Real Estate In Miami Florida is Our Business!

You’ve agreed on the loan terms or purchase price. Now the really treacherous part of the trip begins – meeting all the requirements of the lender, seller or buyer. Experience helps. Companies that don’t routinely invest in real estate are the most likely to trip up because, basically, they don’t get it. “They don’t get” why a document is needed or how information is to be used. Without that understanding, the documents and information may be incorrect or misleading if not just wrong. A few big picture ways to prevent this are:
-Discover and report as much as possible on the history of a property at the outset to avoid tenth hour discoveries. For example, tell where the dry cleaner rented at a shopping center even if it closed or moved 10 years ago. An on-site dry cleaner always sets off alarms for buyers or lenders who may wind up owning their ground water pollution. Old dry cleaners are especially scary because they operated before tight regulations on the chemicals used and their disposal. One of my loans was near closing when we discovered that the dry cleaner had moved from its original location some 12 years before. The old space was now under the newly expanded supermarket. Sections of the store’s sales floor had to be roped off so that the environmental engineer could drill down for soil samples. Finally, several months past the originally planned date and at considerable extra expense to the borrower, the loan closing went through.
-Ask why a document is needed. One owner of a well-located shopping center originally developed by his family 50 years earlier arranged for new financing to update the center and pull out equity. As the loan closing date neared, the owner submitted the required “certified rent roll”, signed by the CFO. Only, it overstated the center’s rental income as compared to operating statements. It turns out the borrower was honestly listing all the tenants and their contract rent, except, not all the tenants were actually paying their rent. The rent was not collected from some of the longstanding tenants while the center was disrupted by the construction work. The CFO did not realize that by certifying the rent roll he was certifying the income earned. Ultimately, the loan closed but with the amount lowered to allow sufficient coverage by the actual income.
-Question and verify the information you receive and do your own file digging if you are the buyer. As head of acquisitions for a company, I was provided data on a property by the seller that showed an anchor tenant paid its share of real estate taxes in addition to base rent. But, the lease said this expense was excluded. A review of the tenant’s file showed the taxes were being charged and paid by the (temporarily) unwitting tenant. But, we were buying the lease as written, not the income from a mistake. The seller reduced the price.

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