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Updated almost 7 years ago on . Most recent reply

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Jonathan Nguyen
  • Investor
  • Dallas, TX
5
Votes |
15
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What should I request from seller when making an offer?

Jonathan Nguyen
  • Investor
  • Dallas, TX
Posted

I am making my first commercial real estate offer today and was wondering what I should request as part of the offer. I am putting subject to bank approval, copy of all expenses, profit and loss statements, half closing costs and some basic stuff. 

I was wondering if it was unusual or even possible to ask for warranty on the building appliances such as the ac units. I am used to residential and when buying homes on the mls I've got places to buy a warranty for them. 

Is there any other tips or things I should ask for as part of an offer? 

Most Popular Reply

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741
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424
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Kathy Henley
  • Rental Property Investor
  • St. Louis, MO
424
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741
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Kathy Henley
  • Rental Property Investor
  • St. Louis, MO
Replied

@Jonathan Nguyen You said 'commercial'.  Commercial leases layout many layers of the owner's future income.  Ask to see each tenant's leas. I work in the office of three commercial investors. They verify every aspect related to the investment. How much money comes in during the year, how much goes out. 

Are the tenants paying for the common area maintenance?  Who pays for the HVAC repairs, or the roof repairs, tenant or landlord?  You will find the answers in the lease. Stepped up rents will be laid out on a schedule. Ask for the rent rolls to see if any tenants are behind in payments.  Don't overlook the leasing commissions, service contracts and property tax expenses. 

Warranties are not part of the deals in my area.  Detailed inspection reports of the land and building are mandatory.  The buyer pays for these third party reports.  The property condition report will tell you the life expectancy of the roof, parking lot, and the major systems. Your lender may require such reports so that you, the borrower, will keep a reserve of funds for future expenditures. So the buyer is back to looking at the leases, as to know where the funds will come from, to evaluate the deal's worthiness.

A letter of intent may get you started.  Information will be exchanged and money will be put in an escrow account to show that you are in earnest.  More information will be verified (tenants asked to sign a paper verifying the facts of their lease) and expenses verified (copies of the energy bills and service contracts shared with the buyer.)  More money goes into the escrow account. Your offer will include deadlines for gather the above information, usually 45-60 days. Price negotiation may continue as facts reveal themselves.

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