I have come across a killer deal! The gentleman needs to sell a triplex FAST for cash to buy a bigger multifamily deal (tenants occupying all three). Checked out the guys LLC, its G2G and he is an active investor. He has his attorney lined up for us to come sign paperwork. I want to pull the trigger, BUT safely. How would you recommend outlining a DD period to close with cash fast and how many days do you recommend?
Thanks for any info!
Fill out standard contracts for your state.
Send everything to a title company.
Ask for concessions.
I'm an Illinois real estate attorney and have little knowledge of the real estate laws and customs of North Carolina.
However, Cash is king and you should make sure you are covered/protected before you complete the transaction.
First, yes complete an inspection if you want to and that can take as long as you can to have it completed.
Next, although I may feel ok with giving the Seller's attorney my Earnest Money, I would not do the transaction unless a title company is involved as the escrow agent for the parties, takes/receives my payments, and can guarantee me clear title ownership.
In Illinois, as a Seller's Attorney, I can be ready for a cash closing in about a week, subject to the time it will take to obtain a Plat of Survey, HOA documents, mortgage payoff letter and city inspections, and cleaning up any title exceptions, if any.
Therefore, as a Buyer, you'll want to review the title commitment, survey, HOA documents etc. before you actually close, no matter how much in a hurry you or Seller may be.
And if I may add the following:
Assuming there are tenants living in the Units, you'll want to obtain a confirmation from Seller (perhaps an attorney should do this for you) that the Units are up to code, none of the tenants are late in their rents, and review the leases and security deposit amounts so you'll know what credits to expect at closing.
As an investor, you already know what I'm concerned about here, particularly if the Seller gave a tenant a lease for 20 years at $ 200 a month. Yes never saw that but make survey the leases are in order and can be transferred to you by the Seller at closing.
Thank you so much for all the info! I greatly appreciate it. It was very insightful and potentially saved me a big pain.
@John Hamilton --questions that have the word "should" are business decisions or moral/ethical decisions. In your case, it's a business decision. Naturally, the shorter the DD period, the strong the offer. NC has a unique system with the DD and EMD deposits, but that's not really your question at the moment. The way I would look at it would be in terms of how quickly you can do your DD, and make your offer with your DD period and deposit based on that information. You'll want to know the lease terms and meet the tenants, and review the rent rolls. You'll also want to inspect the properties, and run a title search--all of that should be able to be done without much time passing, right?
There has been more than one sale of a property by someone who did not own it. Cash is King but it is also impossible to stop payment if you have been deceived.
1. Select a reputable title company. They will ask the seller the sensitive questions like proof of ID at closing. The fact that the seller has an attorney could just mean that two people are in on the scam.
2. Check the county records for who actually holds the title.
3. Check for foreclosure listing against that property.
4. Go by and talk to the tenants. Take a clip board with some forms on it and tell them that you are conducting and insurance inspection of the property. Since you will need to buy insurance before closing this is a true statement. Ask them every question you can think of about the property. Work in the following items a little at a time. Are there any maintenance issues that are not being addressed? How much is the rent? Who do they pay it to? Are there security deposits? Are the electric and gas working properly. Do they have good neighbors? Who provides the appliances? Do they work?
5. Once under contract hire a building inspector.
Echoing what my fellow member of the Illinois Bar Association @Clint Votruba explained, you can't be sure it's a good deal unless you know exactly what you are getting. Restrictions in the title, easements and other convenants conveyed with the property, leases, liens, HOA documents, etc. can impact the value of the property immensely. Even when closing in a rush, be sure to work with a reputable inspector, title insurance company, and attorney to make sure you're actually getting what you bargain for.
But with that being said, there's no reason why this deal couldn't just be an incredible opportunity available to investors with cash. Take 10 days or so to look into docs, get inspections done, and the like. Whatever you decide, I hope everything works out!
Do you know what "Fast" means exactly? On houses and small multis, the due diligence period is usually 15 days. You could get away with 10 or even 7 if you really go fast and he gets you all the documents you need asap.
This may be off topic and a link to a Reddit post may not be allowed but a buyer/investor is asking what to do when a Seller will not give up copies of leases, rent rolls, maintenance information etc to him, the Buyer.
Buyer is wondering if this is normal and is it wrong to walk over this.
Frightening how a buyer/investor does not know what to do here without asking others for advice.
@John Hamilton how do you know its a "killer deal " if you have not looked at it yet, or spoke with the tenants ? Also it takes an hour MAX to look at at a property , so why would you need a DD period ? I go to contract same day and close in the same week.if I like it .
@Bob Prisco I have all the financials and leases. I know what the property is worth and could be worth. Hes selling it for $50K and the tenants are all brand new due to his "lipstick" he just put on the property. He opened it up for lease the beginning of Nov and filled it in 3 days. I am slightly concerned about the age of the house and what lies under all the sheet rock (possibly cast iron plumbing, old electrical, etc...) and don't want to be held responsible for someones child dying due to my neglect of DD and the house burning down. Thanks for your passive aggressive comment, but I'm here for the help of the kind people and the great advise they offered above you.
@John Hamilton again it takes less then an hour to determine all...... I am not tying to be a smart ***. It takes me 20 min to determine yes or no on a deal ( 10 seconds to give a verbal yes and offer based on what I am being told ) All the props we buy/ flip are built from 1910- 1940. I suggest connecting with a more experienced investor / consultant , learn and then apply what you learn.
If someone told me they wanted 10- 15 days for DD on my SF - 4 unit prop I would simply move on. I typically sell / flip a prop in a few days to out of state investors.
I wish you success and good luck