Anatomy of A Flip that Fell through - Posted by Frank Chin
Posted by Frank Chin on February 12, 2001 at 09:02:21:
Agree with JPiper on his points. There are so many variables in any Real Estate Transaction - that you always have to think of a backup plan. But its hard to predict how things will turn out.
Here’s when happened
1- Got an assignable contract in December one year, allowing me to flip and do rehab. Contract calls for closing in six months.
2- Rehab completed in February and Buyer found in May the following year.
3- Buyer got his mortgage comitment in July.
4- Closing scheduled for August. Though its past the six months, since time is of the essence not required, No extension was sought.
5- Got a call a week before closing mid August. Buyer claims he lost his job. We told him of the mortgage contingency clause, that he’ll lose his 10% deposit. Told him that he dosn’t have to tell his bank.
6- He told his Bank. The whole thing called off.
7- We asked the seller for extension. He said NO. He needed 10K still tied up in the house, and waited long enough.
Here’s what I did
a- Loaned the seller around 9K to pay his bills from my credit lines.
b- Got a two month extension to October.
c- After listening to the Buyers sob story through his attorney, kept 8k of the deposit to pay my closing costs and loan to the buyer. Returned 5K.
d- I closed on it - rented it out.
Was planning to make 25K from a quick flip. Still have the property but its worth at least 150K more. Thinking of selling it this year.
What I learned
Had to cope with the situation week by week. So many twists and turns that its not possible to write everything into the contract. Attorney did say NEVER agree to “time is of the essence” in such cases and keep things flexible enough to roll with the situation.
Seller did threated to cancel once or twice. Just causally mentioned that he rather be my friend ( how about a loan) rather than be my enemy ( I tie this up in court years and years).
Buyer attorney called my attorney and threated to sue to get the deposit back. My attorney said he has no case - but could tie things up. Buyer attorney then called me saying “Do you know who I am?” - I’ll take you to the cleaners. I laughed and said - “If you’re such a big shot - why are you wasting your time with this loser for 13K”. I hung up.
Buyer attorney called back a week later - begging - saying the buyers wife would leave him. I said OK - if he’ll cover my closing and other expenses - I’ll consider paying him whatever is left. He agreed