Does waiving inspection waive right to verify financials?

Question

This will be my very first purchase and I am looking into a triplex. If I waive inspection period, does that also mean I waive right to "inspect" or verify financial/rent roll history? I want to be able to verify all expenses & income as well as tenant lease history. How do I ensure I may do this? How do you investors do this before/after purchasing a property?

Steve Vaughan · Answer

Why would you waive the inspection period? Super risky.If a hot market, I'd be willing to buy as-is, but with the right to inspect and have a few days as my DD period. Don't waive a DD period, even if for 5 days. The as-is says I will not ask for things to be repaired, but I still have the right to look and back out if not satisfactory / what I was expecting.

Steve Vaughan · Answer

I only buy as-is in certain situations. Last one was an old trailer on a .25 acre lot zoned r3, multifamily. Bought as-is, where-is because I didn't care about the trailer. I still had a 7 day DD (due diligence) period to get a survey, clarify zoning, etc.If the market was so competitive I had to consider waiving crucial diligence and couldn't check things out, I'd change my method of searching and or asset class. You need off--market deals, non-bankable or odd properties, abandoned or distressed commercial, industrial, retail properties you can repurpose, etc. As-is simply means you will buy without repairs or modifications...if you decide to buy after checking it out. Do not waive the right to check it out.

Russell Brazil · Answer

Most owners of 3 unit properties don't have financials. You can usually get the rents and thats it.

Don Alder-LaRue · Answer

@Jay Hinrichs Yep. Texas is one of the states I have been licensed in Texas, Florida, and California.

Jay Hinrichs · Answer

not that we are experts at this but my wife has listed and sold a number of small multi family over the years.. she always allows for inspections .. but those are to be done on the day of appraisals.. so they only interrupt the tenants one time.. and the inspection are quick and dirty.. not like a owner occ crawl through the house spend 6 hours on every little thing. its a different ball game. At least from our limited experience with it.. I did broker a 100 unit apartment once.. and that inspection was done in one day.. crew of inspectors looked at one out of 5 units and basically just looked for leaks and dry rot.. and of course roof is easy and other issues.. but you cant do normal inspections. like your buying a house.

Jay Hinrichs · Answer

I have only seen the option in Texas .. its how they do things in that state.. 100 dollars for an option you walk for any reason you lose the 100 bucks.

Lien Vuong · Answer

Inspection pertains to the inspection of the property's physical condition so no, your financing and rent roll privileges are still in tact. You can do this during the due diligence period of your sale which is around Purchase and Sale of while you're going through financing. You can verify rent history by their Schedule E's, their deposits in the accounts to verify timely payment of rents, leases, tenant at will agreements, etc. Your attorney or agent should be able to supply you with all that info. If seller is reluctant to offer, keep pushing, that's a pivotal part of the purchase, what is REI without math?

Don Alder-LaRue · Answer

It all depends on how your contract is written. In some states the buyer pays for an option period and it is during that period they have the right to inspect the property, check financials (if there are any), enter the property for repair/improvement estimates...anything they need in order to be satisfied with their due diligence. In other states, you may be waiving only the general inspection. I would never recommend waiving the inspection period, even on a flip when the buyer will be doing extensive remodeling. There are times that the inspector discovers items that you overlooked or the seller did not disclose. That general inspection can save your earnest money deposit should you need to back out.

David Avetisyan · Answer

To answer your question: no, just because you waive your inspection doesn’t mean you eliminate your right to investigate the properties finances. Although I agree that on a 3 unit property you will be hard pressed to find a P&L, I would recommend you still look at 3 - 6 months of utilities bills, rents collected, lease agreements and insurance premiums.With the above information, you can get a good feel of the income it generates and the overhead associated.As for waiving the inspection, I’m not sure if that’s a good idea. Plus, LA is a hot market, ‘low ball’ offers are typically ignored unless the property has bee on the market forever or its in the absolute ghetto.Feel free to reach out if you need more specific advice. I’ve been playing the SoCal game a long time my friend. To your success!

Chris Puntini · Answer

Why are you considering waiving the inspection period contingency?