Emotions almost got the better of me on this deal
Sometimes you put a lot of work into looking at a home. Sometimes you put in so much work and time that it begins to cloud your judgement and you start to make wrong decisions. This is one of those stories.
I looked at a home a few months back. This was in a decent area of town. It was a bank repossession and it was listed for $48,500. Houses in the area sell for around $65,000 - $70,000. The house stayed on the market and eventually dropped to $42,500. I went and inspected it and it’s looked ok – so I made an offer. The bank rejected it and countered and we went back and forth a few times. Eventually I made my final offer at $36,500. The bank said they would review. So I waited....and waited......and waited....then I got fed up with waiting and made a bunch of offers on other homes.
After about 2 months, the bank called and accepted the offer. I’d forgotten about it at that point and was half way through a couple of rehabs on purchases I’d made in the mean time so I laughed and told them I wasn’t interested. I closed it off and moved on. Around Christmas time (about 2 months after they accepted my offer of $36,500) I got an e-mail saying that the price was now reduced to $29,900!
This amused me because they could have gotten $36,500 four months prior. I made an offer for the asking price and they said it was going to highest and best - basically a bidding war. I didn't change my number. A few days later, the bank accepted my offer – I don’t think there were other bidders, they were just trying to squeeze some more from me.
Then the contractor when through it in detail - it was going to cost $15,000 to get it in rent ready condition. This wasn't too bad - but - what we scrutinized were the long term costs. There were a bunch of little and big items that whilst not needed now, would have to be done in 5 years or so. Total cost – about $30,000! This was much more expensive. My bargain house was now going to cost me much more than the purchase price and since I’m a long term investor, I had to give it up – it just stopped making sense.
I was devastated to walk away. On the one hand, I felt like I dodged a bullet but on the other hand the purchase price was so good I did everything I could to make it work. Fortunately, my rational brain kicked in and we let it go. To ma