Private sale purchase?

Question

Hi all,

I've got a verbal agreement on a 2 bedroom property that works great for the BRRR strategy.  All the numbers work, the property needs a little cosmetic love, and will rent very quickly.  I'm excited to start on the journey!!  I own one other rental which used to be my primary residence, so this is my first real investment purchase.

My question:Any property I've purchased in the past was an MLS listed property and I had a realtor walk me through the process.  This is my first private sale.  I've got a call in to my lawyer to draw up the sale contract.  Anything else I need to think about?  I'll find a title company (unless the lawyer sets that up for me?) Anything else I need to know?Thanks!!  I'm going to BRRRR this one and then hopefully move to the next in 6 months!!

Dan Pereda · Answer

As far as needing a CO for closing it all depends on the town.   I recently went thru a closing where i was buying all cash.  My lawyer kept telling me i needed a CO to close, but I knew the town didn't need it.  I had to educate the lawyer in this case.  I didn't get a co for 3 months later after the rehab.

Brian Stike · Answer

@Ryan H. and @Ibrahim Hughes thank you for your replies. We are moving along. My attorney is involved, sale contract is being developed. I think I am on the right track.  Thanks so much for all you’re insight, excited to close and get in there and start ripping up carpets and getting it tenant ready!

Brian

Ryan H. · Answer

@Brian Stike, I am in the process of closing on an all-cash, private sale, in New Jersey right now.  This is a flip; it will not be rented to tenants.  I cannot speak to whether this is the norm for every deal, but so far the process has been as follows:

1.  Attorney.  My attorney drafted the contract and sent it to seller's attorney for review and comment.  There were various negotiations.  Contract was signed.

2.  Inspection.  I had my general contractor do the inspection and prepare a scope of work and cost estimate.

3.  Due Diligence.  I went to the town hall and pulled the tax/water/sewer balances (this will also be done by the title company) and I also went to the building department to confirm no open permits or violations.

4.  Title.  The title company was engaged to conduct title and lien searches and to issue an owner's policy of title insurance at closing.

5.  Survey.  This was required because the project involves an addition and we will need the survey for the town's building department.  But for the changes to the footprint of the building, I would not have needed a survey.  If you have bank financing the bank may require a survey.

6.  Insurance.  I obtained quotes for "builder's risk" coverage to cover the property while it is vacant and under rennovation.  It will be ready to bind on the date of closing.

7.  Closing.  Because this is an all-cash transaction the closing should be relatively simple.  The attorneys and the title company make sure there are no open issues and that buyer and seller get appropriate pro-rated credit for any prepaid taxes, sewer, etc.

@Marcus Johnston mentioned an appraisal.  If there is bank financing, then the bank will require an appraisal.  In a cash deal, I am not sure why an appraisal would be required.

@Mike McCarthy mentioned a certificate of occupancy.  I would imagine a CO may be required if there is bank financing (and it is not a renovation loan that anticipates an initial vacancy).  Again, in my all-cash deal, I am not worried about the CO because I will get it after my renovation is complete.

Marcus Johnston · Answer

Hi Brian.

First of all, best of luck in your investment career.

Buying without an agent is completely do-able. Having an attorney is the first step - which seems like you already have done. Once you sign an agreement of sale, you will need to get an appraisal and inspection on the property. It is encouraged that an agent be present during the appraisal and inspection in case anything is over, or under looked. In your case, you could have the sellers agent do this, or be there yourself.

Other than that, the title company, lender and your lawyer should help you through the rest of the process.

Best of Luck!

Brian Stike · Answer

@Mike McCarthy thanks for the reply.  If the property is in need of work - (Its dirty, smelly, needs new flooring and a new bathroom) is a CO even possible?  I don't think it'll pass inspection until I spend about 3-4 weeks doing about $5000 worth of work.  I remember the podcast ( I forget which one) where the guest trained his small son to walk in the house with him, take a big sniff and say "Smell that?  Thats MONEY!!"  Thats the first thing I thought of!

Brian

Sam Shueh · Answer

I will order NHD report through title company to confirm the property neighborhood has no known issues. Also Megan's data base....

Private sale purchase?

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