Here’s the next podcast for the Smart Real Estate Investing series!
Today Marcia and I are breaking down inspections on multi-family unit properties. Listen in to learn how multi-family unit inspections differ from other property types.
René Nelson, Eugene commercial real estate broker
Marcia Edwards, Eugene residential real estate broker
Smart Real Estate Investing – Part 4
Marcia Edwards: Let’s talk a little bit about our experience, because we’ve seen a lot of things in this marketplace where it’s almost as if sellers are asking too much from a buyer to absorb problems on a property. Let’s talk about inspections, for example. What in commercial investment, like apartments, are you running into when it comes to inspections and the request and expectations of the sellers and the buyers?
René Nelson: Well, right now with multi-family like apartments where it’s five units or more, we’re seeing multiple offers because there’s not much multi-family listed for sale on the market, so pent up demand with buyers, buyers rush in, try to outbid each other, create like an auction like atmosphere and then once the seller selects a buyer and says, “Ta-da, you’re the winner,” now the buyer wants to start their inspections in their due diligence.
Marcia Edwards: And that is not unreasonable.
René Nelson: Not at all.
Marcia Edwards: And the seller should actually encourage them to discover what they can. Is that right?
René Nelson: Oh, I totally agree with that, because the last thing that I wanna do is have someone buy a property and later say, “Wow, it had latent defects and you didn’t tell me about it.” Well, I didn’t see it, I didn’t know it had a crack foundation or it had tenants that were hoarders. The only way you’re gonna see that is by doing inner inspection and walking through them.
Marcia Edwards: In this market, can’t you ask the buyer to absorb those unknowns at some level?
René Nelson: Well, here’s a deal, it’s really hard, especially if you get into a bidding war where the buyers try to outbid each other, and even if it’s a cash buyer, they’re still gonna wanna walk through and do their due diligence and look at the property and do the inspections. I’ve had sellers say, “Nope, it’s as is, I’m not paying for anything,” and that typically just kabashes the deal and kills it because a buyer is gonna typically ask right off the bat for you to cure life and safety issues. So that’s fire hazards, I had a property in the campus area about two years ago that had a fire exit ladder to the side of the building, it was a three-story building, and my seller actually had to do some additional shoring up of the support of the ladder on the back of the property before we could close, because those requirements are continually changing as well.
Marcia Edwards: I see that kind of hazard in electrical most often.
René Nelson: Yes. There’s old Zinsco panels that are federally recalled, that absolutely is a life safety issue that a seller has to cure.
Marcia Edwards: So sellers, be aware! You can’t just say, absorb everything, the buyers are still going to make sure that their investment is stable.
If you enjoyed listening to the podcast, expert René Nelson is just a 15-minute discovery call away from answering your questions. Give Pacwest a call today.
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