Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
Friend of mine is trying to pickup a condo deal here in Colorado. The HOA's members have first right of refusal. The unit has a mold problem & needs a full rehab. The problem is that if other members see the agreed upon price, they might make a move on it without knowing all the issues which might result in a higher price for him or not getting it at all.
Has anyone navigated a situation like this before? Any tips, etc. I told him to speak to a RE attorney as it is something I haven't dealt with before.
Saskatchewan, Saskatchewan · Member since 2015 · 10 posts · 10 votes
10y
Hey Guys,
Just wanted to follow up. I did purchase the property successfully and do a full rehab and now have positive cash flow on it. Many owners were interested but no one exercised their first right of refusal.
If a member tries to move in on the deal sell the option to them.
The position of the option holder is still junior to that of the HOA right-of-first-refusal holder. They would have no need to purchase the option; they could intervene if the option were ever to be exercised, if not sooner.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
How does the right of first refusal work in this situation? Do they get it on the terms of the sales contract or is the price the only criteria?
I think it is going to be next to impossible to not get outbid on a financed deal. He might have a little more flexibility if he is doing all cash. Possibly including an escrow in the deal for the need repairs which may push the sale price to a level where others will pass on it.
Does the condo restrict rentals?
Also one thought is if it is this tough to get in, how hard will it be to get out? If there is an investor matching most offers, selling owner-occupied may be the only exit strategy. While that gets the most money, it also takes the most time.
Real Estate Investor · Elkhart, IN · Member since 2014 · 119 posts · 50 votes
11y
Tell your friend a deal is only a deal at HIS price. If someone wants to over pay and get stuck out of ignorance, so be it. He needs to bid his price and nothing more. Don't chase deals until it is no longer a deal.
Saskatchewan, Saskatchewan · Member since 2015 · 10 posts · 10 votes
11y
Howdy Everybody,
This question was asked on my behalf. Thank you for the responses.
The first right off refusal must meet the terms and conditions of the initial contract. Also matching down payment.
Should my earnest money be equal to the sale price to deter people from quickly jumping in?
This is a FSBO, cash deal. And quickest close possible. The homeowners get a 10 day notice to respond which is not business days. So I'm thinking close on the 10th day utilize presidents day weekend?
Condo does not restrict rentals. You can't own more than 4 units on the property. It won't be hard to get out of, we are currently revising the declarations to remove ROFR.
Please explain escrow for repairs, I'm a novice at this. A board member suggested I create a purchase price $50,000 higher then a credit for that amount to me from the seller. Not sure the legal and tax ramifications of that though.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
The escrow idea is stupid, for a cash deal. People try to get repair escrow credits when they are financing, and don't have enough cash for down payment, closing costs, and repairs combined. The EM equaling the purchase price makes sense, just make sure it's with your closing agent, not the owner of course. You don't need to close on the 11th day, other owners either pony up by the 10th day, or they're out.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
Closing at a higher price and kicking back undisclosed credits is fraud, fraud, fraud, from settlements, to taxes!
No need to jump through hoops to close, but it can be quick requiring the HOA to act just as promptly. Disclose the price, in fact the whole contract, in an addendum list the bids and costs of renovations/repairs required, list the mold! Might even have asbestos tile, lead paint, who knows, was it inspected by a certified inspector? They may not want to touch it with a ten foot pole, much less buy it! :)
Saskatchewan, Saskatchewan · Member since 2015 · 10 posts · 10 votes
11y
Is there a specific Colorado form of addendum, or something I draw up? I was not planning on getting an inspection due to the current state, it's being sold as is.
Saskatchewan, Saskatchewan · Member since 2015 · 10 posts · 10 votes
10y
Hey Guys,
Just wanted to follow up. I did purchase the property successfully and do a full rehab and now have positive cash flow on it. Many owners were interested but no one exercised their first right of refusal.