the-abcs-of-real-estate-investing-ken LifeFeeling

engineering reports, or any recent appraisals? As the buyer, you must receive all of these
before the due diligence period begins.
• What is the time frame to perform the pest control inspections?
• What are the time frames for the physical inspections of all interior and exterior
spaces,including units and common areas?
• Does the seller have any information with regard to lead-based paint or mold and
other allergens?
*An ALTA survey is a boundary survey of your property to reveal the actual property lines and
easements.
Again, the contract law governing the sale of commercial property varies by state, so
you’ll want to make sure you consult a qualified attorney. By now, however, you should
have one on your team and he or she should be familiar with your specific goals. Work
closely with your attorney and your broker to make sure you receive the items promised in
the agreement on time.
Contingencies
Your attorney will be able to advise you about contingencies. Contingencies are
provisions within a contract that give you recourse to cancel the deal in the event of
unforeseen circumstances. A few examples of typical contingency statements include loan
contingencies and due diligence contingencies. These are critical and I recommend they be
in every purchase and sale agreement.
A loan contingency states that the sale is contingent on you qualifying for the loan. This
gives you an out should the lender refuse to finance the deal. I won’t do a contract that
doesn’t have a loan contingency. We were property-managing a project where a buyer put a
deposit of $200,000 in earnest money on a property that didn’t have a loan contingency. He
didn’t get the loan. The sad ending is that he lost his $200,000. True story.
Due diligence contingencies are equally important. This language in a purchase and sale
agreement states that you as the buyer are entitled to any and all documents related to the
property. It also states that you as the buyer may ask any questions about the property and
that you are due answers from the seller to the best of his or her knowledge in a timely
manner. As you will come to find out in the next chapter, the results of the due diligence
process are ultimately what decides your purchase or decline of the property. They also help
you formulate your property plan and operating budget, two steps critical in maximizing
your investment. This clause ensures that you get all the information you need.
Signing the Agreement
Once both the buyer and the seller agree upon all the terms of the agreement, you have a
completed purchase and sale agreement that is ready to sign and date. This agreement is
binding, and in most cases you will be asked to put down an earnest money deposit on the
date you sign the contract. Again, this earnest money is fully refundable and you can walk
away from the deal until you have completed and waived the contingencies such as due
diligence and getting the loan. And that’s what we’ll cover in the next chapter.