What is the process of buying a property through a private sale?

Question

I am talking to the owner of a 5 unit building I am considering purchasing from him. It is not listed on the MLS. How would I submit an offer? Is there a standard format? Would there be a deposit and escrow? Should I use my real estate agent to make things run smoothly? What if the owner doesn't want to pay an agent's commission?

I'm sure it can be done, but I don't want to make a mistake like using a contract that exposes me.

Thank you

I'm sure it can be done, but I don't want to make a mistake like using a contract that exposes me.

Thank you

Garrett Fulton · Answer

Hey Eric

I just went through this process on a single family rental property.  I recommend finding a good title company to help you through the process. They should be able to walk you through everything. Here are the basic steps.

1) agree on a price with the seller

2) Have title attorney create a purchase and sales contract with the purchase amount and closing date.  (Include in the contract inspection contingency and seller disclosure addendum to protect yourself.)

3). Both you and the seller look over the contract and sign.  (Typically things like transfer taxes are split 50/50 between buyer and seller; however the contract should dictate this.)

4) Send earnest money to title company to be put in escrow account.  Earnest money amount should be stipulated in the purchase and sales agreement.

5)Title company will take care of the title search and ensure the property is ready to transfer ownership by the closing date.  Make sure that title insurance is included when purchasing to protect yourself.

Note: if getting financing, speak with a lender beforehand to make sure that financing is available.  When using a lender, they will help you schedule appraisal and get all needed documents for getting financed

I found this website that is New Hampshire specific, that might help you.

https://www.amitree.com/articles/148/new-hampshire-homebuying-and-closing-process

Steve Vaughan · Answer

Here I just utilize the MLS realtor PSA forms and put n/a in the listing and selling broker spaces.  The title co's are most familiar with the realtor forms.

Here in WA there's a whole separate addendum for multi-family, a few pages long.  There will also be the issue of commercial financing that you just stepped into with that 5th unit.

Since you've already used a realtor there, see if they'll e-mail you the standard contract they would use with appropriate multifam, financing and inspection addendums.

Bringing a realtor into a FSBO is usually not a good idea.  At least without first asking  the seller about it.  Mine have always said - fine but you're paying for any representation you bring in, attorney or agent.  Some aren't even that nice.  Check first and good luck!

Account Closed · Answer

Please make sure, if you're not paying cash of course, that you go through the lender to order the appraisal.  Commercial appraisals can range anywhere from 1500 and up depending on comps etc... and if you order it, the lender may not accept it.

Good luck

Eric Hathway · Answer

All great info everyone. I'm sure once I get one done, the next deals will be a piece of cake. Now I can at least sound like I know the next step. I've just always fulfilled what my agent has asked for and never really paid attention to the process or moving pieces. Thank you again.

Richard Dale-Mesaros · Answer

Good feedback from everyone. Happy to help you as an investor-focused Realtor if it comes to that, Eric. Feel free to call me any time on 603 726 0221/nhrebiz@gmail.com. I've done 75+ deals as an investor myself, so might have some appropriate input :)

Steve Davis · Answer

You can submit an offer to have an option or first right of refusal before you do research on the property.  Just give yourself enough time to fully review the deal.  If the seller has a real estate agent, then the offer should be on a TAR Commercial Contract - Improved Property.  In that case use an agent or broker who will be able to find out if the seller is paying brokers fees quickly.  Also, those forms are not promulgated, but only for use with agents.  You can negotiate with the agent that if the seller will not pay broker's fees then you will make the offer with some agreed compensation to the agent that makes sense to you and the agent for each property purchase offer.  The best way to avoid exposing yourself on deals is to use professionals; since their fees are negotiable, use your creativity in making the deal happen.

Jeff B. · Answer

@Gerrett is spot on :)  In your offer, be sure to state

• personal property, eg: all existing furniture and fixtures are included in the sale
• existing leases are to continue enforce
• the current owner is to require all tenant to complete a statement of all oral or written promises made to them, and which fixtures if any belong to them and then to be sent directly to the purchaser upon acceptance of the offer.
• security deposits are to be transferred to the purchaser at close of escrow
• any prepaid property tax accounts are to be assigned to the purchaser

What is the process of buying a property through a private sale?

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