All Forum Posts by: Oren K.

Reminds me of the listings you see that state 'Below Appraised Value' or 'Less Then Replacement Cost' or some such. Look at when the appraisal was done and virtually always it was prior to 2008. Even if it was done in the last year, it is irrelevant other then for comfort at best.

The only thing that matters at the end of the day is what a willing buyer will pay a willing seller.

Sean,

How did you make the original?

To state the obvious, if you printed it out the first time, just do so as many times as needed. It cost the same as copying (at home) since the consumables are the same (toner and paper)

If the issue is the need for a signature, just execute each copy. This also applies if this is a hand written contract (I get a hand cramp just thinking about it ;),

Otherwise, I hear a copy center calling you.

Good luck,

Oren

Joel,

Yes, I would expect them to be similar. So, do R&W survive closing?

On the EM side, I see I wasn't specific enough. The issue was not that the EM would become non-refundable. If we got through DD, presumably the deal would become what we call 'firm'.

What he wanted was that some of the EM would be released in to his hands. That was a 'NO GO'.

Your comments reflect what I would expect with EM. EM, typically, gets put down in two stages; an initial deposit to show commitment, then you go through DD and if it all passes (and you can arrange financing), it goes firm. At that point it is also common to put down a larger second deposit. All the funds get credited to the purchase on closing and if the Purchaser does not perform for whatever reason, the deposits are forfeit to the Seller. If the Seller does not perform, the funds are returned to Purchaser.

Oren

So I just had a deal fall apart over Ernest Money (EM) and Reps and Warranties (R&W).

As a Canadian looking to invest for the first time in the US, I can't help but wonder if the standard practices are that different and this is just part of the learning curve. On the other hand, the seller could just be a nut bar. Here is (was?) the situation:

The property is an ~50K sq ft commercial office building in TX. We got the LOI done and started working on the sales agreement. Minor issues aside, the Seller and his lawyer were adamant that no R&W survive closure. Even such simple declarations such as if the Seller was a 'Foreign National'.

The Seller claimed that this was standard language in CA, AZ, TX and that this was boilerplate language. Our lawyer says explicative! explicative! ;). Our lawyer (based in FL but has done many deals in TX) has never done a deal where R&W do not survive. Nor have I ever seen them not surviving here in Canada.

Another deal breaker was with respect to the EM. Our position was that none get released until after closing. Their position was that it gets released as soon as the inspection period is completes. Now I have seen deals with non-refundable EM in rare cases but really? Odd things do happen; you go through DD (Reports, commitment fees, appraisals, etc.) and move to closing. If the Seller simply does not show up, not only are you out the DD costs but also the EM?

Leaving an Auction situation aside which, I think, is(?) an exception, what is standard practice in the US with respect to the survivability of R&W?

How do you view EM; as a deposit subject to performance or a Fee for the privilege of getting the DD material?

Thoughts and comments?

Depending on how experienced you are and financing, it is not uncommon that the inspection / DD period is 45 - 60 calender (sometimes business) day.

Looking at the rent roll / examining leases is fairly quick but arranging inspections, appraisals, arranging financing can take quite a bit of time. Remember, good people who know what they are doing are in demand and you have to work to their schedule as well as your need.

So if you have done several of these before and you are 100% certain regarding the physical state of the property and you are putting cash down, it can be as quick as your lawyer can file the paper work. Otherwise, plan on taking minimum 30 days and if you are new to going through the process, I would urge more time.

There is nothing like making an uninformed decision under time pressure to put yourself in a hole you can't dig your way out of.

Good luck.

Jared,

You will have to provide more information to get reasonable assessment:
With respect to the 1st deal;
- What Rent to you realistically expect (everything should be verifiable)
- What are the expenses (full breakdown)
- How do you know that it will apprise for so nearly 20% higher then you are paying
- Why are you so confident that the bank accept the higher appraisal price vs. the purchase price

With respect to the 6 unit building:
- What terms (rate, amortization, term) has the owner offered you
- See some of the questions above

It's first about the math and then about your gut. On the first deal or four, you should be doing the math in a very detailed fashion (crawl before you run) to develop the feel of the deal. Later on, if you can decide to skip steps you may but at least you will have developed a feel for things.

Finally, I think it is a very big risk to go all in like this. Much much preferred would be to get any sustaining job / position and do one deal. Make sure you can handle the workload / stresses as an owner / land load and then do more.

I am also challenged to see how this deal can be solidified and closed by Dec 20; basically two weeks.

Good luck.