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Making an effective real estate deal

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Sellers of commercial real estate should avoid common errors. For example, many sellers put off spending on repairs and hope that a buyer will lower the purchase price to cover this deferred maintenance. Unfortunately, potential buyers will always estimate that the repair costs are much greater than any discount. This creates a dispute over the costs of repairs and who will pay for them.

Buyers may also lack the money to make these repairs because they usually obtain financing to pay for the purchase. They will lack the financial resources to pay for the repairs. Also, buyers may not want to devote their time to a new major repair project.

Marketing a building with occupants is not as attractive as it sounds. While these tenants are paying rent, arrangements are needed to conduct tours, which may be complicated by the tenants’ schedule. Also, potential customers may not imagine the real estate’s potential for them if spaces are occupied with other workers, equipment and activities.

Disgruntled tenants may share their gripes with potential purchasers. Buyers with immediate needs could be lost because the space may not be occupied by the time escrow closes.

Leased property should be in lease-ready condition. A prospective client must be able to immediately imagine his business occupying this space. This means that offices are repainted and carpeted or ready for flooring chosen by the tenant. Warehouse space should be painted, and all machinery, equipment and debris should be gone. Common areas, restrooms and break areas should be deep cleaned.

Hidden agendas can delay a transaction. Sellers should not hide whether building occupants have rights of first refusal or first offer, purchase options or options to expand or contract. They should not use the sale as means to persuade current tenants to renew a lease or hide whether a current tenant has a place to move.

Finally, sellers should remember that they must disclose any defect, maintenance issues, zoning problems or other similar complications. Buyers will conduct due diligence by having the building inspected, title reviewed and seeking information from local officials. Failure to disclose can blow up the sale and waste time and money.