Listing Agents: Do Your Investor/Sellers Provide Estoppels?

Question

I made an offer on a triplex and one condition of the contract was receiving estoppel statements and leases. Listing agent pushed back, saying "No one asks for those, we'll just tell you what the deposits and rents are."

This was my first multiplex offer. It seems super shady. Ultimately I didn't win the bid, so no big deal.

Listing Agents, what is your response to an offer with this condition?

Andrew Chapman · Answer

We demand them. It's for your as well as the tenants protection. I had guy refuse once who was being super shady. He ended up hiding a few things from us that we found out further down the road. Anyway, we told him it was a lender requirement and that we would have to exercise our finance contingency and back out of the deal if he didn't provide them. He ended up getting them done.

Steve K. · Answer

Haha "We'll just tell you what the deposits and rents are"? Nope. I always require estoppels in our market @Mindy Jensen. Never had any pushback on this from a listing agent (although I have provided the form if they're unfamiliar with what it is). Banks generally only start requiring estoppels on 5 units and up, but in my opinion they're equally if not more important on the small 2-4 unit MF transactions as it's often difficult to get hard numbers from sellers on those in general. When you get a profit and loss statement that's a cellphone photo of a hand-written note, literally on a napkin, and the rents and deposits are recorded as one amount in one place, another amount in a different place, and yet another amount in another place, it's good to have an estoppel to refer back to if there's ever a dispute with the tenant later about the deposit amount or some side deal they supposedly had going with the previous landlord ("They said I could have 5 dogs and an iguana even though the lease says 0 pets", "They said I could knock $50/month off rent if I water the plants", "They said I could use my deposit for the last months rent", etc). Gotta get the estoppels.

Steve Morris · Answer

"It takes 3 seconds for the landlord to do it "We must be talking different things then, estoppels need lessor/lessee signatures - More than 3 seconds.If you're talking about stipulation that a rent roll is true/accurate, then that's not an estoppel.In OR, we don't use estoppels often on properties besides commercial spaces with long term tenants.On apartments, you get a current and mutually accepted copy of the lease assigned to you as buyer to enforce.

Charlie MacPherson · Answer

@Mindy Jensen Whether representing a buyer or a seller, it's cheap insurance - for ME.With an estoppel, nobody can claim that I misrepresented anything. Including tenants, who have a litigious streak and a drug-addled attorney brother in law who would love to sue anything in sight.It's SOP with me.

Dan M. · Answer

My attorney always requires them as a contingency to close. It takes 3 seconds for the landlord to do it and if the sellers are unwilling there must be something else going on or must not really want to sell the property. Its possible in your case the agent did not want to bother the seller with "another thing" and felt being aggressive back was an appropriate response?

Jason Regan · Answer

We use estoppel on all of the rentals we work with. Its a protection I don't want to be without, in case something weird was going on with the previous landlord.

Mindy Jensen · Answer

Thanks everyone.This agent seemed shocked that I would even ask, like I was asking for the world. The seller was super shady, 2/3 of the tenants had been there for years but one was super scary and brand new. I definitely wanted to know what was going on. I lost the deal, but found another, even better one so it all shakes out in the end.

Johnny Lynum · Answer

@Mindy Jensen I would definitely try to find the reason why its an issue for only 3 units. We recently requested estoppels on our 18 unit purchased in Panama City, FL. With all the job losses and shutdowns, its worthwhile to know what deals the owners and tenants have worked out post lease signing.

Nicolas Botia · Answer

The investors I have worked with here in Florida always ask about estoppels or lease agreements before closing on the property, if the seller does not have one, I would go to the tenants place and have them sign one (with the sellers permission of course). I have done this many times with off market deals, with on market deals, I will ask the listing agent to send me a copy of the lease agreement or estoppel.

Russell Brazil · Answer

We don't use estoppels on residential (1-4 unit) properties here. We only ever use them on commercial 5+ units, and just because lenders then require them. Im sure of the agents selling 2-4 unit properties in my market, theres probably only lile 3 of us who even know what an estoppel is.