Making an offer on a Multi-Unit Property, don't make any of these mistakes
To be blunt, some people want to do stupid things. Submitting an offer to buy an investment property requires more than a measure of common sense. Ensure that you don’t make any of these mistakes. See Part 2, REALTORS Advice when making an offer
How NOT to Submit an Offer
NOTE: This article is written from the Sellers' Perspective!
It’s not just about the money. Most Agreements of Purchase and Sale (APS) are filled with agreements and conditions.
It is important that you understand that a condition is a special type of agreement in that it allows a buyer to terminate the purchase if an action is not to his or her liking. One condition that most people are familiar with is that of having a satisfactory building inspection.
If the inspection uncovers unknown issues with a property that the buyer is unwilling to accept and the seller is unwilling to remedy, then the buyer can walk away from the deal and have their deposit returned in full.
This is sometimes also referred to as an escape clause.
Recently I have seen some of the most frustrating agreements and conditions in offers that have caused aggravation. Multi-unit residential investment transactions have many clauses specific to this type of building class, different say, from buying a condo.
Here are a few that have crossed my desk recently.
Guarantee of No Easements on the Property
In one offer to buy a building the buyer wanted the seller to guarantee that there were no easements of ANY type across the property. This is virtually impossible unless one does not wish to have electricity, water/sewer, heat, or cable in the building.
All of these utilities have easements across the property because owners tend to enjoy being able to watch television in a heated apartment in February, and they have learned that their tenants enjoy that as well.
Allow the buyer to Walk away at any time
One of my favourites was the buyer inserting a condition that he be allowed to terminate the APS at any time up to and including the Date of Completion (that’s the day he takes possession) Why on earth or Mars would a sane person insert such a condition and did he really expect that I would advise my seller to accept this bit of unreasonableness?
Why would any seller agree to allow a buyer to walk away from the deal, literally at the last moment with no reason necessary for doing so?
Evicting current Tenants prior to the Closing Date
But wait…..it gets better. This same buyer wanted the seller to evict tenants from two apartments so he could put “family members” into them on the Date of Completion. This was a larger building.
It is illegal to evict a tenant who is
- A) on a lease or
- B) is in a building with four or more units in it, for the purpose of installing a family member.
So what was he up to?
Was he trying to remove a tenant because he believed the apartments were under rented and he could obtain higher rents?
Was he on crack? Also based on him wanting to be able to walk away from the deal at any time, his request would mean that my seller (even if it was legal) would evict two great tenants leaving two vacant apartments.
Then the buyer could refuse to close on the transaction, and my seller would have been left with two vacant apartments, the loss of income, and perhaps a law suit.
The seller looked at these conditions and rejected the offer out right without countering back to the buyer. That buyer killed his own offer regardless of his price because of unreasonable terms, agreements and conditions.
Meet the Author, Patrick Walchuk
This article was written by Patrick Walchuk, who specializes in helping people buy or sell Multi-Unit Investment Properties, Phone 613-788-2590 or Patrick@AgentInOttawa.com
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