8-UNIT MULTIFAMILY

The property in question was an owner-managed apartment with some deferred, mostly cosmetic maintenance. The sellers, looking to retire and enjoy more free time, decided to list the property in February 2021, shortly after the enactment of AB 1482. Before listing, we advised the sellers to raise the rents to enhance the capitalization rate. However, due to AB 1482, we were limited to a rent increase of only 5.69% (5% plus CPI), as the seller had chosen not to raise rents during the pandemic out of consideration for the tenants.

Selling multifamily properties poses unique challenges, primarily because most offers are contingent upon interior inspection. These properties are difficult to show, reliant on tenant cooperation and availability, making it hard to coordinate viewing all units simultaneously. Additionally, the pandemic heightened concerns about having multiple buyers enter and exit units, both for landlords and tenants.

Given these challenges, we recommended that the seller not accept any offers until potential buyers had viewed the interiors. This approach helps avoid the loss of time and potential buyers if a property falls out of escrow due to unsatisfactory conditions. To manage this, we scheduled showings for only qualified and serious buyers on weekends.

Within a week of listing, we received several offers, although they were not as favorable as the seller had hoped. Persisting with a proactive marketing strategy, we garnered three more offers after about a month, all of which were highly competitive. Notably, two of these offers were from buyers in a 1031 exchange, and one of these was an all-cash offer. Despite the appeal of an all-cash deal, we chose a non-contingent offer from an investor within our network. This offer was not only the highest but also nearly guarantees a swift transaction, as it was non-contingent—effectively making the sale final upon contract execution. The buyer agreed to purchase the property 'as-is,' ensuring the transaction would proceed regardless of any potential faults or discrepancies in the appraisal value.