Real Estate Deal Gone Bad
Have you ever been party to a real estate deal that turned south? My husband and I just escaped from one that turned nasty and we’re interested in getting your take.
I’ve been a party in 4 completed real estate transactions: 1) bought a personal residence (which later became a rental), 2) bought a personal residence, 3) sold a rental, and 4) bought a rental duplex. From the time we became landlords in 2017 to now (March 2020), I’ve read a bunch of real estate books and read a ton in the online forums. In short, we know more about real estate than the average person would, but we’re not seasoned investors.
Now let me tell you about this nasty real estate experience my husband and I just had. After you read it, let me know if it’s unusually bad or if we’re just newbies.
Since we moved into our primary residence in early 2017, my husband and I have both changed jobs. He’s been working remotely for over a year and I have a new job where that’s the case for me as well. Because of our new work situation, we would like to buy a little bigger home, in which we can have two offices, a guest room, and a master suite. Right now, we have 3 bedrooms and the second and third ones aren’t large enough to hold two offices and guest bed/area.
Once we decided we wanted to start looking at homes, we realized we’re not tied to our current central location, with access to Tampa, St. Pete, and Clearwater, all of which are 20-30 minutes away. We still would like to remain in the Tampa Bay area near family and within an hour of the airport for business and personal travel, though.
In addition to the office and guest space requirements, we would like to be able to walk to town after working all day in the house. We have also picked up biking recently, and it would be great to be located near bike trails. As “real” real estate investors, with a duplex rented out, we thought it might also be nice to have a rental space on the property as well.
As we started searching online, we narrowed our search down to Sarasota, Gulfport, Safety Harbor, Dunedin, and Tarpon Springs. We even went out to eat, biked, and walked around those towns. It was in one of these small towns that we found a property we liked. It had 3 buildings on the lot: a 4/2 house, 3-car garage with 2/1 above-garage apartment, and a studio pool house. The property was walking distance to downtown, and it even had a pool. Although it was pricey, the house was in a historic neighborhood and we figured there was still room for appreciation based on houses that had recently sold in the area.
It was listed for $570,000 and had been on the market for more than 6 months with multiple price drops. The owners did not live in the area and rented the house and pool house out on Vrbo and Airbnb, while the 2/1 apartment had a long-term tenant. We weren’t alarmed by the length of time on the market because it’s a pretty niche property in an area that would make most commutes difficult. We requested a showing and were granted a time the following Saturday at noon, 6 days later.
When we arrived with our agent, we were surprised to find multiple groups there looking at the property. The listing agent said there was nothing he could do but show it that afternoon because the house was in between the short-term Vrbo tenants. We gave him a pass for not letting us know ahead of time, but this would end up being the first data point we’d later consider shady.
The listing agent seemed very keen, even a little desperate, for an offer. We understood because trying to sell a place for 200 days seemed frustrating. He wanted to know what we could do to make a deal that day. We’d later wonder, was his desperation calculated?
We had a showing at a different property the following day, so we didn’t make an offer on Saturday. After looking at the other property on Sunday, we decided to make an offer on the house/pool house/garage apartment property. Let’s refer to it as the property on Toilet Street henceforth. My husband really liked the place at the time. We offered $515,000.
That night, we heard they had multiple offers, and we should supply our best and final within an hour (by 10:00 pm). The listing agent, let’s call him Max, was going to turn his phone off then. This is another data point where we believe he was fibbing. We deliberated and decided to go to $525,000 and I even included a “Our Story” letter about why we should get the property. We went to bed happy to know everything would be resolved the following day. We either would be under contract or we wouldn’t.
If only. The next day (Monday), instead of a formal counter, they went to $560,000. I’m not sure if it was by phone, text, or email. We went to $535,000 and they countered at $558,500. That’s not a joke or a typo, they came down $1,500 on their $560,000 offer. That’s 0.3%. Anyways, that’s when we started thinking these people really were assholes. We did not come back with an increased offer.
They then countered their informal counter at $550,000. We said that’s still too much, so they went to $548,000. We went to $540,000 with $10,000 total escrow with $2500 nonrefundable so they could stop renting the house on Vrbo. We also asked that the crappy furniture remain there. This was at my request. At this point, my husband was attached to the place and wanted to live there. I didn’t think it was worth what we were now offering, but if we could sell some of our stuff without moving it and know we have some furniture there, that had some value to me. Plus, it was a little bigger house than we currently live in, so we literally needed more stuff. The sellers agreed to the $540,000 price and said they would make no repairs under any circumstances.
The sellers of the house on Toilet Street did not like the furniture request though. They said they did not know what furniture was there, but they might want some of it. You would think if it was nice and worth having, they’d know what was there, but I digress. They also didn’t want to itemize everything. So, I went through the pictures on the listing and had our agent send the wish list to Max.
