1. You must submit an offer and get accepted before seeing inside the units – some exceptions apply
This fact meets the most resistance from buyers of 2-4 units and creates the most concern, especially if they haven’t been through the purchase process before. Negotiating price/terms before seeing inside the units is actually the standard practice for duplexes, triplexes, and fourplexes, but why? More often than not, it’s because sellers require discretion when selling their 2-4 units. They do not want to inform their tenants that the property is for sale and hassle their tenants with showings, unless they know that the buyer is willing and capable to meet acceptable price and terms. Sometimes sellers will allow the units to be shown before submitting an offer, but this is more common amongst owner occupied units and smaller properties like duplexes.
Although it seems like a backwards practice, this procedure shouldn’t be a reason for concern. What’s important to note is that the standard purchase contract provides the buyer with 17 days after acceptance to cancel the sale without any penalty. This means the buyer has 17 days after the price/terms have been negotiated to view the property, conduct inspections, do proper due diligence, etc. and the buyer can still cancel the purchase without penalty, as long as they cancel within that time period. If you still find this process concerning, we can talk about the details at length and discuss how we can guide you through this process so that you are not financially at risk.
2. Discretion is KEY – Do not disturb tenants
Do not contact tenants, enter the property without permission, or inform any of the tenants or neighbors that the property is for sale. Most 2-4 units for sale are listed without the knowledge of the tenants and the sellers prefer to maintain discretion until they obtain a willing and capable buyer. This is a very important point. Buyers and agents MUST respect the privacy of the tenants and the seller’s request for privacy. Once the buyer and seller reach a sales agreement, the buyer is then allowed to do their investigations and the tenants are typically informed of the pending sale. Until then, just assume that the buyer does not have permission to enter the property or communicate with the tenants.
3. Paperwork and due diligence process can be different
There are a number of differences between single family home purchases and 2-4 unit purchase. For instance, often times the Residential Income Property Purchase Agreement (RIPPA) is used instead of the Residential Purchase Agreement (RPA), mostly because it already includes verbiage that is relevant to a 2-4 unit transaction. Also, investigations and inspections of the properties typically have to work around the tenants’ schedules. The seller has to give the tenant proper notice before entering the property and allowing potential buyers to enter the property. Also, seller disclosures are often limited which is address in the next paragraph. To discuss the various other differences, please don’t hesitate to get in touch.
4. The disclosures are often limited
Seller disclosures during a purchase transaction require the seller to disclose all the defects and issues that he/she is aware of regarding the property. However, it is common amongst 2-4 units for the seller to just be unaware of much of the defects of the property. That doesn’t mean that the defects don’t exist, it just means that the seller does not know they do. Usually this lacke of awareness stems from the seller not occupying the property, not being involved with the management of the property, or the tenants not informing the owner of existing issues. Other times, the seller is a bank that reclaimed the property in a foreclosure or it’s an investment company that recently acquired the property and is flipping the property immediately after acquisition. Whatever the case, the seller is only required to disclose what he/she is aware of. This is a very important limitation to the disclosures because often times sellers are just unaware of the problems with their property. That is why it is critical that the buyer does thorough inspections during the investigation period of the sale.
5. These properties are selling FAST
Similarly to single family homes, 2-4 units are selling incredibly fast right now and often the listing will have multiple offers. This often comes to a surprise to many 2-4 unit buyers. Just like single family homes, 2-4 unit prices are skyrocketing, supply is limited, and the good properties can sell immediately. Many times, they can sell on the same day it hits the market. It is important that buyers take the time to determine what they are looking for and be decisive once they see a property that they like. In this market, they may not get much time to make that property theirs.
If you are thinking about buying a San Diego duplex, triplex, or fourplex, please get in touch! We’d love to help you with the process.
Dycor Realty, Inc.
Ph: (858) 449-1253