It seemed like the stars had aligned and dropped the perfect deal just blocks from the U of M campus.
Jim Porth and Sarah Grabinski listed three student rental properties for sale. Before the houses had even hit the market, the agents had an offer for the seller—an offer that was near the asking price with a short due diligence from a reputable buyer. The seller was impressed, and happy. The buyer was happy. Jim and Sarah were happy.
But then the stars shifted. Although the buyer wanted to close quickly, he was using a smaller private bank which couldn’t grant him the loan until it was approved by a committee—which wasn’t scheduled to meet until 15 days after the expiration of the contract. Still nothing troubling—if a standard extension had been an option. But it wasn’t.
The buyer had stipulated in the contract that the seller sign no leases with tenants for the following school year. Given the bank’s time line, the seller panicked. If he accepted the standard extension of the contract and the bank didn’t approve the buyer, the leasing season would be over and his chances of leasing the houses slim. He’d be stuck with empty houses for the 2015-2016 school year. A standard extension put him at risk of losing all his rental income for twelve months. The buyer himself was up against the risk that the properties would fall out of contract and he would lose all the money he had already spent towards closing.
Jim and Sarah heard the fears of the seller and the needs of the buyer. And they had a solution: an increased security deposit that would become nonrefundable when the extension was signed. This would give the seller hard cash to cover a good share of the rent he might lose if the buyer’s loan wasn’t approved. With cash security, he could better risk agreeing to the extension, which, for the buyer, would insure the properties stayed under contract during the loan approval process. Jim and Sarah arranged for the Duke Company to manage the escrow account internally, which allowed the deposit to be immediate and the extension seamless.
Then they went the extra mile. Through the bank’s holiday slowdown, Sarah worked diligently and efficiently with its staff to keep the process moving quickly. As a result, she and Jim were able to close the deal just halfway through the extension period.
Whether you want to buy or sell student housing, whether the transaction is simple, or not, Ann Arbor’s exclusive student housing experts can help. Call Jim Porth or Sarah Grabinski at 248.476.3700, or email jporth@thomasduke.com or sgrabinski@thomasduke.com.
