Yep. After all the drama. All the back and forth. All the ups and downs.
My first apartment deal is DEAD.
Call it doctor:Â time of death Thursday July 10, 5pm eastern.
The cause of death is what’s ridiculous. Again, to recap (please indulge me if you’ve seen this before) Mr Seller and I agreed to terms last April 15th. He produced all of the required due diligence documents up front, except for his 2007 Tax Returns and a year-to-date income or operating statement, which he committed to getting me during the first week of May. (These two items, by the way, are required by every commercial lender and were required if I wanted to get financed, which I did)
So I’ve been waiting for two months. Ready to proceed at a moment’s notice, if he would simply provide – literally – 2 pages of information.
And so I waited. And waited. And waited.
Until last Thursday. After trying to light a fire under him as I discussed in a prior post, I received a call from the selling broker. Apparently Mr Seller had had a brain fart and had thought up one whopper of an additional condition that he wanted to impose.
Mr Seller wanted an additional $10,000, non-refundable, earnest money deposit before he would release any more information, particularly the tax returns.
Huh?? But I’m not the one holding up the deal Sherlock.
So I gave Mr Seller until 5pm Thursday to pull his head out, or else the deal would die.
He didn’t. It did.
Do you know what the funny thing is? This was property named as part of a 1031 exchange for the seller. And in addition, Mr Seller, aka Mr Einstein, refinanced this property at the beginning of May in order to pull all of his cash out – in the middle of selling it!
Why do I call him Mr Einstein? Because he took on an adjustable-rate mortgage. But that’s not all – the genius took on a mortgage where the rate adjusts monthly! It was like he simply asked for the lowest closing cost commercial mortgage and signed whatever they put in front of him.
So not only is he losing out on his 1031 exchange, but his interest rate will move against him such that in October or November of this year he’ll be upside down on his payment.
Couldn’t happen to a nicer guy.
Off to continue my Apartment Quest!
Great post. I really likd the title of the website/blog, too. It is so nice to see someone getting back to basic in the real estate world! Sorry to hear that you lost the deal, but it will always open another door! It sounds like he has put himself in quite a pickle, so he just might be back with more favorable terms.
I agree about the door opening – the details of the way I was financing this one has held up two other projects I was looking pursuing – so now it’s full speed ahead with the others.
Mr Seller has indeed painted himself in a corner on this. He’s a small operator and when his interest rate moves against him he will be cooked. He has about another week before I get too far down the path to be interested.
Thanks for the comment William.