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FSBO and offer

3,927 Views | 26 Replies | Last: 2 yr ago by DannyDuberstein
LeanderAg
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9:01p, 2/19/23
AG
I'm interested in a FSBO duplex and I'd like to put in an offer. I have two questions...

1) When I asked about touring the home, he said it has tenants and I can see it when under contract. There are some pictures on Zillow, but I think it is only one side. I've also driven by and have seen the front and some of the back. How would you approach this situation? Put in a conditional offer for inspection and just rely on that?

2) How should I approach him with the offer and what does it look like? Should I find a template online? I have his phone number, but I'm pretty sure he is from out of town.

Thank you
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AggiePlaya
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9:24p, 2/19/23
AG
What a terrible salesman if he won't let you see the property without a contract. Probably another reason dumbass FSBO owners get lowball offers.

I would send a lowball offer. If this is in Texas you can download the TREC contract online and fill out and send to him.
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SteveBott
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9:27p, 2/19/23
AG
Not sure how you even offer without a personal inspection. You need to convince the seller of this.

Contracting to get to inspection is not cheap. And requires professional help. I'd start with some realtor assistance. However you want to pay commission
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Red Pear Felipe
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10:27p, 2/19/23
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I recently helped out some clients who chose to be represented in a FSBO purchase. Do NOT put an offer if he won't let you see it. Where is the property? Maybe one of our Red Pear Realty agents can help you out with this. It seems like the FSBO owner is only looking out for himself and not your interests.
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jagvocate
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5:02a, 2/20/23
AG
Get a real estate lawyer to write a favorable, extended option period for your low-ball offer contract. If accepted, you pay your option fee and do your inspections with a legit inspector and report. If you find a deal breaker, give the owner notice. Maybe you won't find any deal breakers and you have a good deal.


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Agilaw
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In reply to LeanderAg • 10:12a, 2/20/23
AG
If it looks like it could be a good deal, write up the offer with contingencies and option fees favorable to you. Your main risk is losing the option fee and the cost of the inspection. These can often be good deals as the number of investors willing to pursue the property is much smaller. Feel free to send me a message if you would like to discuss further.
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HomeFinderCody
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10:43a, 2/20/23
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Option fee $1.

Only if the property is something you are REALLY interested in and can't find something similar. Completely unreasonable to require a contract to see the home. BUT, if you really want to see it, just build in an option period with a fee of $1.

Cody
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Jay@AgsReward.com
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In reply to LeanderAg • 10:48a, 2/20/23
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That is not terribly rare for tenant occupied properties. I have put several properties under contract in this situation at a price that would be good for me assuming the property was in average condition. Basically you are just putting a couple hundred bucks of option money on the line. You would walk the property before even shelling out the money for an inspection which of course you do during the option period.

I have killed a couple of contracts immediately after walking the property but have also purchased a few like this. One of them being one one of the best deals I have purchased. Got a 3 unit in a high rent area of east Dallas under contract 620k, for 200 option, walked the property, closed the deal with cash immediately refinanced at a close to 900k value. That deal obviously made up for what ever piddling option money I had thrown away on previous deals I walked away from.
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jja79
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3:42p, 2/20/23
AG
I don't think it's unusual at all from my experience. Not of interest to me but I know quite a few folks that have bought this way.
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LeanderAg
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6:39p, 2/20/23
AG
Thanks for all the replies! I'm going to talk it over with my wife to see what we want to do.
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Diggity
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10:02a, 2/21/23
AG
2% rent rule sounds like some good pie in the sky *****

Good luck with those offers.
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Caliber
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In reply to Diggity • 10:44a, 2/21/23
AG
Diggity said:
2% rent rule sounds like some good pie in the sky *****

Good luck with those offers.
I wouldn't say it's pie in the sky necessarily... It will make you a slum lord more than anything though.

You're looking at the very low end with distressed housing markets.

There is money to be made but you have to want to deal with that class of renters which takes a certain kind of personality. Most people would rather have higher end renters and not deal with having to be a hard ass on renters.
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Diggity
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In reply to Caliber • 11:25a, 2/21/23
AG
that's even a stretch for meth-lab style homes, unless you're going to be spending a fair amount of cash on the renovation, which needs to be added to your cost basis.

As you mentioned, you have to factor in vacancy, eviction costs, repairs, etc., etc., which are higher on those types of rentals and will have a negative impact on the simplistic 2% rule.
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LeanderAg
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8:17p, 3/20/23
AG
Just wanted to provide an update in case anyone was curious. This was several weeks ago...

After some negotiation, we agreed on a price and entered into a contract with an option period. We tried to leverage that the $/SF was too high and we had not seen the inside. He did come down, but not as much as we hoped. He leveraged the cost vs rental income ratio.

Anyway, we arranged to bring in our inspector and see for ourselves. The first unit wasn't in too bad condition, other than the HVAC not working. It was just FILTHY - the tenant hadn't cleaned anything for years. There were piles of dirt and sand all over the floor. He had all his tools in the living room plus two transmissions. He kept the lawn mower in the kitchen. The second unit was a disaster - like meth lab conditions - holes in the walls, holes in doors, walls torn down, flooring gone, the clothes washer hadn't worked in years and had green water in it, both the tub and toilet had been leaking for a long time, etc. Supposedly, the tenant was paying $1,400/mo and paid on time. Yeah, right. We drove by this place numerous times and you couldn't tell any of this from the outside.

So, we took our option and walked. The guy tried to argue that all of the things could be fixed (and the tenant would fix them, lol), but we felt deceived and didn't want to deal with him (and the tenants) anymore. By the way, this guy is also an agent and has his own company. So shady...

