Contributing Author: Cory M. Tyksinski
The process of buying commercial real estate (CRE) can be complex, long-winded and sometimes challenging, even if you are the only buyer negotiating to purchase a property. The complexity increases when multiple buyers seek to purchase a property at or about the same time. While simultaneous multiple offers in CRE are rare, it will be helpful to keep the following tips and tools in mind if you find yourself in the middle of a potential bidding war.
A. The Seller always wins. If you are one of the potential suitors for a commercial property, a common misconception is that the seller always wins in a multi-offer process – logic being that if 2 or more buyers are desirous to purchase the property, they compete with each other and the price always increases. Not necessarily so. Most winning offers do not exceed the original list price for a property.
B. Proper Disclosure. Typically, the seller or seller’s broker should notify the interested parties that multiple offers have been received, but they aren’t required to disclose that fact – So ASK before you make your offer. The best approach would be to evaluate what your total budget costs are for acquisition and anticipated renovations and set your limit and mindset to that total cost. Unless you are a deep-pocketed developer or have a strategic and highly lucrative reason to purchase a specific site or property, do not allow yourself to overpay for a property, or pay more than you would have if you were the only buyer involved.
C. Your best foot forward first. If you are informed that a bidding process is going to take place and wish to proceed, make sure your first (and only) offer is as strong as possible, using your high limit budget number to guide your decision. You can turn the tables on this process. The seller needs to feel that you will “walk away” if the terms in your offer aren’t met. Some demands include:
D. Assemble your advisory team before you make your offer. Everyone knows someone who has sold or purchased a property without the assistance of an attorney. I have nearly 20 years of experience in commercial real estate sales and leasing and I still wouldn’t do it alone, but it is possible to complete the process unscathed. Most purchasers choose to rely on a team of trusted, experienced advisors comprised of the following experts:
E. Clean up your offer. Purchaser offers generally contain a multitude of contingencies or “outs” that a buyer may want in the event they cannot do want they want with the property or are unable to finance the acquisition. Shrewd sellers will not only look at the purchase price but will also give considerable weight to the purchaser’s contingencies. If your offer contains a multitude of contingencies, this may deter a seller from choosing your offer even if your offer is priced higher than the others.
F. Remain polite and optimistic. Your offer is important to the seller and they know it’s important to you. They feel the pressure to make the right decision and it may be impossible for them to remove some doubt about the offer they didn’t choose. If you are informed that the seller chose to negotiate another offer, request that your offer be placed in a first back-up position. If for any reason the chosen offer fails to move forward, you want the ability to slide your offer into position to purchase the property. You may want to place a time limit on how long your offer remains a backup, in case you are actively seeking another site.
Multiple offer situations for commercial properties do occur in the Capital Region, but not nearly as frequently as residential sales can. Even so, failing to plan for this situation can be costly or result in a lost or less than optimal deal. The key, as with any situation, is to be prepared for as many variables as possible. One of the best ways to ensure you and your deal survive, is to work closely with a trusted CRE brokerage.
Our team at NAI Platform possesses extensive knowledge and experience across the intricate nuances of commercial real estate. We operate with the singular focus of working diligently to help our clients meet and surpass their goals.
For more information and expert guidance on your commercial real estate needs, please give us a call at NAI Platform or visit our website at www.naiplatform.com.
Cory M. Tyksinski, Principal Broker
14 Corporate Woods Blvd.
Albany, NY 12211
Direct: 518-465-1400 Ext: 217
Mobile: 518 857 8396
Fax: 518 465 1441