Tips for Negotiating a Counter Offer in Commercial Real Estate Brokerage
In commercial real estate today, we negotiate in many different ways in all stages of a transaction. The parties involved in a sale or lease, and within the property types will have a lot to do with the levels and the intensity behind the negotiation.
It directly follows that every broker and agent should be highly skilled in negotiation. Whilst this personal skill will come to a salesperson in the industry over the years, regular practice and role playing strategy will be of high value to getting results.
Here are some tips to help you with negotiating an offer or counter offer when it comes to any sales or leasing situation:
- Every offer and counter offer should be in writing. You cannot legally process and negotiate effectively with a verbal offer. Get the commitments of the parties on the correct offer documentation and capture the details of the current situation. Have them sign off on the details of the deal before you take it to the other party.
- Understand the instructions of your client when it comes to the final price or rental. The offer should be within the realms of possibility when it comes to closing on the deal. The offer should also be realistic for the prevailing market conditions and the property type.
- Reduce provisional conditions and subject to clauses that could frustrate the implementation of the final contract or lease.
- The property description and title should have been checked for legality and accuracy. Any questions regards those issues should have been removed at the time of listing.
- Take care when it comes to situations of due diligence. In most sales situations today a due diligence process will occur, and on that basis special clauses and conditions within the contract will need to accurately interpret the actions and requirements of the parties.
- Simplify every offer and counter offer so that the key facts, or the ‘deal breakers’, are well known and ready for negotiation. To achieve this point of advantage, you will need to question the parties at depth ready for the final documentation and final close.
- The parties to a negotiation will have a cutoff point when it comes to price, timing, and a deal conditions. Given that you are acting for your client, the transaction and the elements of the offer should be biased towards a satisfactory outcome for the client. In some cases you may need to help the client understand current and prevailing market conditions. You can do that through comparable market evidence.
- Every contract or lease situation should be supported by valid and enforceable consideration. Money needs to be paid as part of supporting the closing process on the legal document of sale or lease. The deposit monies should be suitably large to show the commitment of the parties concerned.
- Understand that you are working with the decision makers for each side of the transaction. This can sometimes be difficult when you are working with larger corporations and companies. Third party intervention can only frustrate the negotiation.
- Present all offers and counter offers personally. When it comes to a large transaction, it is not unusual for a real estate salesperson to take the offer or counter offer document personally across the country to another town or city where the client may be located. It is very difficult to negotiate any large or complex property transaction across the telephone.
- As a general rule, every transaction should be negotiated accurately and clearly. Every comment and piece of information provided in the process should be noted and documented. Be prepared for the disagreements and disputes that are likely to occur from a larger property transaction. Your notes will be critical to the process. Keep your file notes even after the property transaction has been closed. Disagreements in our industry are quite common, so you need to protect yourself from the demands and the representations of other parties.
- Any property listing should have been correctly established and fully documented at the outset of marketing. Any hurdles or challenges that could come up in the due diligence process should have been removed prior to marketing and inspections. That being the case, a good salesperson in the industry will be prepared for the final challenges to the offer or the negotiation.
So there are some things to be considered here and controlled as part of negotiating the offer or the counter offer. Preparation is the key to controlling the commercial real estate transaction.
