All Forum Posts by: Edward Liu

Below is the language in the contract

Seller's Failure to Comply or Breach: 

If Seller fails to materially comply with any of Seller's obligations under this Paragraph
8 or Seller materially breaches this Contract, and Buyer elects to terminate this Contract as a result of such failure or breach, then the Earnest Money Deposit and the Due Diligence Fee shall be refunded to Buyer and Seller shall reimburse to Buyer the reasonable
costs actually incurred by Buyer in connection with Buyer's Due Diligence without affecting any other remedies. If legal proceedings are brought by Buyer against Seller to recover the Earnest Money Deposit, the Due Diligence Fee and/or the reasonable costs actually incurred by Buyer in connection with Buyer's Due Diligence, the prevailing party in the proceeding shall be entitled to recover from the non-prevailing party reasonable attorney fees and court costs incurred in connection with the proceeding.

Today is close day for one of my purchases in NC.  However, despite I completed everything needed from the buyer end (all the money is with closing agent, etc.), seller is refusing to sign final documents and close the deal.  

Seems seller realized that agreed purchase price is about 20-25% below market.  Listing agent said today that they intend to fix up couple things and put it back onto the market.  

I have never encountered 'seller remorse' on the day of close.  Obviously I have put in money and time for inspection, appraisal, etc.  Best case is I want to finish the deal as it is a good buy, worst case is I want to recuperate cost and time spent (mine, my agent, title company, my 1031 exchange, etc.).  

Any options for next steps? Can I force seller to sell to meet the contract obligations?

Palo Alto, CA would not meet my/most people investment standard.  5 deals in 4 different cities.  I have investments in those cities already, just expanding portfolio.

There are still deals to be found, just harder right now.  Key for me is don't compromise my investing standard - don't 'chase' a deal even if everyone else is going crazy in some markets.  As long as every one of my investment is based on good fundamentals and numbers, then even during downturns, I would not be worried.  Even if market falls by 15-20%, as long as my properties are still cash flowing, it is only paper loss.

I am wrapping up 5 deals in the coming 2-3 weeks.  So definitely not hoarding cash.  However, I don't over stretch my cash, so there is still plenty in reserve if things went south.

If you already have success in this niche, then keep on doing it.  No point to be sucked into something larger and unfamiliar.  If you use conventional loans for these purchases, only note is there is max # of conventional loans you can take out.  But hit that limit first before considering something else.

Your purchase price is too high. Purchase price + rehab cost should not be more than ARV. Use 70% rule if possible.

Your rehab cost also seems high for a 1080 sq ft house.  Get multiple contractors to bid.  I am not familiar with Jacksonville cost, but without doing much to HVAC, roof, mold, structure, cost should be lower.   

How far is the 'small town' from a major city?  If suburb of a city, what is population of that city?  If suburb of a major city, then should not be issue.

Personally I don't invest in small towns that are far away from major cities and in the middle of nowhere.  Problem is demand - hard to find buyers or renters.  Look at properties for sale in the town you are interested, what is typical DOM?  It probably give you idea of demand.  Similar see how many rental units are posted in this town and DOM.

There could be exceptions.  For example, is the small town a college town?  or next to military base?  If so, at least you don't have to worry about renters.

If your focus is in the bay area, then likely numbers won't work based on cash flow - no matter how you slice and dice it.  

If focus in the bay area, then don't worry about cash flow at all - buy run down property, dress it up, then sell immediately.   Don't house any tenants as no investor will buy these, so there is no Rent and Refinance.  An ex-coworker quit his job in January doing this for living now - he told me no way to do it part time.  He needs to be full time to quickly turn these and get the property back on the market within 1 month, max 2 months after close.  Also, he is hand on doing rehab so he can save time and money.

If someone is suggesting for your to pay down the debt by putting in extra $200k (in addition to down payment), my suggestion is keep that $200k in your own hands.  You already have 25% down.

You can provide more info such as how many units?  Why people suggest $200k extra?  What is gross rent?  Type of units?  Etc.

It is really hard to answer your question.  I am getting sense that the financials for the building can not secure the loan due to negative cashflow and need you to put in extra money (to make the numbers work).  If that's the case, likely asking price is too high.

Don't bet!  Either way.

Your scenario is not something I worry about.  Just focus on finding good deals in good or bad times.