First deal might fall through bcs. of bad contract

[Joseph Taub]

Hi folks,

This is a bit of a new member introduction and request for feedback on my first deal at the same time. I'm currently a grad student living in SoCal, and my wife and I have decided to start building a real estate portfolio. I've spent about a year listening to the podcasts (over a hundred) on my commute to campus, and reading investing books including Brandon Turner's and David Greene's. I decided to look for my first deal in my hometown in central Arkansas, basically using Greene's book as an instruction manual. I haven't posted much since I figure my inexperience contributes little that isn't already well-known, but man I could use some feedback on this situation.

I found an 8 unit property, two 4-plexes on a lot, 2b/1ba each, very new, renting toward the top of the rent range for the area ($700/mo). I found an agent who has been diligent and responsive with my questions, and quick to put in my low-ball offer.

The offer is contingent upon breaking it up into separate residential loans on each 4-plex (for the 30 year am).

Then I started thinking: you know, there's nothing in this real estate contract that says I have an out if it turns out the financials aren't as rosy as advertised. Big oops. Fortunately the seller countered, and I haven't accepted yet, so I'm not stuck. The numbers still work so I want to accept the counter-offer with an addendum specifying that I'm buying the property on the condition that current rents are as advertised, subject to verification, etc. etc. However, here's the problem. My agent doesn't want to add any such verbiage. I am confused.

The main protests he raises are things like (paraphrased):

• "The seller advertised 700/mo on the MLS, so if it turns out he misrepresented, that would be a breach of contract." (The problem is nothing in the contract talks about rent at all, so I don't see how it could be breached thereby).
• "It's understood that you're buying these for investments, so it's assumed the sale is conditioned on verifying current rents." (The problem is, since we're doing residential financing, the contract is worded like a residential deal, again, nothing about rents, so I'm not at all convinced a judge would "understand" that this is for investment purposes).
• "It's a little presumptuous to ask for private tenant information and financial data before even having a signed contract." (Maybe we're just talking past each other? I don't want it before the signed contract; I want it in the signed contract--I want to sign it!! I'll sign a NDA too!)
• "I've never had anyone ask for this at this stage in the process." (?!?!? I mean, OK, it's a small town in the South, so I could see things running along more of a good ol' boy system rather than meticulous contracts, but still!)

OK, so what the heck is going on? I get that he doesn't want the deal to tank because then he doesn't get paid, but I don't even see how this could possibly tank the deal. It's like buying a business without seeing proof of any sales. Wouldn't a seller want to share financials as a selling point if they're that great? If there's anything I've learned from BP, it's "for the love of God, always verify the financials." Or did I misunderstand how the process is supposed to work? <---not being sarcastic.

The main challenge seems to be getting on the same page with my agent. I just can't understand what he's worried about. For all we know at this point, the seller might be happy to provide details. So I guess my concrete questions are:

1. How do you get an otherwise diligent agent to do what you want when apparently it's something he's not in the practice of doing?
2. What is the bare minimum proof of rent I should require if/when I actually get my way?

I will be very grateful for any feedback the BP community can provide. If this isn't going to work out I need to move on because I'm ready for a deal dangit!