All Forum Posts by: Kaushik Mahorker

So the seller refused to make the repairs I wanted and the contract fell through - but now THEY WANT TO SUE ME out of my EMD...?!?!

Made another post regarding the details: https://www.biggerpockets.com/...

These sellers have just been so difficult to work with :(

I recently went under contract for my first rental property in Ohio. I had gone through the due diligence of getting an inspection and there were a significant number of repairs. I wanted to get a full estimate of the repairs, so we extended the due diligence period mutually from 3 to 6 days. Both parties came up with repair estimates (full story on that here: https://www.biggerpockets.com/...), and verbally the sellers decided that they could not meet my request of the repairs. So my agent sent over a Removal of Contingency document on that 6th day (still within the agreed due diligence period) asking for the repairs (knowing beforehand that this request would not be met). The Sellers now have three days from receipt of that document to make a written decision. We've pretty much been ghosted and the seller refuses to sign a mutual release document and return the Earnest Money. Then today I hear from my agent that they want to sue us and keep the earnest money because we had wasted so much of their time. Bear in mind this is a property in Ohio, so earnest money is only $1000.

This is clearly a scare tactic right? What grounds do they have to keep the earnest money? And clearly it is not worth it to go to court for both of us over who gets to keep $1000. Really I should be suing because they aren't releasing my EMD when it clearly states that when sellers and buyers do not agree to the repairs needed to be made.

What can I do to protect myself? Can I get out of this contract with my EMD without a mutual release document signed?

@Theresa Harris Got an estimate for the roof, one at $18,000 and one at $12,000. Even $6000 out of pocket for a home worth only $130K seems ridiculous. Additionally found out water heater is at end of life and got quoted for $3000. I see repairs totaling from $16,000, even if seller can pay half $8000 out of pocket is way too much for a home worth only $130,000 (DP is 32,500 --> repairs are adding 33% to my up front costs and I'm not getting the property at rehab prices)

@Alecia Loveless What are all the factors do you consider into this 8%, I'd like to know how to better gauge older properties - what percent do you leave for maintenance monthly? After the repair quotes I'm back down to about 12% CoC, and there tends to be little appreciation in the Akron area.

@Jared Lichtin Appreciate the offer, but I am actually located in California! Also I tend to find it harder to do repairs/rehab without being in the area or a strong network of professionals.

@Eric James Amazing you've got that network setup, would love to know you got crew together!

Asked the sellers to make the repairs before closing, and going to see what they say.
 

@Danielle Jackson @Joe Villeneuve They just got back that they're willing to pay for $4000 as credit in escrow, claiming that Ohio roofing is about $8000. My agent says this is a good deal - do I counter this? It looks like they don't want to make repairs before closing and its snowing/ice on the roof right now so roof repair would delay closing. There are also other repairs - not as concerning, but I expect those to be another few thousand with labor. My gut tells me to get a professional estimate of all the repairs and ask them to pay at least half of that as well or credit the whole roof. Thoughts?

@Neil Furry I'm under the impression that most insurance companies don't cover roof repair due to wear and tear.

@Joe Villeneuve Got it yeah that makes sense, still coming out of pocket. Based the bid on due to the proximity to the University of Akron, strong rental history, similar comps in the area go for 115k-130k, however most would have recent renovations done like a new roof/HVAC. The flooring is updated (nice looking laminate) (2 bedrooms still have carpet, rest is laminate). Already tenant occupied till the end of the year.

@Theresa Harris Yeah the returns on the numbers are looking great, which is why this is such a dilemma! I'd definitely have to replace the roof once in the lifetime of the loan, so if it happens now by the sellers that would be ideal. If this was my third or fourth rental, I probably couldve assumed the roof cost more easily as multiple property repairs would offset eachother.

@Kaustubh Johri Would you suggest getting a separate structural inspector? The current guy I had come in said no concerns structurally. There was some small gap in foundation and cracked joist in the basement, but nothing major to fix. But also, these guys aren't looking inside walls.

@Joe Villeneuve What would you consider a good DP/cost basis recovery period? I'm probably paying around $35K already including closing costs. But I don't really see DP as an expense, because it goes into the equity of the home. Then again thinking of the market 20 years down the line, I might end up being the last owner of this property, given it would be 150 years old by then, or wouldn't be able to sell close to my current buying price taking a loss in terms of equity.

Another question, how would y'all go about negotiating this with the seller. This seller was super aggressive even when getting the deal contract done. We gave a strong offer of $128K initially asking for $3K in closing costs and they came back asking for $135K and finally settled on $130K. Should I ask for all repairs mentioned in the inspection report first, and then maybe try to negotiate down for just the roof? Or should I focus solely on driving home that sellers need to replace the roof, and I'll take care of the rest?

@Joe Villeneuve That sounds like a really smart idea! Yeah I think putting 5000 down right now is gonna put me further from my goals of saving up for my second property, which is why I am also reluctant to take it without repairs done. I feel like the buyers won't budge on getting the repairs done/providing credit.

@Joshua Janus: Yeah i dont know maybe having second thoughts about getting into a really old property as my first. There is no driveway and yes there is a basement. Yeah agreed, there are going to be repairs and I plan to save 10% of profits for future repairs. Could use any advice on this end as well!

Currently in the process of buying my first rental property, a duplex, in Akron, Ohio. Just got the inspection report back today and it looks like the roof is pretty worn and would need to be replaced in the short term (estimated age 20 yrs). There are a few other repairs like a broken window, and cracked joist, but don't seem as expensive as a roof replacement. I feel like I'm already paying a premium rate for the house in the market (around $130k), close to the highest comps in the neighborhood, and don't know if going through with the purchase makes sense.

The property would cashflow about $550 a month (6600 yearly) after all expenses (insurance, taxes, prop manager, mortgage, etc) for a cash on cash of 18%. Basically the first two years is going to the roof and maintenance expenses. The property is already 123 years old. However with some upkeep upfront this could return some really nice cashflow for a while.

What would you do in this situation?