Selecting the Right Buyer

July 17, 2023

The Capital Stack

Selecting the Right Buyer

If you have been following along you know we recently went full cycle on the 33-unit property we owned in Linden, MI. Before getting the property sold, we negotiated, came to terms, and fell out of contract with several buyers. It was a rollercoaster experience, and we are glad to have successfully exited the ride.

Off Market Offers

Buyer 1: Presented us with a full-price offer and a 90-day contingency period for inspections and financing. Although they presented us with our desired purchase price, their request for a 90-day contingency period raised concerns. This arrangement meant they had the option to withdraw from the agreement at any time within that 90-day period. Considering the significant time and expenses involved in the property selling process, a potential withdrawal at any point during that period could result in substantial legal fees and other sale costs for us, along with continuing operations of the property.

Buyer 2: Offered 10% below our price, with a 60-day contingency period. While Buyer 2’s offer was tempting, the property was still off-market. We prefer to purchase properties off-market and sell them on the market to ensure maximum exposure to potential buyers. With this in mind, we ultimately made the decision to list the property with a broker, as it would provide us with broader market visibility and opportunities.

On Market Offers

Buyer 1: Lowered their offer, solidifying our choice not to proceed with them, as it indicated they would likely have re-traded while under contract.

Buyer 2: Increased their offer because they had previously established a connection with the broker and gained reassurance from the broker’s account of the deal’s background. Initially, we were inclined to accept their offer; however, as we received additional offers at higher prices and with more favorable terms, we decided to explore our options further.

Buyer 3: After thoroughly evaluating numerous offers, we ultimately accepted one from a buyer who matched our full asking price and proposed a 30-day due diligence period. We thought we were golden. However, upon sending them the attorney-drafted purchase agreement for review, the buyer, who resided out of state, became apprehensive due to their unfamiliarity with such contracts. Unfortunately, they decided to withdraw.

Buyer 4: We proceeded to engage with another buyer who actually did sign the contract. They promptly scheduled due diligence walk-throughs and conducted inspections of the units. After completing the tours, they verbally expressed their satisfaction, stating, “Yes, it looks good.” However, to our surprise, the very next day, they returned with an outrageous demand for a 38% reduction in the purchase price. Recognizing the unreasonableness of their request, we declined, resulting in the termination of that deal as well.

Buyer 5: Ultimately, we entered into an agreement with a well-qualified buyer who presented a 21-day due diligence period, a 2.3% earnest money deposit (EMD), and a 60-day closing period.  The offer was 8% below our initial target sale price, but with rates in the 6% range, it was clear this was market value at this point. We started out with an ambitious asking price and eventually reached an agreement that we were very happy with.

Major Market News

President Howard Smith Retires, Multifamily Market Insights Shared

The article from The Real Deal reports on the retirement of Walker & Dunlop’s President, which was announced this past week. The renowned real estate company’s President, Howard Smith, has been with the publicly traded company for 43 years. We appreciated his opinion on the state of the multifamily market. Howard emphasized the strength of the apartment market, stating that if people are not in the office, they are likely in their apartments, which is why the multifamily sector is performing well. He continues to say “Office is under pressure. Retail is under pressure. Industrial and apartments have been outstanding.” Check out the article for more information on his opinion of the multifamily market.

Source: TheRealDeal. Walker & Dunlop president to retire.

Tips and Tricks


After closing, we asked ourselves “Would we do anything differently to perhaps avoid cycling through 5 different buyers”. We determined that it would be impossible to predict how a buyer will perform and the best we can do is to stick to the criteria that we know are indicative of a well-qualified buyer.

Qualified Buyer Criteria:

  1. Have they bought a similar property before?
  2. Are they using a lender that we feel confident in?
  3. Does the lender have experience with this property size and type?
  4. Are they familiar with the overall process of purchasing commercial multifamily properties? In substitutional deals, it is not uncommon to come across less-experienced buyers who may be unfamiliar with the typical steps required to facilitate a smooth closing. 
  5. What is the source of equity for the purchase? Is it from personal funds or syndication? In the case of personal funds, we would request proof of funds to ensure the buyer’s financial capability. However, if the equity is coming from a syndication, we would need to understand their track record of successfully raising funds in the past and assess their likelihood of achieving similar success for this particular investment.


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