Seller Due Diligence: Qualifying The Buyer

[Patrick Massey]

I did a search on this topic and did find a topic with this idea in the description.  My apologies if this was discussed previously.  With the wealth of knowledge in the forum, I expected to find something similar.

I am looking for some advice from the forum on how to properly qualify a buyer's ability to perform on the purchase contract they are presenting. To give you a little background. My partners and I purchased a partially developed subdivision that was foreclosed on at the beginning of the economic downturn. We have owned it for several years now, added some additional property and got it zoned for mix-use, multi-family, SFR and commercial. We had accepted a contract at the end of last year with a 120-day due diligence period and the buyer didn't perform. I believe the buyer was just looking to flip the property and when he could not, he walked away. He never completed any of the typical soil study, phase 1, zoning request, etc. and therefore they did lose any money on the deal, but it cost us four months of dead marketing time and then had to restart the marketing process all over. I have a buyer that has been working for the last several months on putting a group together to buy the property and we are meeting next week to discuss the contract. There is also interest from several other parties at the moment. Of course, I want to put my partners and me in the best possible position. If we can agree on terms with this buyer, how can I qualify their ability to fund the purchase and not waste a bunch of time like the last poser did?