Conditions and terms for Multi-Family units/fourplexes

[VicChung]

Dear REIN members,

My partner and I are considering making an offer on multi-Family units/fourplexes. REIN recommends adding conditions such as "subject to financing", "subject to property inspection" for residential units.

However, in the case of multi-family units/fourplexes, there is no mention of specific conditions that should be added.

What are the terms and conditions that we should include specific to multi-family units/fourplexes? for example, should we include conditions such as engineering inspection completion?

Regards, Vic

 

[navaz]

I would add insurance to the list.

 

[Nir]

How about fire coding status satisfactory to the buyer. Depending on your bank it may be a requirement. Good luck!

 

[PeterKinchMortgageTeam]

QUOTE (VicChung @ Dec 21 2007, 01:13 PM) Dear REIN members,

My partner and I are considering making an offer on multi-Family units/fourplexes. REIN recommends adding conditions such as "subject to financing", "subject to property inspection" for residential units.

However, in the case of multi-family units/fourplexes, there is no mention of specific conditions that should be added.

What are the terms and conditions that we should include specific to multi-family units/fourplexes? for example, should we include conditions such as engineering inspection completion?

Regards, Vic


Most lenders consider anything up to and including a 4 plex to be a residential property - meaning you would be applying for residential financing. The conditions that you add to the contract are for your protection, and the bank (in most cases) will not be concerned with the conditions you have included to the contact. When writing your offer, you would want to include the conditions that are important to you - which may or may not include additional conditions to what would be included on a standard single family home, condo or townhome.

If you are getting into buildings with > 4 units, its likely that the bank will have additional requirments and conditions, such as an environmental which you may want to consider including as a condition since you`ll have to provide one anyways

Hope that helps,

 

[DennisEpp]

Although this will still fall into the residential mortgage catagory, 4 units is just under the wire between commercial and residential property. The lenders may apporve your loan but not necessarily the property. Absolutely do full due diligence as you were buying a commercial property with some obvious exceptions. Definately make insurability and insurance cost not to excee a certain $ a condition of due diligence. Not with the seller but with a insurance broker. The cost is sometimes an unexpected surprise as insurance is generally not grandfathered.

Dennis Epp

 

[Thomas Beyer]

QUOTE (VicChung @ Dec 21 2007, 12:13 PM) Dear REIN members,

My partner and I are considering making an offer on multi-Family units/fourplexes. REIN recommends adding conditions such as "subject to financing", "subject to property inspection" for residential units.

However, in the case of multi-family units/fourplexes, there is no mention of specific conditions that should be added.

What are the terms and conditions that we should include specific to multi-family units/fourplexes? for example, should we include conditions such as engineering inspection completion?

Regards, Vic

you need only ONE "subject to" clause if you wish to walk away .. and that is usually "subject to financing satisfactory to purchaser".

In order to get financing the bank will ask for a variety of reports, such as
- your personal net worth statement
- property data like rent rolls for up to 3 years, current rent, operating data
- engineering report
- roof report
- structural report
- environmental report
- list of major upgrades
- pictures
- RPR with compliance certificate

Thus, in order to get finanicng, you need all these reports, either pay for them or get current ones from seller. Thus, you do NOT need to state "subject to satisfactory engineering report" or "subject to RPR being compliant and current" .. etc. ..

Ask the seller for ALL reports in his possession, and then buy / order the rest .. the older the building the less you will get .. so an engineerng report dated 1989 may do you not much good .. hence 2 month due dilligence period is not uncommon to get all these reports and get them evaluated by yourself and then the bank.