Once we have a property under contract, we must ensure we know what we are buying. Before the closing date arrives, we should focus on uncovering any unexpected issues that the property might have. The issues, big or small, can impact our returns and the lucrative of the deal.
Eventually, we should decide if the issues we found are a deal breaker and if we need to renegotiate, or budget for them.
To find any unexpected issues, we will use whoever we can, specifically focusing on three key players: the seller, the agent, and the inspector (and other professionals as needed).
The Seller
We will ask the seller to disclose things they are aware of. In New York, for example, it's a state law to fill out a disclosure form.
In agent-to-agent deals, we don't have a direct connection to the seller and, therefore, cannot read between the lines of what he is saying.
Moreover, The seller might be uneducated about the issues - she might be an out-of-state investor and might not know how to answer the questions or just a first-time homeowner who ignored this stuff.
Lastly, we don't have an alignment of interest with the seller, so we cannot expect them to go above and beyond with disclosures.
Eventually, we take whatever the seller discloses with a grain of salt.
The Agent
Many important things are hard to understand from an online listing only, especially things that require either people skills or a deep understanding of the market.
Both people skills and understanding of the market are characteristics that an agent has and can help us out.
For people's skills, we will ask the agent to uncover what are the seller's motivations - why do they sell? Knowing this can be a key to how we build our offer.
If, for example, the seller has already identified another property they want to buy, cutting a few % from the offer price and offering a fast closing might work for both parties.
Another example of understanding the seller's motivation is what they intend to do with the money. If the seller wants to buy something else, they cannot finance the deal, and we can focus on a more conventional offer.
While touring the property, the agent might have a short conversation or impression with the tenants. We can try to understand if the tenants are friendly or not, whether they want to stay, and eventually what kind of life we will have as landlords to these tenants.
Agents see a lot of properties. They know when something stands out, and we can talk with them about it. We will ask the agent if the rooms are too small, does the house layout standard looks quirky, and more. As extroverts, they will talk, and we should be good listeners.
While the agent is working for us and representing us, they are also not 100% aligned with our interests as they earn their commission from closed deals.
We also depend on our relationship with the agent and familiarity with each other. Lastly, while a new agent might not disclose too many things to steer us away from a deal, a good agent will not maximize one deal but the relationship.
Eventually, we can understand a lot of things from the agent, but to be able to puzzle the pieces entirely, we need an inspector.
The Inspector
The inspector is getting paid for inspecting the house for you. It is a transaction-based relationship, so their interests align with ours. Indeed, they are also afraid to be held liable for things they did/didn't say, but this is as close as we get to the alignment of interests.
The inspector will go through the house, focusing on the critical things - mostly visible issues, roof condition, exterior, foundations, and the condition of units. And while the inspector is preparing to tour the property, we should be preparing too: as out-of-state investors that will probably not set foot in the property, we should prepare a list of highlights and places to look at. While we will keep most of the list to ourselves to compare with the inspection report as soon as the inspector sends it back, we will provide the inspector with a few highlights.
Inspectors know what to look for, so we should keep our questions list short. Our motivation is double - we want to get answers to things we need and simultaneously show the inspector we are in detail to ensure that they send one of their better inspectors.
There are things that the inspector will not cover, which require professionals in the fields. If you think that there is an issue with electricity, roof, foundations, plumbing, etc., you should bring on a professional to evaluate the specific issue.
Checking again and again before pulling the trigger can help you get ready for the day after purchase.
Conclusion
Purchasing a property can be stressful and fun - stress can come from uncertainties, and we want to tackle that.
The more educated and aware we are, the more fun it will be, so let's get educated and enjoy!