Several years ago a note seller accepted our offer and we began the due diligence. The buyer’s credit was acceptable, so the next step was to order a property appraisal that hopefully would confirm the sales price.
The agent’s report revealed some very negative comments – and pictures – about the condition of the property, with particular attention to the foundation. Without mentioning this to the seller, we asked if we could move up our telephone interview with his buyer. He agreed.
The buyer began by saying she was not happy and wished she had not purchased the property. During the negotiation with the seller, she raised concern about the cracks in the foundation. The seller assured her he would take care of the problem. The buyer then opted not to order an inspection report, continued with the purchase because of his assurance, and the transaction closed before any repairs were done.
Now, the buyer states, she has a rat problem and the seller keeps putting her off – nothing has been done. She provided pictures, one of which showed her new occupants!
When we spoke to the seller again, he sheepishly confirmed the buyer’s story. We indicated we could not continue with the note purchase until the repairs were completed and the buyer was satisfied. He said he understood and would call when he had fulfilled his commitment.
We never heard from him.
Ronald Reagan famously said “Trust but verify.” How true that axiom is in the note business.
