"Using an Investment Real Estate Contract Checklist to Efficiently Close the Deal"

If you and the seller ultimately agree on the price, the next step is to execute a real estate contract, also known as a purchase agreement. The industry jargon for this is getting the property "under contract."

Again, your real estate agent will coordinate this process by obtaining and completing a legally binding real estate contract as well as securing the signatures of both parties.

CONTRACT CHECKLIST

You will typically be "under contract" for 45-60 days, providing enough time for you to secure such things as your financing, building inspection, property insurance, title work, and other required items.

Click here for a checklist to help you easily glide through the process. Typically, many of these items will be contingencies within the contract – so for example, the sale will be contingent upon you obtaining a mortgage, and if you are unable to get a loan despite making a good faith effort to do so, the deal will void.

Most of the items in the checklist will be your responsibility as the buyer. The only exceptions are the property survey (sometimes paid for by the seller, especially on a foreclosure), city inspections (negotiable), and certifications (negotiable).

A WORD ABOUT ZONING

One final word of advice – you will definitely want to make sure that the multifamily rental property you are buying is zoned appropriately. You could either verify this prior to bidding on the property, or make verification of adequate zoning a contingency in the real estate contract.

An example of a zoning problem is a property that is structurally a triplex, but is located in a single-family zone and was never "grandfathered." If you find a discrepancy like this after the mortgage closing you’ll be in a real pickle. You can’t tell just by looking at the property, because the zoning trumps the structure.

I only mention this because I got burned once with a zoning issue on a duplex, and it took 4 months to resolve and cost over $5,000 between attorney fees, city fees, and lost income. So do yourself a favor and check with the local municipality on the zoning status while the property is under contract (at the latest). Zoning maps are often located online, so that would be a good place to start.

If you see any discrepancy between the property’s structure and its legal use within that zone, then you will have to investigate with City Hall. And if you are smart enough to do this before you bid, or at least to put it as a contingency in the real estate contract, then you will also have the option to simply walk away from the deal if a problem arises.

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