Here is an urban definition of what a deal breaker is:
“A deal breaker is ‘the catch’ that a particular individual cannot overlook and ultimately outweighs any redeeming quality the individual/situation may possess.”
We all have different investing tolerances, likes, dislikes and lines that we would not cross in our own personal real estate investing business. What's yours?
Common Investing Deal Breakers
Here are some common deal breakers that most investors, buyers and sellers have in negotiating real estate investing deals:
- Closing dates
- Seller carry backs/financing
- Subject T0 – Sub 2 financing
- Liens – petty mechanic, judgements
- Deed not update/still in grandpa name
- Sellers want cash to move in foreclosure situation
- Closing costs
This is just a random list that I came up with based on my experience as a real estate investor. There are tons more. Investors/Buyers often on the surface don’t know there are potential issues or deal breakers until they submit an offer, perform and inspection or get the full disclosure addendum from the seller or his real estate agent.
There are times two weeks before closing that some thing major comes up on either your side or the owner of the property – and you will have to pass altogether on the real estate investment deal.
Like most anything else in real estate, it comes down to your risk/reward tolerance. Many investors will not even look at properties with even the slightest inkling of mold or foundations problems.
As you continue to look for deals, make real estate offers to purchase or perform due diligence inspections on potential real estate investing deals – try to figure out what your deal breakers are – that line you will never dare to cross.
Is This a Deal or Deal Breaker?
You perform your due diligence as an investor by ordering a home inspection on your contracted real estate investing deal. Your inspector finds mold under the carpet of 2 secondary bed rooms. Your purchase price is $65K and the ARV is $120K. Home currently valued in AS-IS state for $75K. Is the mere presence of MOLD a deal breaker if it cost about $5K to repair/fix?