The Personal Finance Playbook

My wife and I just closed on our new multi-family.  I am out of town for work this week, writing this in the comfort of my hotel room, but when I go back to St. Louis, I’ll be going home to our new place instead of the place we’ve been subletting.  It’s an exciting feeling.  Meanwhile, most of the responsibility for getting things going at our new place have fallen on my wife (as so many things have throughout this process).  It’s just one of those twisted coincidences that I end up out of town the week we close on our place.

Looking back on the process, there are some things I think we did well.  We stayed conservative about what we could afford.  We got a property capable of producing revenue of 10% of the purchase price annually if fully occupied.  At the same time, there are a lot of things that I would do a differently, too.  For instance, a couple of weeks before closing, I mentioned to my wife that it was important to me that the sellers leave the basement completely empty (it was packed full of stuff when we saw the house).  She communicated this to our realtor, who told her, “there’s really not much you can do about that.”  (I’m not crazy about our StL realtors professionalism or advocacy – but I have a great Kansas City realtor if anyone in that area ever needs a recommendation).

Rachel told me that our realtor said that there was nothing we can do about making sure they empty the house completely.  I disagreed, and sent our realtor a note saying that if the house was not empty to our satisfaction at the time of our final walk through, we wouldn’t sign at closing.

Our realtor then wrote me telling me that if we didn’t sign as scheduled (our realtor isn’t crazy about me, either), then we would be in breach of contract and we would need to consider whether it was worth it to us to proceed under those circumstances.

As a practical matter, being in breach of contract means nothing until someone actually files a suit.  If that had happened for some reason, they would have to explain to the judge how they were damaged and demonstrate they had a claim to survive a motion to dismiss.  I think a judge would find it unreasonable if we asked them to remove their personal property and they filed a breach of contract suit against us.  At the very least, a mediation likely would have been ordered.  For one, closings get pushed back all the time for all kinds of reasons.  Further, it would likely be cheaper for the sellers (two non-lawyers) to simply have their excess stuff removed than to pay the cost of prosecuting a breach of contract suit. (On the flip side, it would likely be cheaper for us to just hire someone to move it out rather than defend the suit, but I didn’t want to do that;))  I told the realtor all of this (and more).  I tried to be polite, but after having several problems with this realtor throughout the process (all long stories), I’m not sure I came off that way.  I hope I wasn’t too bad.

In any case, if that was something that was important to us, we should have put it in our initial offer.  It’s the kind of tack on language that gets thrown in to contracts all the time.  ”Seller agrees to remove all personal property before closing unless specifically identified and agreed to in this document or in an addendum to this contract.”  The seller is worried about getting the best possible price.  The seller typically isn’t going to balk at this kind of language in an offer.  It would have been easy to do and would have protected our interest in this particular circumstance.  That was my mistake.

Ultimately, this did not end up being an issue.  The sellers got their stuff out.  They were the kind of people that took good care of their house, and were nice enough to leave the place nice and (mostly) empty for us.  Even when we were having this back and forth dispute with the realtor, my wife and I suspected this based on having met the people that we bought the place from.

All in all, I think we did well with our purchase.  We got it at a good price and ended up getting lots of add-ons and throw-ins after the inspection (about 30k worth of extra, necessary upgrades).  From a negotiation standpoint, however, I think a buyer should add in lots of extras into the initial offers.  It’s easy to focus only on price (that’s what the average realtor would like you to do, because that makes their life easier).  If you ask for lots of things and the sellers focus on price because the add-ons seem small, you might end up getting a better deal overall.  In any case, if it’s your first opportunity to make an offer, I would put in all the things that help optimize your the property to fit your needs, especially in a down market (like this one).  If you have a negotiation story, or another perspective, I would love to hear it (via comments or email).  Best of luck, and thanks for reading.

Related posts:

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2. Selling Real Estate – Listing vs. FSBO My wife and I are contemplating putting our condo...
3. Closing Deals: Thoughts on Inspections I had a busy week and a busier weekend. ...
4. Keeping the Buyer in Play I’ve mentioned before that we’re selling our condo and...
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This entry was posted on Wednesday, July 15th, 2009 at 5:00 am and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.