I currently have a property under contract that I am flipping to another investor. The day we were to sign the contract I was informed by a neighbor of the property that 3 individuals were arrested for cooking Meth in the home & it is currently under quarantine until it is cleaned & inspected. Police say a lien will be put on the home preventing it from being sold until the quarantine is removed, but as of yet I have seen no lien. It will cost $5,00 to sanitize the home and have quarantine removed.
I told the investor that I will just reduce his purchase price by $5,000 & he can pay to have the home cleaned. He will come to closing with the same amount of money, it just gets distributed differently. I also told him about the possible lien, which may force us to structure the deal creatively so he pays the $5000 and not the current owner, and still gets the deed. The investor does not want to pay $5,000 to have a property cleaned that he does not own which makes sense. He also does not want to buy a home under quarantine indefinitely. Because of this I have told him that before closing he can sign an contract with the contractors to do repairs for $5,000 to guarantee that price.
What’s the simplest way to structure the deal so the investor is guaranteed ownership in the property after he pays for the cleaning if in fact the deed cannot be transferred until after the quarantine lien is removed?
I would get out of the contract as it is highly likely that you, your buyer and any future owner will have to disclose the fact this property was once a meth lab, on top of that the clean up by a haz-mat crew will run $5k, but you will potentially need to completely repaint the interior, tear up and replace carpet, might have to replace portions of sheetrock and could end up needing to monitor VOC levels for some period after clean up and could have a bunch of other problems including chemicals deteriorating drain pipes by dumping chemicals, residual toxins in HVAC ducts and chemical exposure to drywall and other surfaces.
I agree. This may be one of those type of deals that you need to run away from, and run away fast. If you assume responsibility of any part of it you may find yourself coming out of pocket on some expenses that you had no business doing what in the first place. It’s okay to pass on this one, there will be plenty of other deals out there. :bobble
However, if you want to stick with it, you go back to the seller and tell them that they neglected to inform you that the place was a meth lab and you get them to drop the price by 10-20K
I’m curious. How much did you get the building for? What do the buildings down the street sell for? How much did you sell it for? You must have gotten it real cheap already or made a huge spread to be so hung up on making this deal happen. You don’t have to mention the location, so no one will ever figure it out.