Just like a kid on the free throw strip with the game on the line in the ACC tourney final (assume he’s wearing anything but an NC State jersey), when you find a motivated seller, you need to be able to nail your shot. Consider the following…
In a recent transaction, a seller had reached a level of motivation to sell a property at a very marketable number. They weren’t giving the property away by any stretch, mind you, but they decided, basically, they wanted to sell it. In reaction to this, another agent brought into the picture buyers whom we thought, in the end, were simply going to complicate the transaction. They asked for pointless contingencies, altered terms after a verbal agreement, were unwilling to put anything in writing and basically, demonstrated they were flakes. Their number however, was in an acceptable range for the seller. The offer was being considered.
In ongoing efforts to sell the property, we decided to follow-up with some Investor Network members. We thought that one of our own buyers—an experienced, savvy investor—could move on this property and ultimately provide the seller with a solid, dependable buyer who wouldn’t shake things up prior to closing.
We found one.
Buyer #1’s offer finally became a clean one. No contingencies and a good close date. To no one’s surprise however, they actually decreased their number to just outside the seller’s range. It was communicated to our buyer, #2, that if he could do a clean deal—100% completely free of contingencies—at a slightly better number, the property was his. Two catches: We needed the offer in writing in less than 24 hours and he hasn’t seen the property. (However, his local property manager, who handles these units already, gave him a vote of confidence in their condition and performance.) He agreed to do that if the seller met in the middle on price. The seller agreed. Verbally, we had a deal.
We wrote a contract according to terms and e-mailed it to the buyer. I communicated with the agent of buyer #1 that the seller was considering another offer and would respond to all parties by 12:00 p.m. the next business day.
Now given the less than dependable nature demonstrated by the first few rounds of negotiations with buyer #1, even if they countered with a number slightly higher than buyer #2s, the seller would be better off sticking with #2 because of his track record. The ability to close confidently is a critical component of being a sound investor.
The next morning, buyer #1 presented an as-is contract in writing that raised their offer to the seller’s desired sell point. Buyer #2 also returned an offer in writing at the number agreed upon the day before.
However, deep into the contract, under paragraph 20, Other Provisions and Conditions, he had hand-written a soft but clearly stated contingency for an inspection period. The offer, on terms, wasn’t what we agreed upon.
I communicated to the seller that despite the contingency, I still have a great deal more confidence in buyer #2. Nevertheless, the seller had his number on a contract that could be fully executed in minutes as opposed to one that may never get signed given the inspection period.
After some last minute negotiations with Buyer #2, the seller accepted buyer #1’s offer.
Do I blame buyer #2 for wanting an inspection? Absolutely not. He was offering on a property without seeing it. Still, the property is structurally sound and managed by a firm with which he already employs that is well-known for only managing very good properties. An inspection, as is done with all investment properties we sell, can be done outside of contract.
In the end, I feel bad that a buyer I like and have confidence in lost out on what will be a very solid property.
When a good property comes along and it’s combined with a motivated seller, you need to be ready to step to the line like a senior on his home court. And not blink.