All Forum Posts by: Scott P.

Thank you for the information. The P&S did have an inspection clause, which ended today, and I did back out.

I'm just amazed there can be so much misinformation, and the broker doesn't seem to care at all. It's a shame, as much of my loss could have been avoided if I had insisted, rather than simply asked, for due diligence documentation before the P&S. At least I'll know better next time.

Interesting. Here in Massachusetts, with residential transactions, I believe the norm is to do inspections after the offer is made. The seller's broker (who wrote up the initial LOI) and my attorney (who came up with his own LOI) both stated inspections to be done starting when the P&S was signed.

I had asked the seller's broker for due diligence documentation before the P&S was signed, but he responded that they would be given to me after the P&S was signed.

Sorry, I wasn't clear about attorney fees -- I'm referring to the attorney I am used for the LOI and P&S. I am hoping to work something out with the seller, but if the broker was responsible for much of the price discrepancy, that might not be easy.

Whatever happens, this will certainly be a learning experience!

The majority of the discrepancy was from what the lease requires the commercial unit is responsible for paying. Without seeing the lease, it was impossible to know about that misinformation.

I did have a tour of the building. I'm not a property inspector; I can't tell if the parking lot has 15 years left in it with minor repairs, or 2. I was told the seller was installing a new $15K HVAC system (due diligence shows he hasn't quite spent that much on repairs and capital expenses in the past 5 years, despite this being on the market for 2 years). On a tour, I wasn't going to go poking through the boilers to try to determine how old they were. And the 2 apartments I was shown didn't have any issues noticeable without actual doing a full inspection (e.g. baseboard heaters that don't work, and an unvented gas space heater).

Hi,

I submitted an offer for my first multi-family (8 apartments plus one commercial unit), and it was accepted, and signed the P&S. I got the due diligence documents on the same day as the inspections. And it turns out there was a lot of misinformation in the listing and offering.

The biggest issue is that the commercial unit, on a newly signed 7-year NNN lease, was supposed to pay for half the real estate taxes, half the maintenance, half the water/sewer. But it is actually about 1/3rd the real estate taxes (perhaps as little as 1/5th; "percentage of ground floor to entire building", but SF numbers for the floor and building vary), they pay their own maintenance and water/sewer but nothing beyond that. The building was also laughably listed as Class B, "minimal management", "easy to manage." It's 98 years old, and not in the best neighborhood , so I took that to mean a Class C, but with little if any deferred maintenance. It needs a new roof, new driveway, new boilers, new HVAC, and every unit needs work to get them up to code. There was lots of shoddy work done in the past.

For the misinformation, it could any combination of the seller providing incorrect information, error(s) the broker made, or just simply me not understanding what was presented. But the broker hasn't pointed out any errors in what I have presented (he's trying to sell "potential" and "upside", making it sound like my fault, etc.).

I've already put in quite a bit of money (attorney fees, inspections). I'd like to work something out with the seller. But I am strongly suspecting that the broker made a number of the errors in the listing, and if so, I imagine the seller and I won't be able to come to an agreement.

Any thoughts? I could easily bail on the deal, but lose a lot of money. I'd like the deal to work, but if the broker made most of the mistakes, I doubt the seller would get to a price that works.

Thank you all for your help.

To update, I didn't end up asking the seller. We signed a P&S, I did a lead inspection on Tuesday, and the apartments are surprisingly lead-free, but common areas have some lead (perhaps $5K or less to fix).

It turns out the lead paint isn't the big issue; there were major misrepresentations (e.g. things I was told the NNN lease would pay, but does not, and rents on 3 units showing up $100 lower than what was claimed originally), that end up causing the NOI to go down close to $7,000, and something in the ballpark of $100K of deferred maintenance (on a $700K building). And the seller's broker is pooh-poohing it and seems to think I should accept it because of the potential of the building. Yikes.

Thank you all for your help, I appreciate it.

I'm hoping to find a good mortgage broker that covers Central Massachusetts. Any recommendations?

That sounds perfect.

I'm starting to worry about the hassle of spending time/money with the P&S, inspections, etc. only to find that there is lead paint and the deal doesn't go through. But your solution likely avoids all that. Thank you.

I am looking to purchase my first multifamily, and 8-unit building built in 1920. This is in Massachusetts.

I asked about lead paint, and the response was that the unit was rehabbed in the 1980s and the seller thinks he has paperwork from then showing that the lead paint was gone. A Massachusetts search shows no lead paint inspections. The seller later stated specifically "There is no lead paint." From what I understand, the chances that there was never lead paint in the building is almost zero, and that even after extensive work there is almost always some lead paint left.

To me, this seems very different than saying "I don't know if there is lead paint" (which seems to be the way things normally work, at least in Massachusetts where lead paint laws are strict). By saying there is none, the assumption (to me) is that I shouldn't need to budget for lead paint when coming up with my offer.

I made an offer, got a counter offer, and said that I would accept the counter offer if I could get a lead paint inspection done (I didn't know then that the law lets me unless I waive the right).

So if a lead paint inspection shows that there is lead paint, should I get quotes for abatement and try to get the seller to cover the whole cost? At that point, he could likely refuse, but then he would be stuck finding another buyer, who he will have to disclose the lead paint to.