Posted by Rich on March 22, 2006 at 08:20:04:
Did you have an inspection done prior to their moving in? Or at least one from when you purchased the property? Do you have a copy of their inspection?
At one house in TX I had an inspection done while under contract and my inspector came up with foundation problems and the pictures he included showed the potential of a big ticket repair. After I cancelled the contract, the seller brought out their own engineer to evaluate and report on the foundation.
You might want to have your own ASHI certified inspector go over the property and, if they had turned up one of the big problem items such as foundation problems or roof replacement, then you should put together a pro-forma on what kind of reduction you would give based on FULL comparable sales in the neighborhood. You may want to hire an appraiser to get this done professionally.
So your starting price for negotiation should be FULL market value based on YOUR appraisal. Then deduct estimates you have obtained for repairs from that to arrive at the modified sales price. I will bet that it is above what the tenants are asking by a large margin. You will have also put together the documents neeeded to fight anything they may try to pull in forcing you to reduce your price.
You should also get some sort of anaylsis together as to what interest rate and mortgage they could get on the open market for their credit history (you should have pulled a credit report before signing an agreement with them).
Put this package together with a notice to perform from your attorney stating that the price they already agreed on is below what it would sell for with the stated problems unresolved on the open market.
Never let the other side set the starting point for reductions in price. You should research and support every price and concession yourself, including the starting price for negotiations. By starting at the artifically low price in your contract, they are trying to essentially get their $20K back from you either in cash or equity. By supporting that your price is ALREADY generous, you can head this off.
For comparables without MLS, I have been using www.Zillow.com, which seems to have a lot of info on it for pricing and price growth. It also explains their method so you can package up the info and use it to support (or not) your starting price for renegotiation of the contract.
Above all, NEVER just take their word on the kind of repairs and costs are involved. Have your own inspections done and make sure the folks doing it are of the highest caliber. You cannot prevent someone from going to court but you can prepare yourself to win.