Three Dramatic Deal-Breakers in Commercial Real Estate Transactions
Commercial real estate can be extremely lucrative for the savvy investor; however, being successful in this market takes knowing when to make a deal, and when to walk away. While closing the right deal in commercial real estate can provide a great deal of cash flow for an investor, making the wrong deal can result in great loss, and may even end your career as an investor. It is imperative that commercial real estate investors know what signs to look for when it is time to walk away from a commercial real estate transaction. Three very dramatic deal-breakers in commercial real estate transactions include having multiple sellers that cannot agree, an unrealistic property price, and clouds on the title of the property you are trying to invest in. If any one of these situations arise, it is definitely time to walk away and save yourself the trouble of a commercial deal gone bad.
Dramatic Deal-Breaker #1 - Multiple Sellers that Cannot Agree One very dramatic deal breaker that commercial real estate investors need to watch out for is multiple sellers that cannot agree. Usually it is best that you stick to only one seller, because when you have more than one seller it becomes increasing difficult to have everyone agree to the same terms. It can be difficult to get all of the sellers together at the same time, and even more difficult to actually get them to agree on the important issues in the sales transaction. This can be especially disastrous in an estate heir’s situation. Before you waste your time and money on this type of a deal, it is probably better to walk away, since the situation is very likely to unravel and you will be the one with the bad end of this deal.
Dramatic Deal-Breaker #2 - Unrealistic Property Prices Another dramatic deal breaker to keep in mind before you waste your energy and resources is unrealistic property prices. In some cases the sellers may not really be aware of what their property is worth, and they may just make up a price off the top of their head, or they may go with a price that a neighbor or friend used recently. Sellers should compare properties and evaluate the market in order to come up with a reasonable price for the property, but unfortunately there are many sellers that fail to do so. Any real estate broker that is reputable will have access to comparable prices to help a seller set a price, so there is no excuse for prices that are totally unrealistic. If you come across a seller that has priced the property unrealistically you need to beware. Either they do not know what they are doing, or they are trying to find someone to trap into this deal. Your goal as an investor is to make money, so do not even bother with properties that are priced unrealistically. Doing so may cost you a great deal of time and money, so it is best to just steer clear of a deal like this.
Dramatic Deal-Breaker #3 - Clouds on the Title of the Property you want to Invest In When you are dealing with commercial real estate investing, another thing you want to avoid is investing in a property that has clouds on the title. In some cases it can take a great deal of time and money to resolve the issues with the title, and in other cases the issues may never be totally resolved. This can keep you from being able to quickly turn over the property for a profit and can end up costing you a great deal in both money and time. Investors need to be sure that the title is free and clear, and if a property does not have a title that is free and clear, then you will want to move on to consider a different piece of commercial property. If you as an investor are careful to do your research and due diligence, you should be able to reveal any clouds on a title before you get tied up into a commercial real estate deal.
In some cases, it may be worth your time to try and overcome these deal-breakers; however, as a general rule these are very good reasons to walk away from the deal. Savvy investors want to make the most of their time and money, and usually will not have the time to try and deal with these issues that can cost so much of their time and money. Under normal circumstances, if there are multiple disagreeing sellers, problems with the pricing, or any clouds on the title of the property, it is best to walk away from the deal. Before you waste your time and money, be sure that you keep these deal-breakers in mind to help you avoid any problems that may cause your entire deal to unravel and you to lose money.
About the Author
Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.
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