This is the point when things started to go south. My gut says this list was read as a list of “demands” rather than wishes. I also think the sellers thought we had settled completely on $540,000 regardless of the furniture, which was never our offer. So, we went back and offered $538,000 with $2,000 provided after closing for the furniture.
Right when we sent that over and probably before reading it, Max called our lender to see how our financing was. Our lender said we were the ideal borrowers. Max told our lender the sellers would be making a decision between us and another offer within an hour. Our lender relayed this conversation to us, and it was news to us that there was still another offer on the table. It’s possible that the sellers and Max had not sent back any formal counters to our formal offers in order to negotiate with two buyers at once. It’s also possible there was no other offer. Nonetheless, we once again rejoiced that we would know soon whether we’d get the place or not. It was Thursday at 5:00 and we went out to dinner.
By 9:00 we hadn’t heard anything, and our lender was questioning us. The sellers had set an almost-unreasonably short closing time frame and he wanted to get started. We reached out to our agent via multiple calls and texts and did not receive a response, so we knew she’d gone to bed. I broke protocol here by looking Max up online and calling him. The conversation was short. I told him our agent had fallen asleep, so we didn’t know what the decision was. Max said there would be no decision until the following day. I could tell he was surprised to hear from me and hung up. The call was less than one minute long.
The following morning, we heard from our agent that the sellers were very mad that we decreased the sale price and there would be no furniture involved in the deal. At this point, I’m over it. My husband is over it, so we finish the thing and offer $542,000 and take the furniture off the table (pun not intended), keeping with $10,000 escrow with $2500 nonrefundable with them ending all short-term reservations upon execution. It took 6 days to get to this point.
Happily, I was out of town early the next week and my husband handled the inspection process. We learned the sellers were still renting and doing business as usual, but we could do inspections whenever we wanted, and they’d let the tenants and guests know. We told them what we had planned and to make sure the listing agent was present. There was a month-to-month tenant in the pool house that apparently was not notified about the inspection because he threatened to call the cops. The Vrbo guests of the house arrived mid-inspection, yelled about how they were on vacation, slammed the door, and stormed off. The above garage apartment was empty, and the power was turned off. The inspection was otherwise completed, although under duress.
Between the time we went under contract and the time we received the inspection report, Max indicated to our agent that the sellers were very smart businesspeople – smarter than him, our agent, my husband, and me. She didn’t like that.
The inspection report indicated the property needed extensive repairs. It’s not even safe for anyone to live in the above garage apartment. Since we’d been told multiple times there would be no repairs, and we were straight up frustrated with the sellers for how they negotiated, continued to run their business after they signed a contract saying they wouldn’t, and then didn’t tell the tenant or guests we were coming, we decided to send the cancellation over asking for all $10,000. It was during a discussion about ending the contract that Max told our agent about my phone call to him 8 days prior. His intention was to sow discord, and it worked. He also threatened us with yet another “backup offer.”
The sellers declined to return the entire $10,000, and rather than fight with them we sent over the cancellation to return $7,500 to us and give them $2,500. At this point, I was really regretting the nonrefundable escrow, but at the time we didn’t know how else to inspect freely. About 30 minutes later though, the Toilet Street sellers informed us that our inspector had bent a screen door and they were going to dispute the ENTIRE escrow deposit. Our agent looped Max’s broker (boss) in at this point. I quickly spoke with a lawyer who indicated we were in the right and if we went to mediation, we’d probably get the whole amount. We had our agent relay to them that we would be filing suit on Monday (it was Friday at 4:00 at this point) for the whole $10,000 and they signed the cancellation releasing $7,500 of escrow to us within an hour. It turns out the nonrefundable escrow and the broker’s involvement probably saved us quite a headache. Without it, they surely would have contested the entire amount.
The lawyer I spoke with figured the sellers were going to go after the full $10,000. She had seen this before – people who knew how to work the system. The sellers and Max most likely had planned the entire time to fabricate a repair to hold the escrow up if things didn’t go their way.
My husband and I learned a lot from this experience, so in a way we’re grateful. We’re now looking at other properties and are hopeful we can enter into an agreement with a seller where we share the goal of passing ownership of the property along. We all know that sellers want to get as much money as possible for their property and buyers want to spend as little as possible, but overall there is a business transaction to be done. And I fully believe it should be civil. We don’t need to question the other side’s intelligence along the way, lie about other offers, or fabricate inspector-caused damage.
As for the Toilet Street property, the listing was removed. They continued to rent out space that is not safe for humans to live in or walk on, and I don’t mean a bent screen door. Recently, we heard it’s under contract again.
Do you think these sellers were unreasonable? Is there anything we should do to warn future tenants or future owners of the unsafe conditions? Do you have a similar story to tell?
Please reach out to me (Lauren) at email@example.com or @AdultingIsEasy on Twitter.