Multifamily sellers: How to qualify a buyer before going under contract
Don’t waste time and opportunities: learn how to select the right buyer every time
As the seller of a multifamily asset, it’s crucial that the buyer you select is the best possible prospect for your property. Don’t waste time, money and opportunities: you must ensure they’re qualified, and can close and execute on the contract as signed.
Keep reading to learn why it’s essential to qualify a buyer before going under contract on your multifamily property, and how to do it.
Why do I need to qualify a buyer?
It’s important to close with the first buyer you select. If you don’t, each buyer after that will ask themselves, “What did that other buyer discover about this property that I am missing?”.
When you enter into a contract with a refundable deposit, you’re basically giving your chosen buyer a free option on your property for a period of time, typically 30–60 days. Before you proceed, you must be confident that they can close and execute on the contract as signed.
What’s more, your tenants and staff will be disturbed throughout the contract process. To minimize the period of disruption, you should do all you can to ensure the transaction will close successfully at the end of the contract process.
As a seller, you’re required to provide due diligence information to the prospective buyer. When you qualify your buyer, you’ll greatly reduce the risk of wasting a lot of time and doing a lot of work, only to not close on the property.
How do I qualify a buyer?
Before you sign the contract, make sure that your prospective buyer can provide certain items. Always ask them for:
– Proof of funds
– Lender pre-qualification
– A list of the other properties they own
– A list of the sellers and agents that they have worked with
For added reassurance, it’s recommended that you call the buyer’s lender to confirm their pre-qualified status. You can also call the agents, sellers and buyers they’ve closed with in the past to enquire about how the transactions went.
Has the buyer toured the property in person before making an offer? Have they reviewed the due diligence information beforehand? If they have, this is a great sign. It’s proof that they have seen and have taken into account any issues with your property, and this greatly reduces the changes that they may later wanting to back out of the sale, saying they were unaware of the building’s condition. Be very wary of a buyer who doesn’t tour your property in person.
A prospective buyer who shows they’re motivated and wants to move quickly is also a great sign for a successful closing. The shorter the due diligence period the better, and the larger the deposit the better.
When you spend the time making sure your prospective buyer fulfils these criteria, you’ll put yourself in a great position to close successfully and ensure a quick and smooth transaction.
If you need help selling your multifamily property, the team at 100Units.com is here. Our objective as your multifamily advisor is to help you achieve your investments goals: from determining the listing price, to selecting the best buyer and handling the sale process through to the closing, we’ll facilitate a smooth transaction for you. We’ve helped thousands of clients close more than $100 million in multifamily property transactions. Learn more about how we can help you here.