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One of the most frustrating things we encounter as commercial real estate professionals – and you as a buyer of commercial real estate – is a “no response.” Zilch, nada, zero, crickets, anyone – Bueller?, all describe that sinking feeling you suffer when an offer is made and hours or days pass with no feedback.
Believe me, buyers, we feel your pain as a “no response” is much more difficult to explain than a quick “no thank you!”
A great deal of emotion is expended deciding to pursue a property. When met with nothing – the agony of defeat looms large.
So, why, you may ask, is my offer not receiving the red carpet welcome you believe it deserves? Indulge me as I proffer a few hypotheticals.
Your offer may not be very good. Many times, these days, asking prices make no sense are are not based on a real view of the market – I refer to these as arbitrary owners. Your well intentioned, researched and comp based offer may just not be enough to move the seller needle.
Competing offers may be in play. If a deal is priced right and there is no “hair”, multiple offers prevail – and in some cases at above asking price. Occasionally, a seller will wait until he has several offers and then respond to one or all with a “best and final” request.
Seller decision making may be convoluted. Frequently, a commercial property is owned with an entity with multiple owners – thus decision makers. Allow a disagreement in direction to occur within the ownership ranks and – you guessed it – gridlock.
Something entirely un-related may have occurred. A death, extended vacation, business set back, a new lender requirement will cause a seller to re-think his strategy and delay a response.
Your offer may be too good. If a seller receives a full price offer immediately after listing – with limited contingencies, all cash, and a quick close – something curious occurs. Sellers may believe they’ve priced their offering too low and delay responding until a review of comps and availabilities can occur.
The seller may not have a destination for the money. As I have previously opined, sales of commercial real estate can create large tax liabilities. Tax burdens can be deferred with a 1031 exchange but if the seller is un-prepared for this shock – if I can’t find anything to buy, I owe how much?- your offer may languish.
The seller may not have a place to move. Our market is encumbered with the lowest number of vacant buildings in history. Similar to not having a place to deploy the sale proceeds, if the owner occupant cannot find a place to move his business – a quick response is fantasy.