Avoiding roadblocks in commercial real estate transactions | RENX
Have you ever encountered a roadblock, turned around to take an alternate route, and encountered another obstacle?
During the construction season in Saskatoon (basically any non-winter time) it can be frustrating to find a route without a hurdle.
Likewise, commercial property buyers and sellers can potentially encounter endless obstacles in the course of a transaction.
However, unlike driving, you can anticipate these stumbling blocks and possibly turn around them.
Control the clock
Sellers hoping to close deals faster should compile due diligence articles that most buyers will ask for. This includes reports from third parties that take some time to complete, e.g. B. Environmental tests or asbestos examinations.
A buyer, on the other hand, may be willing to save time by understanding all of the documentation their financiers want to see.
Weeks of due diligence is not the time to determine that you need an assessment, for example by a third party.
Know what it takes to be happy with the sale and order it once the contract is accepted.
Read the fine print
Lease valuations for investment buyers are likely on par with brushing your teeth. But just like our smile, it needs to be taken care of.
I will review investment sales leases ahead of time when I list the property so I know what items might turn up.
Clauses I pay attention to are early terminations, definitions of occupancy costs and renewal options.
A customer who had recently completed a sales transaction had read the fine print and was preparing to close when she encountered an issue with insurance.
If she hadn’t fully understood what was required of her as a new landlord, she could have placed herself at great risk of breaching her contract with the tenant.
She knew what was expected of her thanks to her thorough examination and decided to resolve the insurance problem before taking possession.
Ask questions, then ask more questions
Ultimately, a due diligence phase is the time to ask and answer questions between the parties to the transaction.
Don’t leave anything to the assumption. Once a deal is unconditional, it may be too late to ask.
As a seller’s agent, I can ask questions myself if I don’t hear from the buyer or his agent. I want to make sure that they can carry out any necessary inspections within the agreed timeframe.
Both sides should communicate regularly during the due diligence phase to ensure that the business is running smoothly.
And hopefully by the end they are on a clear path to closing with no potholes to discourage the final steps.