WHAT AM I REALLY BUYING? I NEED YOUR ADVICE!

Question

Hello BiggerPockets community. It's been a long time since I've posted, so bear with me... I'm a little rusty.

I'm under contract to purchase a multi-unit property in the Richmond Virginia area. I live in Northern Virginia, about a two hour drive away from the property.

The Seller and I are each represented by a Real Estate Agent (My Agent specifically represent me as a buyer's agent). I am in a due diligence period, and can continue with the transaction or walk away at my discretion. There are several issues;

1. I'm dealing with a bitter Seller.

This opportunity came about when the initial contract fell out because of Buyer  financing problems. My contract is for much less then that initial purchase contract, and I believe the owner is upset about it and not being cooperative. Additionally, the seller was not honest about the rents being collected, and has provided no leases or information about the property whatsoever.

2. Zoned Duplex / Coded Triplex

According to the County, the property is zoned for a duplex, but I've been told it has been rented out as a Triplex for many years. The County also stated that the property is "coded" for a Triplex. The best explanation I could get from them is that the property has been taxed as a Triplex. Also, there are three separate utility meters at the property. So I'm not quite sure whether to consider this property a duplex or a Triplex. To me, whether or not it is a LEGAL Triplex or not, makes a significant difference in its value. This leads to the next issue...

3. No Info or Cooperation from Seller

The property is currently vacant, and I am told by the Seller, has been since December 2016. The County had also informed me that if the property has been vacant for two years or more, no matter what the status is currently, it reverts back to a duplex. I do not trust what the Sellers are telling me, but it is extremely important for me to know this information. And... This leads to the next problem... My Real Estate Agent does not even want to approach the Sellers to ask for things (and risk appearing disagreeable), like asking if they had a property manager, and if so, who was the property manager.

4. Issues With my Exclusive Buyer’s Agent (just my Agent on this transaction)

My Agent is honest, a very good person, has worked very hard, but is not aggressive enough to protect my interests. The seller has lied about financial specifics, has not delivered documents as promised, and is not acting in good faith. This is not an "as is" sale.

What documents would you guys expect from a Seller as part of your due diligence?

My agent does not want to ruffle any feathers and wants to keep everything "agreeable." The problem is I am not getting the necessary information, and everything I need to make my best decision and protect myself going forward. He refuses to demand that they perform in good faith, instead telling me about all the time he has spent on my behalf trying to make the deal work, seeming to be misdirecting (at least to me) his anger and/or frustration regarding the transaction.

Now, my agent is telling me that the Sellers "don't want to be bothered anymore by me" and he is suggesting that I just withdraw from the transaction.

IF this is a Duplex, the amount being paid for the property is comparatively a little high. But strictly looking at cash flow based on expected rents, the numbers are still on the positive side and are okay. If it is a Triplex, this is a great deal.

So, thank you for taking the time to read my long post!  I would appreciate your advice.

Russell Brazil · Answer

I think you need to reset your expectations for the real estate market.  It is very common to get zero information from a mom and pop landlord....and even in the event you get it, it shouldn't be trusted anyways.  We are in a sellers market nation wide, that means the seller is in control and not you the buyer. Your agent recognizes that fact. An aggressive buyers agent in a sellers market will only derail a transaction.

Account Closed · Answer

In order for the building to revert back to the duplex, wouldn't the county need some type of proof that it had been vacant for two years? You need to approach this deal like it is a foreclosure. What ever info you get you have to get on your own. Actually, this should always be your approach when buying because you cannot guarantee seller provided info to be accurate. When it comes to MY money, I never rely on anything that I didn't discover.

John Thedford · Answer

Though I agree with @Russell Brazil points, if it is THAT important you could ask for the part of his tax returns that reflect the operation of this property. Yes, we are in a sellers market, so in the event the deal is too good to pass up in your opinion, go ahead and close. Good luck either way.

