October 19, 2019
We all know that buying real estate is costly. It is probably the largest expense in the life of your business, so you want to make sure you don’t miss anything and you don’t commit yourself to a property that isn’t right.
But I promise you this - whether you have no experience or have done 100 deals, you will be tempted to miss the best deal while you are searching for the perfect one. Don’t do it. Here are three mistakes to avoid to make sure you don’t get distracted and miss getting the best deal: 1) having too strict a standard, 2) taking too long to submit an offer, and 3) forgetting what it means to win.
The first mistake is having #1 too strict a standard on the current condition of the building. I have seen too many companies lose the chance to own a building in a great location simply because the buyer did not see the possibilities of a building that could have worked really well with a little investment and creative thinking. Chances are, your ideal property is not ready in the condition you would like at the exact time you are in the market to buy, so have an open mind and be open to possibilities.
The second mistake is #2 taking too long to submit an offer. As soon as you believe the property will work, draft an offer and submit it, here are a few reasons why:
- Offers are non-binding. you have not committed to anything and can back out for any reason if you find out information that would make the building not work for you or your use.
- Sellers are helpful if they believe the buyer is capable to close, decisive and not a tire kicker Sellers help decisiveness. You may fully intend to submit an offer, but if the seller believes that any buyer is just shopping around, they are not going give a whole lot of help or flexibility.
- You may be on a totally different page from the seller on price Price matters. I recently watched a company spend over twenty hours on and off site of a building they were considering buying doing all their research - they finally made an offer but it was so low the seller did not even respond, and they were upset that they had wasted so much of their own time. Had they submitted their offer before doing all their research they would have saved hours and hours.
- The price may go up, especially if you are in a hot market or a competitive situation. A seller has no obligation to sell at any price, and so submitting an offer early effectively saves your place in line at that price.
- Objections: Now, you may say that you need do research on the roof, environmental report, or building improvement costs. Yes, you definitely need to know the answers to those questions before closing. Just remember that Purchase and Sale Agreements are written to protect buyers, and any buyer will have a period of time called “Due Diligence” where you get free look typically for 30-60 days to do all tests and follow up visits, during which time your deposit money is fully refundable, and the building is taken off the market and not shown to any other company who is interested.
Everybody wants to win in a negotiation, but the number 1 easiest mistake to make is to think “winning” means negotiating hard instead of just doing what you need to do to get the deal done #3 Buying is winning. Winning is sometimes as simple as walking away from the closing table with a signature when all the losing buyers get nothing when they tried to save a couple nickels.
At the end of the day, we all want to get a deal. Savvy buyers who win know when to recognize a good deal and pull the trigger at the right time though maybe they could have done slightly better. Learn from other people’s mistakes and lock down the best deal at the right time.