SSS #144: Swallowing My Pride


Gotta love NJ's weather settings: scorching hot or brick-cold.

Livin' La Vida Luna


Luna's taking this whole Big Sister thing very seriously.

We finally sold the duplex in Westfield, NJ!

Here are the key dates of this project:

  • 2/09/22 - Purchased
  • 2/23/22 - Listed For Sale
  • 3/22/22 - Under Contract
  • 6/21/22 - Sold!

The 90 days between UC and Sold have been hectic:

  • Finicky lender requirements (Navy Federal Credit Union)
  • Ridiculously Low appraisal (518k vs. 600k offer)
  • Adverse Market Conditions (Interest Rate Spike)

Up until last week, I was confident we would close this deal despite all of the obstacles we faced along the way.

When the buyer's lender gave us a "Clear To Close", there was a collective sigh of relief from everyone on our side.

But we weren't out of the woods yet.

During the final walk-through, we all discovered one washer/dryer set in the basement actually belonged to the first-floor tenant. And the other washer/dryer set wasn't working.

We also found out the first-floor tenant had a roommate.

The buyer was visually upset about both but didn't say anything during the walk-through.

Once we hit the closing table the next day, the buyer asked for a $3,500 credit. He wanted $2,000 to buy two new sets of washers & dryers and $1,500 to deal with the "surprise" tenant.

This $3,500 was ON TOP of the $9,000 credit we were already giving them for the existing tenant.

Once my agent informed me about this request, I started to write up a counter-offer.

Then this email came in from the buyer's attorney.


When I read this I had two thoughts:

  1. Damn, this lawyer is good. I might hire him for my next deal.
  2. F*ck this buyer. I will NOT be held hostage. 🤬

30 seconds later I sent this email...


Why the sudden turn around?

$3,500 is a lot of money to give up, but it's also less than one month of holding costs on this project.

[[ FYI:

We financed 100% of the purchase ($450K), renovation ($20K), and working capital ($10K) here at 8.75% interest only.

That $480K loan alone costs us $3,500 per month. That doesn't include the $1,000 per month property tax bill or $100 or so per month in utilities. ]]

If this transaction fell apart because I decided to fight fire with fire, I wasn't confident in our ability to come out ahead in the long run.

There were a few big anchors holding me back.

When we originally listed this property at $550K back in Feb (while the market was still hot), we received only 2 offers. One was at our asking price and the other was $50K above our ask.

Obviously we accepted the $600K offer, but it didn't matter. The property ultimately appraised for $518K.

I do think the appraisal for this particular lender came in low, but I wasn't confident it was going to come in higher than our contract price of $556K if we went back to the market.

Third, interest rates almost doubled since we originally listed this property for sale. Our existing buyer was rate-locked in the 3's, but if we went back to the market, a new buyer would likely be seeing rates in the 6's.

[[ FYI:

The loan amount on a $550K purchase with 20% down is $440K.

  • $440K at 3% over 30 years is a monthly payment of 1,855.
  • $440K at 6% over 30 years is a monthly payment of 2,638.

Almost an $800 difference per month for our end buyer. That's WITHOUT assuming we'd be able to achieve a higher exit price. ]]


It's now a few days later and I can confidently say I'm happy with my decision.

Giving up that $3,500 with a gun to my head at the closing table stings my ego a little bit, but I think it was the best business decision in the moment.

What would you have done?