Now, you would have expected that the closing with the experienced investor buyers who had plenty of time to do all their due diligence and get their money together would have been a piece of cake. You, however, would have expected wrong.
On Thursday afternoon, a bit after 3:00, I hear from them that they didn't get the HUD 1 from the Title Company until 8:00 Thursday morning. Therefore, they claimed, their investor wasn't going to be able to get me any money until Tuesday. That was going to cost me an additional 2 points, plus a payment of $1,320 - so approximately $4,000. I told them that I'd extend the contract if they covered my cost. After all, I had already bent over backward to work within their time frame. Also, I had cleared out the unit that people had left full of junk, gotten the current tenants to agree to the new rent, gotten the current tenants to sign their old lease as we didn't have a signed copy & gotten them to agree to make up the security deposit that the old landlord had taken in lieu of rent.
Well, they didn't want to pay the additional $4,000, but wanted me to extend it for free. Now, I'd already paid 2 points to a private lender as well as $1,800 in closing costs, rather than calling a cash buyer to close on the 22nd, in order to be able to work with these guys. To put it in monetary terms, I'd already spent $4,400 of my profit. Now, they wanted me to eat $4,000 more? When I'd first talked to them, they told me they could close in 2 or 3 days. When I got the seller to extend the contract, they told me they could close in a week. When they went under contract, they told me they could close in 2 weeks. Suddenly, 25 hours before closing, they needed more time. I had some serious thinking to do.
What were my options?
1. Let them have an extension and eat $4,000.
2. Keep it myself, along with their non-refundable $3,000 deposit.
3. Call another buyer and sell it to him on Friday before I had to pay the extra points and payment to the lender.
So, I called the other buyer. He agreed to buy it as long as he could just wire $150,000 and I'd pay his closing costs. In order to do this, I had to get the first buyers to release the contract... which they agreed to do as long as I didn't keep their deposit. So, another $3,000 lesson. Get the money released from escrow as soon as it goes hard. And another one, make it clear up front that there will be a high cost for any extension of the contract. It needs to be built in up front.
I wound up closing with my cash buyer who unfortunately wanted his title policy held open. This cost me over $600 because I had already held open my policy, expecting to turn it over to an end buyer and not incur any additional costs on it. The total amount I made of the $20,000 that I expected after all the expenses was about $11,800. It was a very, very expensive learning experience and I felt pretty beat up last night. I know I made money and that's great, but I just didn't feel like celebrating because the cost was so high.
Well, I have 3 short sales lined up and am going to be on the hunt for more wholesale deals. I've learned a lot from this and am certain that my next deal will be so much smoother. My wonderful Realtor tells me that it would be really hard to top how difficult this one has been.
Until next time...