd have a better chance of acquiring properties because I could afford to pay cash for some low-tier properties in that market. The competition is still pretty intense there though as well. So when I hear folks say to move on and not forget that there are boatloads of other deals out there I know that's true but in my personal experience as a newcomer it takes a loooong time to get one.

My first attempted deal in REI turned into a bust yesterday as the seller failed to perform. I'm hoping to field some advice from the biggerpockets crowd on how to handle this situation. It's a bit of a long post (sorry for that), so I've highlighted the main points for those who like to skim.

It was as an estate sale, and my offer was accepted at the listing price (a figure just high enough for the seller to pay off the loan balance). At some point the estate (sister of the deceased) stopped making payments on the loan, and in turn the bank evidently ran up large amounts of late fees and penalties to the tune of $6000! Suddenly, the seller was short thousands of dollars she couldn't come up with, and couldn't close at our contractual price without lender forgiveness on the fees. Apparently the estate attorney was pushing down to the wire to get the bank to forgive the fees, but when it came time to close ultimately the bank said no. Consequently the seller refused to sell. Now she is planning to put it back on the market at a price that will cover the bank penalties, or otherwise let it go into foreclosure.

I can't help but feel like I got treated unfairly. Yes, I'll get my earnest money back, but between appraisals, inspections, utilities, travel, etc, I've sunk about $2500 into this. Most everyone I talk to says I have the legal right to demand that money be reimbursed by the seller because she defaulted (i.e. there was no contingency of lender approval in the contract). However, I'm not the type that likes to take matters to court. I feel like reasonable people ought to be able to arrive at reasonable compromises without the judicial system. Moreover, while I want to be upset at the seller, I actually have sympathy for her. After all, her sister just passed away, which is a much more painful situation than I am in obviously. And evidently she was just trying to do the right thing in selling off the property rather than let it go into foreclosure in the first place, but she misstepped along the way and found herself at her wit's end trying to make the transaction work.

Is this problem worth exploring creative solutions, or should I just suck it up, and move on to the next one? If anyone has any advice, I'm all ears.

Thanks, Rob

Thanks for all the replies everyone. I concluded this wasn't a dealbreaker for the property I have under contract, based largely on your insights and opinions. I talked to a couple pest control companies today, and got some further clarification.

An L3 decontamination is where they remove all insulation, spray disinfectant and remove virtually all the droppings (but they can't guarantee they will get them all), and then add the insulation back in.

An L2 decontamination is when they just spray the disinfectant (which is allegedly enough to eliminate any potential health hazard). They also attempt to remove as much as possible, but there will still be more droppings left in this scenario than L3. They then add extra insulation to cover it up.

So as far as the health hazard is concerned, an L2 is just as effective as L3. One guy I spoke to indicated that some people end up doing L3 simply because of the psychological factor - they don't like the idea of rat crap in their house anywhere.

As far as future inspections go, it should be virtually impossible to see any trace of a previous rat problem after either L2 or L3 treatment.

As far as ballpark pricing I was told L2 ranges from $1.25-1.65 per sq ft, and L3 is about $2.65 per sq ft. At least in Atlanta anyway.

Personally, I think I'm going to opt for a professional L2 decontamination. I'm going to contact one or two more pest control companies in the next couple days. I'll report back if I reach any different conclusions.

thanks again, Rob

Joel Owens I agree with you and want to rehab it to be "inspection proof." I'm just trying to get a sense of whether covering them up with insulation is legitimately satisfactory (i.e. inspection proof). Unfortunately as you suspected I'm hearing a fair amount of mixed opinions. But the ones who are saying just to cover it up don't appear to portray it as cutting corners, but rather as a satisfactory resolution to the problem. I'm still not sure what to believe myself. Thanks again for your input!

Thanks Mike M. Appreciate the input

Thanks Joel Owens. Yes, I had a pest control company come out. It won't be very much to get rid of the pests. It's the present droppings that appear to be another story. The pest control company said they get rid of the pests, but don't clean up the droppings. They made a couple suggestions on how to address the droppings (as I listed above). If I can cover them up with insulation, and be done with it, then that might be a cheap enough fix. Can anyone speak to the effectiveness of this?

In regard to your comment about sticking to my price, I unfortunately am not sure what price I need to stick to because market value is so ambiguous (for more info see my other post: http://www.biggerpockets.com/forums/88/topics/78539). I've capped my rehab budget around $15k because the cash flow ROI will still work for me, but at the same time I don't want to be all-in at a price that's at market value (or even worse, above) if I'm putting in all the work. Thanks again!

Thanks for all the responses Michelle Marty, J Scott, Kyle J., and Tod R.. I get the impression from your answers that the droppings do need to be cleaned up. Given that they're scattered about on the insulation of the attic, is there any way to clean them up in a cost effective manner?

One pest control company suggested I could cover them up with more insulation to trap any airborne viruses, or remove the insulation to do a full clean and add back the insulation. Neither option sounds particularly cheap, and will probably push me over budget

Thanks again, Rob