Under contract for a property, as part of due diligence, what are recommended documents/information that I should review before closing.
Inspection is happening tomorrow, and I have visited the property.
I have asked to be provided:
- 2+ years of income tax returns showing rental income, and also showing expenses claimed for the property
- 2+ years of property tax reports, for proof that value on listing is accurate for property
- Copies of current leases to tenants
- Proof that tenants pay for ground maintenance and snow removal (this is listed MLS sheet) as well as heat and electricity
- Bank statements further showing proof of tenant rents
- Something to be added to the contract about all provided information being true/not fraudulent
Is there anything else I should make sure to see?
Also another question:
When reviewing the disclosure report, I'm wondering if there is a way to make the seller provide a better detailed disclosure. At least 80% of the answers are "I don't know" -- even to some that should be known (there was a septic installed in 2014 and when it asked about size, etc, all of the answers were "I don't know" -- it was installed when you owned the property!). Or in one area it stated damage had been done by "pests" but no explanation was written. It is getting inspected tomorrow, so I'm hoping that anything the didn't disclose is found by the inspector.
Any information would be helpful!
you are more than welcome to ask the sellers for more detailed information, specifically on the septic installation, and pests/ Many people ask for a septic certification and pumping, so you get it in working condition.
I have never asked for the 2 years of tax returns, but I guess if you are just asking for the 1 page with the property on it, that would be ok... Any deductions here should be listed in the disclosures already. They should be letting you know of any repairs that have been done, upgrades that were done, anything that does not work.
As a seller, I would also NOT provide my bank statements to a buyer, but I would give a detailed list of when rents were paid and how much was paid when.- Rent roll. This is will also show the tenants paying for the snow removal etc. or it shuoulld be listed int he lease.
Once you get your inspection, you can also ask for any further clarification on any items he finds.
All of this should be clearly stated and handled by your agent. If you dont have one, make sure you have an attorney reviewing your documents. Best of luck!
Thanks for the feedback. Septic inspection/pumping is a requirement in the contract before closing. As for upgrades to property, the only thing written on the disclosure was the septic in 2014.
Maybe what I'm asking for is overkill and won't all be provided, but with how poor the disclosure details are, I want to make sure at least the rents, taxes, etc are actually what they say.
When doing the first walk through, one of the tenants mentioned that he was doing a lot of the work for the owner in exchange for reduced rent, I'm not sure there are actual records of what's been done (it hasn't been anything major like floors or roof, but has replaced a few windows).
We'll see how inspection goes tomorrow.
This doesn't make you a strong offer in my opinion. You're basically asking the seller the same amount of info (and then some) as the bank asks to make the loan.
I just closed on a duplex, I got a copy of the current leases and walked the property. I asked the tenants how their relationship was with landlord and if there were any problems I should know about before I hypothetically become the new landlord. The tenant has little reason to lie about their condition, if there's an outstanding problem why wouldn't they tell you? I had a short inspection period, short close, and kept it simple. I made it as painless as possible.... and I feel that's why I closed on it.
Thanks for your feedback. I am mostly looking for verification of rental income and taxes. I think it's in my best interest to check that what the listing says is rental income and taxes, is indeed the actual income and taxes.
Maybe I don't need all of the documents I initially stated, but I also think a seller should provide more information about things listed on the disclosure, such as the size of the septic they had installed, or what exactly they considered "pest" damage, when it occured, how/if it was resolved etc. I don't feel that's asking too much, I would consider it normal due diligence.
Thats a lot different than tax returns.... Also can you not verify the taxes online with your city or county? Think it's smart asset that will help if you can't find it directly.
But know that 2014 was long time ago, if this was me I'd wait to see what the inspection turns up. Then you could go back with specific questions and then use it to reduce price if they can't show documents for work being done. Don't ask before because that will take away some of your power...
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