Lessons learned for us. No more contracts w/o seeing the place first. It wasted $600 plus our time.
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Diggity
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In reply to LeanderAg • 8:33p, 3/20/23
AG
Sounds like a ****ty deal, but it would have made sense to walk the property yourself before paying for an inspector.

It doesn't sound like you really needed a professional to tell you this deal wasn't for you.
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ATM9000
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In reply to LeanderAg • 2:02p, 3/21/23
AG
LeanderAg said:
Just wanted to provide an update in case anyone was curious. This was several weeks ago...

After some negotiation, we agreed on a price and entered into a contract with an option period. We tried to leverage that the $/SF was too high and we had not seen the inside. He did come down, but not as much as we hoped. He leveraged the cost vs rental income ratio.

Anyway, we arranged to bring in our inspector and see for ourselves. The first unit wasn't in too bad condition, other than the HVAC not working. It was just FILTHY - the tenant hadn't cleaned anything for years. There were piles of dirt and sand all over the floor. He had all his tools in the living room plus two transmissions. He kept the lawn mower in the kitchen. The second unit was a disaster - like meth lab conditions - holes in the walls, holes in doors, walls torn down, flooring gone, the clothes washer hadn't worked in years and had green water in it, both the tub and toilet had been leaking for a long time, etc. Supposedly, the tenant was paying $1,400/mo and paid on time. Yeah, right. We drove by this place numerous times and you couldn't tell any of this from the outside.

So, we took our option and walked. The guy tried to argue that all of the things could be fixed (and the tenant would fix them, lol), but we felt deceived and didn't want to deal with him (and the tenants) anymore. By the way, this guy is also an agent and has his own company. So shady...

Lessons learned for us. No more contracts w/o seeing the place first. It wasted $600 plus our time.

2 things (for future prospective buyers):

1. Did the inspection get documented and shared with the FSBO guy? If not. make sure you share it because then I think by law he's got to disclose it… will help prospective buyers have more information than you did.

2. Did you tell the guy this was a waste of your time and money? If not, just say it. 99% chance that he knows, but maybe not. If he doesn't understand this, then you are doing him a favor. If he does understand it, then you shouldn't feel bad telling him. Don't be mean about it… but just make it out loud.
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Diggity
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In reply to ATM9000 • 2:08p, 3/21/23
AG
I get what you're saying, but am highly skeptical that a FSBO seller that operates in the manner described by the OP is going to disclose a thing, whether legally bound to or not.
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ATM9000
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In reply to Diggity • 2:27p, 3/21/23
AG
Diggity said:
I get what you're saying, but am highly skeptical that a FSBO seller that operates in the manner described by the OP is going to disclose a thing, whether legally bound to or not.

Probably not… but… in case questions get asked by a buyer in the future… make him sweat if a subpoena were to show up.
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Hachieaggie10
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2:49p, 3/21/23
AG
I recently purchased a full duplex and many of the ones listed wouldn't allow showings until contract in place. I get it is hard to schedule a bunch of showings with tenants but there are ways around it. If they didn't provide any recent pictures I wouldn't even consider it. If both units are occupied by long term tenants and all the pictures are of empty units then they tell me nothing. Sorry you ended up with a bad experience. The right one will come along.
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LeanderAg
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In reply to Diggity • 8:12p, 3/21/23
AG
For sure. We knew there was risk, but willing to take it because 1) we didn't suspect anything from the outside and 2) he was an agent and assumed full disclosure.
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LeanderAg
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In reply to ATM9000 • 8:17p, 3/21/23
AG
Yes, we made sure he knew and he apologized, but then said he didn't understand why we wouldn't work it out with him. We didn't share the report even though he asked for it. We paid $400 for that and didn't want give it to him. We thought about selling it to him, but again - we were just done with him. And who knows what he will do now. He could try to fool someone else, or he could have the tenants fix everything like he said. I'm pretty sure that one tenant will bail.
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LeanderAg
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In reply to Hachieaggie10 • 8:21p, 3/21/23
AG
Thanks. We aren't new to rentals - we have four STRs. We were going to try long term. We won't give up and will keep looking.
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ATM9000
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In reply to LeanderAg • 8:58p, 3/21/23
AG
LeanderAg said:
Yes, we made sure he knew and he apologized, but then said he didn't understand why we wouldn't work it out with him. We didn't share the report even though he asked for it. We paid $400 for that and didn't want give it to him. We thought about selling it to him, but again - we were just done with him. And who knows what he will do now. He could try to fool someone else, or he could have the tenants fix everything like he said. I'm pretty sure that one tenant will bail.

I'd share it. Sucks you spent money on it, but it creates a legal obligation in that a seller has to disclose findings in it on their disclosure report,

Doesn't mean they are going to, but in theory, by sharing it you are potentially ensuring future buyers don't get scammed like did.

If he does do this to somebody else though and he doesn't disclose the report findings, at minimum, you are creating an uncomfortable paper trail for the seller.
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highpriorityag
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9:07p, 3/21/23
when it eventually sells drop a copy in the mail to the new owners
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ATM9000
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In reply to highpriorityag • 1:38a, 3/22/23
AG
Mumbo Jimbo said:
when it eventually sells drop a copy in the mail to the new owners

But that means nothing if I the seller never saw the document.

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Señor Chang
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In reply to LeanderAg • 4:24p, 3/22/23
AG
LeanderAg said:
For sure. We knew there was risk, but willing to take it because 1) we didn't suspect anything from the outside and 2) he was an agent and assumed full disclosure.
He's an agent, but didn't list this on the MLS? That's a pretty big red flag right there.
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DannyDuberstein
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8:40p, 3/22/23
AG
I don't see the point of withholding it. If the place is such a ****hole, then it's not like it has much value to him because everything is a mess. But sharing it with him is your chance to jam him up.
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