John Thedford · Answer

It sounds as though your agent MAY be more concerned with the deal closing for their commission than "ruffling feathers". The seller has an obligation to provide information requested in your due diligence period. I would also verify everything with the county. If you get no cooperation, then you can gamble and close or walk.

Robert Slatkin · Answer

Account Closed Thank you for taking the time to respond. I sincerely respect your perspective on the market and your experience. First of all, I would like to say that I don't believe in "Seller's Markets" or "Buyer's Markets" as much as I do in "What is this particular person's specific circumstances." This person may need a very specific kind of Buyer within a "Seller's Market." I do not hold guns to people's heads to sign contracts, and will only do a deal if they decide it benefits them.

Having said that, in any kind of market, a contract is a contract. If the Sellers don't perform as agreed, and they have misrepresented material facts throughout the sales process, to me, that is beyond "the Seller being in control and not me" in a transaction.

I believe that this is making foolish decisions that put them at risk, and may end up costing them down the road. Just mho. Although I have built businesses for 35 years, you are very much more active in real estate, so perhaps you are better informed about this.

I would appreciate your opinion on what you mean, and how the transaction might be "derailed" if my Agent/Broker asked the Seller's Agent if they used a Property Manager for the subject property?  Just curious. Thank you.

Robert Slatkin · Answer

@Matthew Maggy Thank you very much for your response and advice. I like the idea... again, it comes down to asking "my Agent" to obtain something from the other Party, and I'm having more than a little trouble getting him to do that.

I think I got a good deal on this property. :)

Matthew Maggy · Answer

Just a thought: you might ask them to sign something relieving you of any responsibility for what was not done to Dept of Interior Historic Standards prior to your acquisition of the property and that you don't have to make any corrections to previous work.

This is just spitballing, I don't know if this is something that's even legally possible.

Also I agree that I think your agent is more concerned without closing a deal than getting a good deal for you.

I would just ask the locality about the zoning issue and see what they would need to be able to zone it as a Tri-Plex..

Robert Slatkin · Answer

@Chinmay J. Thank you CJ.  I will ask the Attorney who is running down the Title.

Also, I have contacted the Historic Foundation and am able to put a request in writing to the Board, and may even be able to meet in person with them next week!

The issue is that they will likely want something in order to drop their covenants from the property. I have not dealt with this before, so I don't know what to do, or offer them... a donation?. The ironic thing is that while it appears that investors completely ignore these covenants and do whatever they want to the properties, I actually care about maintaining the historical integrity, and keeping the structure as original as possible.

Chinmay J. · Answer

Thank you !.

As far as direct answer to your question, I would defer it to a real estate attorney or Title Company to opine.

Is there a way to get a release from Historic Restrictive Covenants?

Robert Slatkin · Answer

@Chinmay J.  CJ... I want to thank you for all your advice and guidance on this project.

You have truly been instrumental in helping me analyze this deal and figure out solutions where I've needed to.  You're an excellent Real Estate Agent and advisor, and I can't thank you enough.

So you know... I asked my Agent to obtain the Addendum you suggested, and he emailed one word.. "ok." But I have not heard back, and don't know if he is really going to even try and obtain it.

Another issue I didn't even mention (I don't want to overwhelm BP members :) ) is that this is an Historic property, and in the chain of title, there are some restrictive covenants by an Historical Foundation that owned the property at one time. Now, the thing is.... none of the owners of the properties they owned are living up to the covenants, the foundation does not have any money now or in the foreseeable future to pursue any of these "violations," and they have not enforced any of the violations. The property I have under contract is in violation right now, and I believe has been since the covenants were added many years ago. For instance... the covenants state that the owner must occupy one of the units in the building. All the units have been rentals for a very long time.

But, these covenants are in the Title Work. So, would you not worry about it, or would you not buy the property because of covenants that are there (but have never been enforced)?

Thank you, again!

WHAT AM I REALLY BUYING? I NEED YOUR ADVICE!

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