Need Advice On Price Reduction
Hi, I'm buying a 5 family apt building in Brooklyn, NYC which will be owner occupied.
We've got a closing date and there's one open violation for work done without a permit that's hanging around. My bank is ok with going forward (they're going to make me agree to having it cleared within x amount of time). The problem is the estimated costs of getting it removed.
The seller says that it should cost $3000 to get it removed.
My architect says it would take like $30,000 to get it removed as there's some fire safety issues with the type of sheetrock and materials used. The plans that they would draw up wouldn't be able to be approved with the materials that were already used for the work in 2001. So the work would need to be redone.
This is my first time buying a big property. Previously I owned a co-op. This deal has been both exciting and completely annoying as I feel like the owner is never telling me the whole truth.
When I get estimate from my architect, I'm going to come back to her for a price reduction. Is there another way to ask for her to pay this? Keeping escrow for the work? Or should I just negotiate a reduction?
Of course i don't want to pay for this work at all since she said it was going to be taken care of.... (yeah, I believed that at the time) And also, way back when, we had an accepted offer at one price and then we had a competing bid and ended up raising our bid $25k. Grrrrrrr. It was still a good price, but not as good as the first price.
I don't know if I'm so much asking a question but what would anyone do in my situation? I'm not a contractor or architect, so I'll be paying for all the work that needs to be done.
thanks!
You didn't write that the owner would take care of the repair to meet code in the offer to purchase contract? If you would have done that the seller would be liable for the repairs. If he didn't do them you walk away from the deal free and clear. Since that wasn't done though it will be your problem no matter what was "said". Next time get everything in writing and in the contract.
At least it isn't that expensive of a lesson. 30K is a lot but depending on what you are paying for the building and what your cash flow is it might not be that big of percentage but it is still 30K...ouch
Q
I suppose what we need to know is whether or not you are still bound by contract to purchase the property. If you are still bound, then do the best you can to get it reduced but understand that they do not have to reduce it. If you are not bound ( which is what most of us are hoping for you ) then that may free you up to do some negotiating. One last thing, unless the architect is also the contractor that you would be dealing with, you probably ought to get an opinion from a reputable contractor as to what would need to be fixed and how much it would cost. Wish you well !!!!!
well the seller has an out in her contract which says that if it costs her more than $2500 to remove any violation(s) she can cancel the deal free and clear. If I accept her $2500 then she cannot cancel the contract.
I did not have an out in my contract, yes, really stupid and a big lesson learned.
But I know she wants to sell this and she doesn't want to start all over. So I guess I'm trying to call her bluff or see if she's willing to negotiate.
Not being familiar with NY real estate I'm a little confused with "two contracts"--the buyers and sellers. If she has in hers that if the repairs cost more than $2500 she can cancel the contract then you have an "out" if you want to get out and start over. Your architect has stated that the repairs will run 30K. Take those numbers to seller. When she says, "deals off" start over and negotiate. But if the seller can get the work done and approved for $2500 then tell her to get it done.
I just don't want to see you stuck in a contract where you lose 30K at the end when you don't have too.
Good luck,
Q
P.S. Can you explain the two contracts?
oh there are not two contracts -
in the one contract the seller has an out clause where she can cancel the contract. So essentially it's our out as well if we push her to pay part of the bill and she doesn't want to.
What we don't have is a requirement on her part to foot the bill for the work to remove the violation.
I hope that's clearer.
And my estimate came in and it's $50-$70k - yowza!!!
Not knowing the property and its potential I'm not sure what a 50-70K repair bill would do to its cash flow and value but I'm guessing this is a deal to walk away from. Push her to pay all of it and when she says "No" the contract is void and you walk away from the deal with earnest money in hand.
Now if you really want the property you are at the advantage for negotiating round #2. Let her approach you. She is probably desparate at this time to sell knowing that she has a building in need of major repairs (50-70K). Hit her on the price and hope for the best.
Q