It’s important to know when to say a lot and when to only say a little. This is true for life in general. It’s also very important for a good CRE Broker to know when to speak up and when to be quiet. When it comes to negotiating a contract or purchase agreement, for example, the answer of how much to say can frequently depend. In my experience, there are several variables that can trigger whether I speak at length and provide many details, or if I should intentionally be more vague, leaving terms simple, open and broad.
What to Do When Representing a Buyer/Seller
Perhaps the most consistent and reliable variable that controls whether a CRE broker will say a little or a lot is whether the client is a buyer or seller. Of course this sounds like an overly broad simplification, but it has consistently been true more often than not. In the case of representing a buyer, I want to give my client as much latitude as they need to accomplish their goals. Thus, the terms contained in an offer for a buyer are generally simple and vague and provide as many reasons or options as possible and as much time as possible for my client to walk away from the contract, retain their deposit and have no further liability. That doesn’t mean they haven’t spent money. Due diligence always costs money, but the whole point of due diligence is to not proceed if it looks like the project won’t work.
So, in the case of a buyer, the time frame and language for due diligence related to physical aspects of the property can be 60 to 90 days. As opposed to trying to make them shorter or milestone specific when I represent a seller. Similarly, financing contingencies are at least as long as physical inspections and the language is very broad and generic. However, If environmental and wetlands issues are likely, the time frames for these contingencies can be even longer and more opaque in language. That is not a bad or unfair thing. It is the modern world and like any other condition of a sale, they simply take time as we are always dealing with third parties over whom we have no control.
Rezoning Can Take Time
Rezoning, like environmental and wetlands issues, can be one of the most time consuming and frustrating aspects of due diligence or conditions of a sale. It seems to be more and more a turf and/or political battle each and every day. However, unlike environmental and wetlands, at least in East Baton Rouge Parish (and I assume it to be similar for most jurisdictions for other commercial practicioners), rezoning is a public hearing issue and that public process tracks a calendar year set in advance for the whole year. So, with rezoning, the time frame can be spelled out in the contract so all parties know all the hurdles as you progress along (or get derailed) the public hearing calendar.
A CRE Broker Will Sometimes do the Same for Both Seller and Buyer
Like rezoning, Conditional Use Permits or PUDS and other public hearing entitlements, are possibly the exception to the rule, where I do the same for a seller as I do for a buyer. I use the actual dates of the multi-step process such as submission, preliminary staff meetings, and public hearing deadlines in the contract as it is in the interest of my client, whether buyer or seller, to understand the process. In the end, our fiduciary duty to our client is the paramount concern. So, issues as complicated and as uncertain as a public hearing contingency are best achieved when all parties understand this is a multi-step contingency and its success is critical to the sale closing or dying on the vine.
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About Danny Watts – Danny is a Senior Advisor with SVN | Graham, Langlois & Legendre, LLC. His 30 year career in commercial real estate started in appraisal and then evolved into 21 years in CRE brokerage. He has been active in the commercial and industrial real estate market throughout its many variations and cycles, making his experience invaluable to seasoned institutional market players, developers, investors, lenders, and builders. One of Danny’s greatest strengths is assisting his clients with entitlement and rezoning issues and he does this at no additional cost to the client. If you would like to contact Danny, you can call him at 225-367-1515, email him at firstname.lastname@example.org or follow him on Twitter at @svngll.