Do I Get Info Before I Sign Purchase Agreement?

[Christopher Munn]

I think I know the answer to this question but I would like to verify it with the BP community. A partner and I are very close to closing our first multifamily and first REI. It's a small 6 unit that we see value in based on the economics we have run. We got the purchase agreement this morning from the agent which has some contingencies around due diligence and financing etc. We have gotten spreadsheets with 'rent rolls' and 'expenses' in the past but haven't seen any legit documents (bills, bank statements, etc) to confirm all this. Is all this usually provided in the due diligence period by the seller? Or have you all experienced situations where you received all this info before signing a PA?

Thanks

[Gino Barbaro]

You first deliver to them a Letter of Intent, usually a non-binding document stating your intention to purchase the property for a certain price, type of financing and other criteria specific to this deal.

You want to have the actual income and expenses to analyze before you make an offer.  Once the offer is made based on actuals, then you craft a contract and purchase price with contingencies.  AT this point, when the contract is signed, usually the due diligence clock starts.  You need at least 60 days to close a multi, sometimes more.  We have the due diligence clock start when we receive ALL due diligence documents,  you want to analyze everything.  If the numbers you were provided initially don't match what he gave you during due diligence, you can either walk away or retrade( ask for a lower price based on misinformation).  You need to work pretty quickly.  You want to perform Financial Due Diligence first, and then if the numbers check out, move onto physical due diligence.  Have an inspector go out and inspect the entire property.  Once the inspection is done, move onto legal due diligence.

Make sure you have a clause for a mortgage contingency in case you can't finance the deal.  Speak to your attorney about other clauses that can protect you, in case the deal does not look good during due diligence.  One bug mistake I made was not having an extension in my contract to close on a deal.  The bank took longer than usual, and went over the time period.  Luckily, we met with the seller and gave him a few extra bucks so we could close 2 days later. 

Good Luck

Gino