My multi unit (4 units)attracts a lot of attention from buyers even though it’s not on the market. One buyer in particular has really been hounding me ( a real estate agent) I told him what the minimum amount I would sell for is and to my surprise he emailed me a written offer. I don’t have an agent and have never sold a property before and have no idea what to look for. Additionally, the offer included a reference to a $1k earnest money deposit but its less than a 1/2 of a percent of the purchase price which seems really low. And it’s sight unseen. I’m not sure if I should take this seriously or not and need to know what I should be looking for. Also they offered $25k below what I’m asking for. Should I ask for proof funds? Anything else?? Lisa
If your property is truly in Alexandria, VA, this is what I would do. NOT A DAMN THING. Sit on that property for a couple more years. Alexandria is seeing a big boom because of the bigger boom going on in Washington, D.C. That 4 unit of yours is a gold mine. Give it at least 2 more years and that property will be worth millions.
Tell the buyers that you are not selling at the moment and just sit on this baby. It will be worth the wait.
Hey @Lisa S. , get a realtor and / or a lawyer, plain and simple. If this were your 100th sale, I'd say otherwise, but you need people with experience with this kind of stuff. Their commission is your protection.
As the first replied said (sorry, on the app and I can’t see who posted) I would wait.
Buuuuut, if you want to sell, remember, it was an offer only. It is YOUR property. If they aren’t offering what you want, counter for someone you WILL take or drop them like a rock.
Brian, Nate, Robert- thanks for the quick replies!! The property is actually located in Washington DC in an “emerging area” with clear signs of revitalizing, i.e, near new development/ plans for construction of professional sports arena, etc. I’ve held it for the past 4 years and sometimes get weary with some of the tenant issues/ drama, but I agree I should try to hold out as I’m sure I could get much more at some point. I’ve never had anyone send me an offer before so it caught me off guard, but it’s not even on the market nor do I have an agent yet. Thanks again for the insight.
Hey @Lisa S.!
I would ask that he put a minimum of 1% of property price down. I am an investor and commercial real estate agent in Austin, TX, and I will tell you from experience, make sure you hire the right help. As other posters here have stated, you need someone skilled that knows your market and can offer you expert advice.
Make sure you counter back with terms that are in your favor, as you are not desperate to sell. Now, I am not saying make no concessions, I am just saying make sure you reduce your out of pocket expense as much as you can and put contingency clauses in the offer that give you an out.
Unless you don't want to be a landlord for that building, which it sounds like you do, then the chances of this offer or subsequent offers being in your best interest are very small. They are merely people trying to get into the position you are now. So unless you don't want to own the building anymore, sit back and watch the hundreds of millions of dollars pour into the area around you.
@Lisa S. Are you aware of DC's TOPA framework? I highly recommend you get some help to navigate this. If only it was as simple as selling to an interested buyer.
j.Robert, Aaron, Tom- thanks for the insight. And oh yes, I’ve heard of TOPA and definitely want some help with that one versus going it alone. Again, I’m getting a bit weary with the tenant issues at times, but it just doesn’t feel right to sell now. Will try to hold out for a while longer.
Joshua- you are sooo right! Especially about what you said about finding another deal. I had envisioned doing a 1031 exchange at some point but I have not even started looking yet so I don’t have another property to roll any funds into. Maybe this is a sign I should get going with that. Unfortunately, I have some really bad tenants. I had to learn the hard way that all money is not good money. For example, I am suing someone now for non payment of rent and she requested a jury trial even though she knows she hasn’t paid rent for 6 months! It’s incredibly frustrating but I need to find a way to look at the big picture and know it will all be worth it in the end.
@Lisa S. , When you've got eager buyers you can use that to your advantage in a 1031 situation to buy yourself more time. Whatever you negotiate with the buyer it needs to include contingency that allows you to find your 1031 replacement property before closing the sale. That eliminates the constrictions of the 45 day identification window.
As an aside I don't know that I'd want to give any discount if I had multiple people interested. A small discount for the delayed closing maybe - especially since I'd be saving realtor fees. But not much.
And secondly while it's easy to get excited or offended at the size or lack thereof of the earnest money - in most cases earnest money means nothing. Especially if a savvy realtor is writing the contract there will be inspection and finance contingencies that will always allow them to get their earnest back for almost any reason. So don't get hung up on the check to you that opens the escrow. Focus on terms of the contract first and then find ways to make the earnest money enforce those terms. And for that hire a real estate attorney to represent your interests.
@Dave Foster Outside of a long close date what sort of verbiage would you use in order to extend close until you have identified the replacement property?
Newbie here, so take this with a grain of salt. It sounds like your life will be easier with a better tenant screening process. I recently ran across "Landlording on Autopilot" which is a book BP recommends. It has some great ideas for training tenants. It doesn't solve your current situation, but it might give you hope for things getting easier. Good luck!
Thanks Amanda, I will check it out.
Dave m, I had no idea about putting the 1031 exchange info in the contract. Good to know!
@Patrick Kendrick , Well the extended closing is really the key so the language can be anything that passes legal and gets you there. It could be as simple as an on/before date thats way out there. Or it could be a "date to be determined" upon seller finding a satisfactory replacement property to perform a 1031 exchange.
You could use escalating earnest money payments at periods to keep the buyer hooked. And you could offer discounts on sales price dependent on how long the sale is delayed - remember while you're waiting you are collecting rent.
When the gain dollars justify it there is also the process of a reverse exchange where your QI purchases the replacement property and holds it for you until your old property sells.
To start with, you need to get them to pony up a substantial earnest money deposit to show they're serious. Secondly, pay an agent to represent you in the transaction. The small amount in commission will be well worth it.
What is your reason for considering a sale if your home wasn't on the market?
@Lisa S. I PM'ed you, but didn't realize you were talking about DC. You have many options in DC. I would consider selling your 4 unit on the open market, but after you establish a solid tenant situation. In DC, its more valuable to sell the property vacant, so if tenants move out and you are thinking of selling, do not replace them with more tenants. Depending on the area, you also have the option of Joint venturing with a developer and popping the top and gut renovating, then selling the units as condos. In DC, if the property is metered with multiple units, by right you can convert them into condos. If you are having issues with a tenant currently and they are taking you to court, I would not sell now and deliver TOPA, because you could have some serious issues with the tenant.
Happy to chat and fill you in on multiple scenarios and options. Good Luck!
You have many options:
-Continue to Buy and hold
-Convert to condos and sell.
-Sell as-is , 1031 Exchange and purchase another multifamily/investment that will have more manageable tenant situation.
-Sell, pay taxes, ,enjoy the profit.
Please feel free to reach out!
Thanks Cassidy, this is good to know!