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Real Estate Submit offer without looking at property

Discussion in 'Real Estate Investing' started by tchandy, Dec 14, 2007.

  1. tchandy
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    tchandy Contributor Read Millionaire Fastlane

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    I have a question. I will looking at a few duplexes and fourplexes in the next week but there is a catch - I can not look at some of the homes without submitting an offer first. I will look at the property on paper and I guess I will drive around the neighborhood and do some "window shopping". Is this something new? I don't think I have read anything on this but if I did then I have forgotten or wasn't paying attention since I wasn't concerned about duplex/fourplexes at the time. Thanks.

    Tom
     
  2. GettingThere
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    GettingThere New Contributor

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    That seems a bit awkward. Do people offer to buy used cars without test-driving them?

    I doubt that is some sort of standard way to operate, but I am no expert.

    They probably have a lot of people look at the places who are in no place to buy them...they feel it's a waste of time unless the person is serious, which is indicated in a formal offer...maybe?

    If you are really interested, perhaps you could submit an offer with a written contingency to allow you to revoke the offer for dissatisfaction upon inspection/walk-through.

    - John
     
  3. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    ask them if a letter of intent is enough. If not then I would be concerned. Where are these properties located? maybe that location has a different way of doing business. Otherwise then yes, strong escape clauses are needed.
     
  4. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Standard operating procedure. It usually disrupts the residents to show a place. There could be a lot of looky-loos that could get to be a bother. Get it in contract and view/inspect the place while doing your due diligence. All income producing property contracts that I have ever seen have an inspection period. During this time, you can get your earnest money back or renegotiate if you don't like what you see.
     
  5. tchandy
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    tchandy Contributor Read Millionaire Fastlane

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    Thank you for the feedback. Most of the homes are about 20 years old and some of the homes do have renters. I will be sure to see what the inspection period is if it is given or will get it in the contract. I will follow up in about two weeks with the results.

    Tom
     
  6. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Good luck with that. So, what area are you looking at? are you investing in Texas? what cities)?
     
  7. White8
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    White8 Contributor

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    So what would be the procedure?

    1. Write an offer at full price with a due diligence period.
    2. Nit pick the property
    3. Go back to the seller and tell him that the property needs $100K worth of work, he was overpriced for the market by $10K a unit to begin with even if there was no work needed, and his financials are unrealistic. Then offer him what the property is really worth?

    This seems like it wastes a lot of the buyer's time and legal fees as well as ties up the property for 30 days just so someone can take a reasonable look at it.
     
  8. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    It takes time to purchase income properties.

    You would take your best guess from the information received and your observations of the exterior. Couple this with your understanding of the market to make your offer. Hopefully, the agent has represented the property to you fairly well. If not, you will make changes and discoveries along the way that you will use to renegotiate.

    Would you rather have open doors for the tenants to deal with? I don't even want the residents to know when I have my properties for sale. All sales inspections during due diligence are presented as lender or insurance inspections.

    I personally tell my agent everything I know about the property up front. I won't accept a renegotiation unless something is uncovered that I did not cover with the agent. They know this upfront and clarify it with the buyer in advance.

    I do this on a purchase as well. I send in a cover letter with my offer explaining my offer and what I know about the property. I tell them that if my discoveries match what I perceive, there will not be a renegotiation. This sometimes helps me to land deals even though others have offered more.
     
  9. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Legal fees? The only legal fees that you should have incurred are for a contract. You need to have one done for you anyway. In the case of a 4-plex, the standard state issued contract will usually suffice so there should not be any legal fees at this stage.
     
  10. JScott
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    JScott Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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  11. White8
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    White8 Contributor

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    I think what is difficult for me is to make an offer based on a quick look at the exterior and the hope that the agent is honest about the property. On older units, do you just assume the worst on the interior?
     
  12. randallg99
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    randallg99 Bronze Contributor

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    In PA, if the offer is accepted, the contract becomes binding...

    be aware of your local laws.
     
  13. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Are you saying that contingencies are not allowed? All contracts are binding once executed and earnest money is put down. The inspection period is in the contract.
     
  14. randallg99
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    randallg99 Bronze Contributor

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    Of course the contingencies are allowed.. a contract can have whatever you put in it... just the original poster is out looking for properties and needs to be aware of these very facts...

    PA, like many other states have attorney review period that can provide renegotiation and/or withdrawl

    I am still baffled why this agent is emphatic about having an offer before properties are viewed.

    My personal experience is that I have placed 100 (low-ball) offers at a time on SFR and I would get some responses back, (about 5-10%+/- not including the `drop dead, MF` responses) I receive counteroffers and in one case a flat out acceptance... all sight unseen... only then after the acceptances/counters came would I look at the properties... saved me a lot of time and trouble.

    I am researching the local SFR arena again now that selling pressure is forcing some good prices in the markets...
     
  15. tchandy
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    tchandy Contributor Read Millionaire Fastlane

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    The weekend is just about complete on the house hunting. Nothing really great though. The homes I did see would be great for a slumlord but I couldn't see myself owning those and renting out to people. Great for some investors but not me. I would hate to have people live in them and raise kids there as well. Most of the homes required some upgrades but not many and others required too much work. A few homes may even have absestos siding. I did some research online and it can be removed but may be a hassle for the people living there. And I would hate to see a lawsuit follow years down the road when they complain of lung disease or something else. But I will continue to keep looking for an investment.

    The realtor did show my wife and I a SFH that was recently renovated and looks almost brand new as a result. But just have to run the numbers and see if it would even be worth it. More to follow on this.

    Tom
     
  16. tchandy
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    tchandy Contributor Read Millionaire Fastlane

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    I look for investments within the area I can drive to in a few hours. So for me Temple, Austin, San Antonio and surrounding areas are on my list. For me it would be good to follow how the homes go as a rental and I feel more comfortable with that. At least for now. But I do have two homes in other states that my property manager keep me informed on their status.

    Tom
     

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