I am in the process of purchasing my first rental property. Over the last two weeks, the closing has been cancelled twice, supposedly because the payoff notice from Wells Fargo was sent to the wrong place. My mortgage broker said it sounded to him like the seller was behind in his mortgage payments and that he didn’t have the money to become current. Sure enough, I hear from my realtor this morning that the seller needs $5K to close and didn’t have the money. The house was appraised at $78K, which the appraiser said was conservative because the last house that sold in the immediate area was more than two years ago. My offer of $67,500 was accepted, was putting 10% down, mortgage was for a little more that $60K. The house needs a little work. After repair value (and this is just my opinion) might be about $85K.

I suggested a short sale, and my realtor suggested that we let the seller’s realtor try to negotiate that deal with Wells Fargo. First of all, I don’t trust the seller or his realtor and secondly, the fiduciary relationship of the seller’s realtor is with the seller, not me.

I still wish to purchase this house. Should I call Wells Fargo myself? Should I have my realtor try to negotiate a short sale with them? I’m not sure what to do at this point, but don’t want to let the house slip away. Any and all advice is greatly appreciated. Thanks in advance for all responses and let me know if you would require any additional information.

Thank you,

What are the rents in the neighborhood?

I suspect the seller is trying to get you to pay closing costs, or just trying to squeeze another 5K out of you. Maybe offer to pay closing costs but lower the price by 5K. If he balks and you have a valid contract, have your lawyer take over. No lawyer? Big mistake.


Call the title company and ask them to fax you a copy of the pay-off. You will be able to tell from looking at it whether he is behind on his payments or not. The amount of interest added to the pay-off will tell you everything you need to know.

 I had a situation kind of like this.  The seller's dad turned the house into a duplex and had all kinds of code violations going on with plumbing and electrical.  The seller owned the place outright.  You can find out how long it's been since the seller purchased or refinanced the property by visiting your county assessor's website, and looking at the property tax assessments; if the last assessment was in 1995, then the seller has not refinanced since that time, and the place is likely to have a chunk of equity.  In my case the seller was broke, but the house had not had property tax assessments since the early 70s.  You said that you're willing to put 10% down, which would be $6750.00 and the seller only needs 5K.
 You can work this out through an addendum to the purchase agreement and joint escrow instructions.  You should consult a trusted advisor before you take my advice, but if there is at least $5,000.00 in equity, you can write addendums to the purchase agreement that read:
 "Buyer to release $5,000.00 deposit through escrow to seller.  The $5,000.00 is pass through money to be paid to Wells Fargo Bank for seller's unpaid mortgage payments ONLY, and is to be applied to purchase price."
 If there is enough equity, get a seller credit:
 "seller shall credit buyer $1200.00 for closing costs"
 You need to be sure that these people are being open and honest before you do this.
 If I were you, I would find a better realtor

NJ Investor,

Bluemoon asked THE pertinent question. What are the rents?

This deal looks VERY thin and I doubt it will cash flow. Maybe you’re lucky that the deal fell through. I’d rather not have a rental than have one that loses money.


Bluemoon06 - Rents in the area are about $1050/month.

Meadowman - I was advised not to go into litigation, as it would only end up costing me money.

The seller needs $5K to go to closing and doesn’t have it. Not sure what I would get out of suing.


First of all, you need to be sure of the ARV. Sounds like you aren’t positive. What is a little work? If you don’t have the repair costs right your margin could be tight.

If the seller can’t close because they don’t have the cash. You may have to restructure the deal. It was said earlier to have the seller lower the price. I would go for that if there is enough equity. Beware of this seller. They may have other problems with liens. Don’t do anything with this until your attorney looks at it. It may just keep you from losing your shirt.

Did you get a qualified inspection done? If the rents are $1050/mo and the appraisal is at $78k it sounds to me like something is not right. Again your repair bill may be higher than you expect.