Sales Price Discount Issues

[Daniel G.]

Hi BP people,

Here's a question that I think we could all benefit to learn from. What legitimate issues have you brought up during the due diligence period of a multi-family acquisition that resulted in a credit or discount to the sales price of the asset?

• Condition of mechanical, electrical, Fire Life/ Safety systems
• obligated tenant concessions
• Building and fire code violations
• Roofs, parking, laundry room,

I look forward to your input.

[Anthony Chara]

Good advice from @Roger Vi. I use the same technique. It's called doing a 'price drop'. I get 3 estimates from contractors to replace/repair all of the issues. I then share the highest estimates to show the seller the amount needed to repair everything. They usually have a heart attack and say they won't pay that much in deferred maintenance credit. In reality, I wasn't going to ask them too. If I show them estimates for $50K I can usually get items fixed for less then that, but whatever I can get in a credit is a bonus. So I show them the high amounts, then ask them for about 60%-70% of that amount in credits. I try not to negotiate below 50% of the high estimates.

Regarding your original question @Daniel G., 'all of the above'. I've only purchased one 120 property that had very little wrong with it, but we still asked for and got a $15K credit due to old AC units. Ultimately, it's not your fault the property is in bad condition.