Received an offer- what should I be looking for??

Question

Hi All,

My multi unit (4 units)attracts a lot of attention from buyers even though it’s not on the market. One buyer in particular has really been hounding me ( a real estate agent) I told him what the minimum amount I would sell for is and to my surprise he emailed me a written offer. I don’t have an agent and have never sold a property before and have no idea what to look for. Additionally, the offer included a reference to a $1k earnest money deposit but its less than a 1/2 of a percent of the purchase price which seems really low. And it’s sight unseen. I’m not sure if I should take this seriously or not and need to know what I should be looking for. Also they offered $25k below what I’m asking for. Should I ask for proof funds? Anything else?? Lisa

Nate Burgher · Answer

Hey @Lisa S., get a realtor and / or a lawyer, plain and simple. If this were your 100th sale, I'd say otherwise, but you need people with experience with this kind of stuff. Their commission is your protection.

Brian Adzadi · Answer

@Lisa S.

If your property is truly in Alexandria, VA, this is what I would do. NOT A DAMN THING. Sit on that property for a couple more years. Alexandria is seeing a big boom because of the bigger boom going on in Washington, D.C. That 4 unit of yours is a gold mine. Give it at least 2 more years and that property will be worth millions.

Tell the buyers that you are not selling at the moment and just sit on this baby. It will be worth the wait.

Dave Foster · Answer

@Lisa S., When you've got eager buyers you can use that to your advantage in a 1031 situation to buy yourself more time.  Whatever you negotiate with the buyer it needs to include contingency that allows you to find your 1031 replacement property before closing the sale.  That eliminates the constrictions of the 45 day identification window.

As an aside I don't know that I'd want to give any discount if I had multiple people interested.  A small discount for the delayed closing maybe - especially since I'd be saving realtor fees.  But not much.

And secondly while it's easy to get excited or offended at the size or lack thereof of the earnest money - in most cases earnest money means nothing.  Especially if a savvy realtor is writing the contract there will be inspection and finance contingencies that will always allow them to get their earnest back for almost any reason.  So don't get hung up on the check to you that opens the escrow.  Focus on terms of the contract first and then find ways to make the earnest money enforce those terms.  And for that hire a real estate attorney to represent your interests.

Tom Gimer · Answer

@Lisa S. Are you aware of DC's TOPA framework? I highly recommend you get some help to navigate this. If only it was as simple as selling to an interested buyer.

Lisa S. · Answer

Brian, Nate, Robert- thanks for the quick replies!! The property is actually located in Washington DC in an “emerging area” with clear signs of revitalizing, i.e, near new development/ plans for construction of professional sports arena, etc. I’ve held it for the past 4 years and sometimes get weary with some of the tenant issues/ drama, but I agree I should try to hold out as I’m sure I could get much more at some point. I’ve never had anyone send me an offer before so it caught me off guard, but it’s not even on the market nor do I have an agent yet. Thanks again for the insight.

Dan Bernstein · Answer

@Lisa S. I PM'ed you, but didn't realize you were talking about DC.  You have many options in DC.  I would consider selling your 4 unit on the open market, but after you establish a solid tenant situation.  In DC, its more valuable to sell the property vacant, so if tenants move out and you are thinking of selling, do not replace them with more tenants.  Depending on the area, you also have the option of Joint venturing with a developer and popping the top and gut renovating, then selling the units as condos.  In DC, if the property is metered with multiple units, by right you can convert them into condos.  If you are having issues with a tenant currently and they are taking you to court, I would not sell now and deliver TOPA, because you could have some serious issues with the tenant.

Happy to chat and fill you in on multiple scenarios and options.  Good Luck!

Cameron Novak · Answer

To start with, you need to get them to pony up a substantial earnest money deposit to show they're serious.  Secondly, pay an agent to represent you in the transaction.  The small amount in commission will be well worth it.

What is your reason for considering a sale if your home wasn't on the market?

Dave Foster · Answer

@Patrick Kendrick, Well the extended closing is really the key so the  language can be anything that passes legal and gets you there.  It could be as simple as an  on/before date thats way out there.  Or it could be a "date to be determined" upon seller finding a satisfactory replacement property to perform a 1031 exchange.

You could use escalating earnest money payments at periods to keep the buyer hooked.  And you could offer discounts on sales price  dependent on how long the sale is delayed - remember while you're waiting you are collecting rent.

When the gain dollars justify it there is also the process of a reverse exchange where your QI purchases the replacement property and holds it for you until your old property sells.

Lisa S. · Answer

Joshua- you are sooo right! Especially about what you said about finding another deal. I had envisioned doing a 1031 exchange at some point but I have not even started looking yet so I don’t have another property to roll any funds into. Maybe this is a sign I should get going with that. Unfortunately, I have some really bad tenants. I had to learn the hard way that all money is not good money. For example, I am suing someone now for non payment of rent and she requested a jury trial even though she knows she hasn’t paid rent for 6 months!  It’s incredibly frustrating but I need to find a way to look at the big picture and know it will all be worth it in the end.

Lisa S. · Answer

Thanks Cassidy, this is good to know!

Received an offer- what should I be looking for??

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