How to Negotiate that Perfect Offer
Buying commercial real estate is not just a one-step easy process. It can take time, resources, and you may run into a few speed bumps along the way. But at the end of the day there is one thing that stays constant and that is: money. A closing will simply never happen until that cash or check is handed over.
Commercial real estate is a big and sometimes risky investment. Negotiating price effectively is one way to prevent you or your business from making a costly mistake. To begin, you should always take your time before purchasing real estate. Do not rush the process and give yourself plenty of time to do your homework. This will only help to protect you in the end.
Before you begin negotiation, think about your needs. Consider what you’re looking for in a property and if it can provide what you need. Think about location, location, location. Don’t forget about how much space is needed. Are you downsizing or upgrading? Do you think you’ll need more space in the future? Utilizing space more effectively and increasing productivity can help you save on costs.
Set an effective budget up front and be realistic as these costs can include more than just purchase price. You need to consider due diligence, legal fees, renovations, and any other extra costs that may be thrown in there. Consider what the cost of development and construction may be. Being clear on what you can afford can you give you more negotiating power with the seller.
Finding a good commercial real estate agent will only benefit you. At H.B. Springs, we understand buyer needs and know the market. We can assist in investigating local property prices and then advise you on whether your budget allows for realistic expectations.
You can save on price by casting a wide net and not being too specific on property requirements. This wide net includes:
- Flexibility as to location
- Being open to purchasing more space than may be needed (you can find a tenant to lease the space)
- Look for property that is being sold off
- Look at former special-use properties
- Consider approaching building owners whose properties aren’t on the market at the time
The more informed you are the more effective you’ll be when negotiating. Bring in a contractor to look over the space. You’re better off finding out early on if a property has any sort of foundation or internal issues that could jeopardize the transaction or financing. Inquire about tenants, neighbors, building’s age, etc. Make sure you know how the surrounding properties are doing, if they’re on the incline or decline. All of these things play a role in the property value. Knowledge in this case gives you ammunition when it comes to bargaining with the seller.
Once you’ve completed all your homework, you’ll want to gather everything together to review. This will allow you to present an offer that’s acceptable for the situation, while reflecting your budget and your needs. Before you do, consider some of the following: financing, pre-requisite conditions of your offer, time needed for due diligence.
Finalizing your commercial property purchase is an exciting time. Following these steps will ensure you make an educated investment that will benefit you at the time of the purchase and in the years to come.