Steer around barriers to commercial real estate sales

Commercial real estate buyers and sellers can anticipate and avoid roadblocks to a successful transaction

By
Western Investor
January 8, 2021





| Dreamstime
— Buyers, sellers and avoid barriers. | Dreamstime

Have you ever come across a roadblock, turned to take an alternative route and found yourself up against another obstacle?

During the construction season it can be frustrating trying to find a route without some hurdle.

Likewise, commercial real estate buyers and sellers can potentially encounter endless roadblocks during the course of a transaction.

Unlike driving, though, you can anticipate these snags and potentially veer around them.

Control the clock

Sellers hoping for quicker closes should assemble due diligence items that most buyers are going to ask for.

This includes reports from third parties that take time to complete such as environmental audits or asbestos investigation.

A buyer, on the other hand, can be prepared to save time by understanding all documentations their financiers will want to see.

Weeks into due diligence is not the time to discover you require an appraisal, for example, by a third-party firm.

Know what you need to satisfy proceeding with the sale and get it ordered as soon as the contract is under acceptance.

Read the fine print

Lease reviews for investment buyers are probably on par with getting their teeth pulled.

But just like our smiles, this needs to be taken care of.

I will review leases on investment sales in advance if I’m listing the property, so I know what items could potentially come up.

Clauses I pay attention to are early terminations, occupancy costs definitions, and options to renew.

A client on a recent sale transaction had read the fine print and was preparing for close when she encountered an issue with insurance.

If she hadn’t completely understood what was required of her as a new landlord, she could have put herself at a major risk of breaching her contract with the tenant.

She knew what was expected of her thanks to her thorough review and resolved to sort out the insurance issue prior to taking possession.

Ask questions, then ask more questions

Ultimately, a due diligence period is the time to start asking and answering questions between the transaction parties.

Leave nothing to assumption. Once a deal is unconditional it may be too late to ask.

As an agent representing a seller, I might start asking questions myself if I’m not hearing from the buyer or their agent.

I want to make sure they are going to be able to complete any and all inspections they require in the timeframe agreed upon.

Both sides should be engaged in regular communication during the due diligence period to ensure the deal is moving along smoothly.

And hopefully, by the end, they’re headed down a clear path to closing with no potholes to deter the final steps.

- Kelly Macsymic is business manager and a sales associate with Stuart Commercial Inc.; ICR Commercial Real Estate, in Saskatoon.

 


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