In commercial real estate brokerage, there are plenty of situations and pressures that can arise when negotiating sales. On that basis, you need to do your homework before you get to the final points of agreement, disagreement, or the negotiation itself.
The parties to the transaction will have their ideas and perceptions of the property, the transaction, and the variables. Preparation is the key to making the property transaction move forward in the best ways possible for your client.
It is no secret that the property market has changed substantially over the last 12 months. But, remember that is what property cycles are all about.
There are now plenty of people looking to upgrade their investments, change business location, or invest in other assets. The time has come in many towns and cities for multiple transactions and opportunities in commercial real estate sales and purchase decisions.
What’s Happening Now Locally?
As an agent working in your location, think about your property market and the new opportunities that are soon to evolve with both the sellers and commercial real estate buyers. These questions are all high on the agenda when it comes to people in the sales market today:
- What are their pressures?
- What are their priorities?
- What are the timeframes to act?
- What limits or targets do they have on funds?
- Do they have the capability to transact a sale or purchase?
These questions all require specific consideration and even a strategy, as the property market now enters a new phase of growth and a new cycle of investment.
Here are some guidelines to help you set some negotiation rules in commercial real estate brokerage, particularly sales transactions. In all these strategies, there will be investigations to make and decisions to follow through with. Preparation is the key to progress and agreement.
- Get all the facts of the property – Understand the property comprehensively before you start any negotiation. Interview the client and get the history of the asset as it applies over time. Look for any risk factors, noncompliance, and potential hurdles that could prevent a transaction from being completed. Be sure that you and your client have the ‘legal’ ability to move on the negotiation. Seek all instructions in writing.
- Scope the transaction before you start – Most sales transactions will be complicated in some respect to move to finality. Due diligence could be a factor to move through from a buyer’s perspective. Are there any problems with the property that could not pass the ‘due diligence’ test? If that is the case, ensure that your client gets legal support to remove those problems before the transaction reaches a critical part of the negotiation.
- Understand the variables that could arise – As an extension of the previous point, a property’s weaknesses could be ‘hurdles’ to negotiate through at the time of final documentation. The best preparation is to have some ‘counter-proposal’ or offset available to move around the property challenge. In business, they call that the BATNA factor, which is defined as the ‘Best Alternative to No Agreement’. Have those strategies ready to use.
- Enter the negotiation confidently – It always helps when you start a negotiation being positive and prepared. If you have all the property facts and matters thoroughly investigated, the transaction gets easier.
- Qualify the buyers before you go too far – Understand and investigate the buyer’s ability to transact. Do they have an ability to purchase at the required price, at the right time, and by the method of sale to be used?
- Have market evidence available – There is always a reasonable degree of ‘bartering’ going on in a property transaction. That is where comparable sales evidence will come in useful. Ensure that your client does understand the prevailing market conditions and is prepared to accept those conditions in their property sale transaction.
- Investigate the parties’ ability – Ensure that the parties you are acting for or with having the legal capacity to negotiate and agree. Through all of that, know your client’s instructions and intentions so you can guide the transaction forward in the right direction.
- Get documentation and supporting papers ready – Correctly prepared property documentation will be the leverage you need when the parties are prepared to sign and commit. Verbal offers are of little consequence in commercial real estate. If a person wants to purchase a property, get the papers prepared accurately, signed correctly, and supported by the appropriate deposit and other funds or agreements.
- Document every conversation, agreement, disagreement, and instruction – There are always some disagreements in a commercial real estate transaction. Add to that the elements of discussion and you have the potential for the parties to the transaction to forget what was said or agreed. The only way for you to work with that problem is to make your notes; you can do that in meetings and conversations of any type. If the matter is critical to the sales transaction, then evidence it back to the other party in writing or email. Keep all your notes and transaction evidence for any potential disagreement. Given the large amounts of money passing hands in a real estate transaction, the risk of a conflict or dispute’s potential is high. Be prepared for that by keeping notes and evidence of discussions or instructions.
- When in any doubt, stop! – When there is any question or problem in the commercial real estate sales transaction that you do not have an answer for, be prepared to stop and get the right answer. Do not guess your way through the situation. The facts are the only things that you can work with. Do you have the correct facts? Can you answer questions clearly, correctly, and legally? Many agents have been caught out by making poor quality statements or providing incorrect information. Don’t let that happen to you.
So, all these facts and strategies are helpful when it comes to a commercial real estate sales transaction. You can add to the list based on your location, the parties to the deal, and your property market factors. Your preparation in a sales situation will help you move through negotiations more effectively.