Seller won't show property W/O POF..is that normal?

Question

I have recently contacted a listing agent and requested to view the property. I was informed that the seller would not allow me to see the property until I acquired a Proof Of Funds or a Pre approval ( which as far as I knew pre approval was a residential real estate thing). I have looked elsewhere and have not found a concrete answer. The property is a 10 unit building on a 1/2 Acre. The listing price is under $200k. Thank you ahead of time for your reply!

Karen Margrave · Answer

Some sellers don't want to be bothered with lookie loos, for many reasons. When you're dealing with a 10 unit building, the owner can't have their tenants lives continuously disrupted, etc., therefore; it's understandable in such a case. There are other listings that don't allow anyone to view without an offer with a contingency to view the property after acceptace, etc. The seller can put whatever terms they want on showing, and everyone has to deal with it, or take the property off their list. Luckily most sellers are cooperative, so don't get discouraged!

Dennis Tierney · Answer

Sam: If you're serious about getting into multifamily you'll need to meet with a few commercial bankers anyway so I would set up meetings with a few local bankers not the national chains, as they will be better to work with a project of this size. After you meet with them you will then have more creditability with the agents

Bill Gulley · Answer

Sam, this is common for more expensive homes and commercial.

As Karen mentioned the looky-loos, consider what goes on to show a property in commercial that has tenants, the tenants need to be notified, if it's offices, that can be a pain if a CPA has to work after 5pm and have a couple agents and a couple buyers, maybe a money guy all checking it out. Appoints may need to be set, the CPA, during tax season may set aside an hour so that his clients are not bothered.

Another issue is security, lots of thieves go to nice homes or commercial just to case the place for a visit later on. So, allowing just anyone to come in can be a problem.

Many landlords don't want it know that a commercial property is for sale, at least not to the public. If I had a for sale sign out in front of a place of business that can kill my tenant's business with the public thinking  the business and building is for sale.

If residential tenants know what's going on and they are near the end of the lease, they may look elsewhere, fearing rent hikes or other issues. You'll see many listings where the tenant is not to be contacted and they may be told it's an insopection that is required.
Well, how many inspections need to be required (?) so limit the number of times to only those times it must be shown to sell.

If you don't really have the means to swing a straight deal, don't put a seller through all that. If you need to do some creative thing, get an appointment with the seller to present your offer subject to inspections.  :)

Joel Owens · Answer

Sam the big question is if you have any money or not to do a deal??

Even if you could get no money down you will spend over 10k in closing costs and inspections on a property that size. You will need reserves for when the tenants do not pay and you will be evicting (paying out money instead of it coming in).

Banks are doing 75% LTV. Loans are 5,7,10 years currently from what I am seeing for term with 25 year amortizations. Interest rate is fixed in the 4's.

You could ask the seller to take back a 10 to 15% second making you only put 10% down in the deal. At 200k you would have 20k down and another 10k to 15 in costs so around 35,000 all in. A seller most likely will not due 100% owner finance. Without experience the building at 90% occupancy could go down to 65% and then the seller who financed you has to foreclose and is worse off then when they started building it back up again.

Hope it helps.

Sam H. · Answer

Typically a commercial loan requires a 25-30% down payment correct? If that is met, without having any prior business activity or massive income it will be nearly impossible to take the route of a commercial loan from a big bank wont it?

Matt Devincenzo · Answer

Since it's a 10 unit you will need commercial financing not residential which you obviously realized, but you can still get pre qualified and since I'm assuming this is your first commercial loan you will probably still have to give a personal guarantee against the loan. Just a heads up based on what I've seen with my initial research as I myself am trying to get into a commercial multi-family property.

David Niles · Answer

Very normal now, agents and owners dont want to waste their time with people who arent serious or wouldnt qualify.  The POF or pre approval show them both.

Seller won't show property W/O POF..is that normal?

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