As the cynics among us often say, “No good deed goes unpunished.” Based on today’s events, I’m starting to believe it…
I mentioned previously about the elderly woman we’re trying to help out who really needs a move-in ready house for under $100K. These types of properties aren’t too easy to come-by in this area without at least a little renovation, and because she is elderly and ill, she doesn’t have the ability to do or manage these renovations herself. So, we agreed that we would find a property that she liked, do some renovations, and sell it to her at a small profit.
We found a property last week, she saw it, and she loved it (according to her agent — we haven’t actually met the woman yet). So, we put in an offer. The seller rejected our offer, so we put in a higher offer — one that wouldn’t allow us to make much of a profit, but we were okay with that knowing we were helping this elderly buyer out. Every day we gets calls from the woman’s agent asking if we got the house, and every day we call the seller’s agent to find out if they’ve gotten a response from the seller. Our second offer was very fair, so we were looking forward to getting an answer.
Today, we found out from the seller’s agent that our second offer was rejected, and that the lowest the seller was willing to go was just a couple thousand below asking price. We did the math (several times) and determined that at the counter-offer price, we would make no money on the deal (we’d end up somewhere between losing a couple hundred dollars and making a couple hundred dollars, not even enough to cover my wife’s commission). After discussing it with my wife and brother, we decided that we’d be happy to do this project for free, as a good deed around the holidays (hmmm, we watched Secret Millionaire last night on TV, I wonder if it relates).
We called the elderly woman’s agent and told her that — while we wouldn’t be making any money on the deal and we wouldn’t be purchasing it otherwise — we’d be happy to help them out. All we asked was that she verify with her buyer the purchase price that we discussed so that we were sure we wouldn’t lose money on this one. She agreed to do so. After speaking to the agent, we called the seller’s agent to confirm that we would accept the counter-offer, and after a quick inspection, we’d very likely be ready to close.
Not more than 5 minutes after letting the seller’s agent know that we wanted to move forward, my wife got a call back from the elderly woman’s agent. She told my wife that she couldn’t in-good-conscience allow us to purchase the house. She said hat her buyer was very finicky and had extreme mood swings, and the agent couldn’t guarantee that she’d actually close on the deal! She said the buyer had backed out of other deals at the last minute as well, and just wasn’t comfortable letting us take the risk on this property.
After almost two weeks of writing contracts, negotiating this offer, wasting the time of three real estate agents, and then deciding to do the deal for free, the woman’s agent tells us “never mind.” Unbelievable! She then goes on to say that perhaps we can try to find the woman another house…though I’m still confused as to why another house would create a situation different from this house.
Anyway, we considered buying the house anyway to do a full rehab, but the numbers are just too thin and the risk is too high. So, now we need to call the seller’s agent back and let her know that we’re backing out. While there’s no penalty (there’s no contract yet), backing out after a verbal agreement hurts our reputation with this agent, potentially jeopardizing future deals.
Some have suggested that I should have gotten a contract and earnest money upfront from the elderly woman. But, I’m comfortable with the decision not to do that until I actually have the property under contract myself (it’s wasted effort if I can’t get the property myself and I don’t like to force people to pay earnest money until I’m fairly certain a deal can happen). As I’ve learned, this can cause a lot of wasted effort and hard feelings, but I still think it’s the right way to go.
I’ll just be a little bit more skeptical next time I consider doing a good deed for a needy buyer…