All Forum Posts by: Alexander Lommel

So I had one of my rentals up for rent and several showings scheduled within a few days period. One of the prospective tenants passed my background check and during the showing left a deposit to hold the property. As soon as she left a deposit I called two other showings and cancelled them and then took the rental postings down from all the usual listing services. There was a timeframe between the day I took it off of the market and the time she was prepared to sign the lease of 15 days. The only reason I allowed her to tie up the property and to cancel my other showings was because she left me a holding deposit of which I told her we would convert it over to her security deposit at the signing of the lease. 

Fast forward a week and she emailed me to inform me that she was having to back out of signing the lease and expects a full refund of the deposit. She also claims I never told her the deposit was for holding the property but rather she never intended me to cash the deposit (not sure why anyone would write a check if they never intended it to be cashed). I explained to her how a holding deposit works and laid out the scenario in which I got the rental back on the market and within two weeks of her signing the deposit over to me and my removing it off of the market, I would refund her the prorated amount out of the deposit that she cost me by missing out of the rent I would have received had I rented to someone else.

Bottom line, I don't have a written agreement of the deposit just a copy of the check she wrote and an email trail documenting everything mentioned above. Obviously in the future I will get it all in writing so no one can claim not to understand the meaning of a holding deposit. 

My question to my fellow BP'ers is how should I proceed? Is the check with the words "for deposit" written on it enough for me to proceed or am I wading into a sticky situation? She obviously is costing me money if I were to refund the entire deposit. 15 days missed rental income  ($645.20) because she had a change of mind is not acceptable to me.

Thanks in advance

I agree with Carlos, sounds like you're trying to convince yourself that it's a deal. You can always walk away if it doesn't meet your criteria. I'd consider a property that might not cash flow without having work done on it, but I come from a construction background and can force equity into a property to get better returns fairly easily. If that's not something you can do without putting yourself at risk, you might want to reconsider. Also 1 bed 1 bath units are not your ideal rentals. 

Bottom line don't force it. Just be diligent and when the right property comes along you'll know it. It can be tough when you're anxious for your first deal, but what's even worse is settling for a so-so deal and having to pass up on a good deal later because you're stretched too thin trying to bring a property up to a break even. 

Hope that helps, and best of luck with whatever you decide!

just curious if you will lose earnest if you back out now?

What are the particulars? City, acreage, improvements, cost?

Thanks Jon, I'm definatly not going to overpay for the property. The deal would create great cash flow, so Thats why I'm trying to salvage it if I can, but I'm not going to shoot myself in the foot over it. 

Not much. He's part of the same realty team as the seller and isn't familiar with alternative financing. 

the sellers realtor

Also, if The seller is under water on the property, she won't be able to sell without going to an alternative method of sale or lease deal (which could cut out the realtors and Inwant to avoid)

Just to be clear, I'm not trying to cut out the realtors. I'm trying to avoid exactly that. My question is how to proceed should we have to go to alternative financing and how that would cost me vs. a traditional loan. The way this deal is shaping up all of the cost burdens are shifting my way. If I have to pay the realtor fees and the overage of the contract between the appraised value and the new negotiated price, the deal is dead on my part. I'm not going to over pay for the deal. If I try to salvage the deal by going a non-traditional financing route, how do I still include the realtors and make the numbers work?

The realtor just hit me up to finance the loan at 474 and to carry a second private note for 75k...  Not going to happen. 

Seller paid for the appraisal. I am hoping to see it but haven't yet so I have no idea how the comps we're pulled.

If the deal can't move forward with traditional financing then there would be no way to proceed without going alternative financing. How would the realtors be paid in that? Would it have to come out of a down payment? If so I don't have enough to pay her equity as well as 12% commission and closing fees.

Not sure how to proceed.