Real Estate Journal — Brokerage Directory — July 29 - August 11, 2016 — 7C
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By Gil Neuman and Cyrus Kashfian, Greysteel The Case for the Nominal Non-Refundable Deposit
he Scenario: You were one of seven “best and final” offers from 18 originals competing to acquire a $16 million retail center in a desirable Washing- ton, DC suburb. You are well- capitalized, experienced, and your offer was competitive, if not aggressive. So how did the unknown buyer with an un- proven track record and a lower offer ultimately win the deal? The Answer: They offered $25,000 of their original deposit as non-refund- able upon contract execution. Amounting to less than the legal and third party fees which the buyer will invest in prior to closing, the gesture sends three powerful mes- sages: 1) We have studied this property and fully intend to close at the price and terms set forth. 2) We are extremely serious and interested in acquiring this property. 3) We share your risk, which aligns our interests. At this point youmay be ask- ing, “Seller risk? But doesn’t the buyer take all the risk? And isn’t it foolish to risk good money before the end of an of- ficial study period?” Not exactly. A seller enlists a broker to expose an invest- ment property nationwide. After intensive marketing and negotiating, the broker and seller whittle the myriad of offers down to award the deal to just one buyer, and then politely reject all others. Now, what if the chosen buyer backs out weeks later on the final day of their study period, per- haps because they didn’t like T
the color of the EIFS (Exterior Insulation Finishing System), or did not apply for financing in time, or simply because all long they had a different asset in their cross-hairs, motivated by constraints of a 1031 ex- change timeline. “Well, isn’t that what a study period is for?” you say. The answer is a definitive no, and here’s why: A good broker will have exhaustively underwritten the deal prior to taking it to market, more so than even the buyer, in most cases. A good broker will pro- vide upfront and early (with
seller approval) most, if not all the due diligence material a buyer will ever need to under- stand the respective property. Of course a clean title is still a necessity (and maybe con- firmation of no 1960’s nuclear waste disposal sites below the surface). But what happens if the chosen buyer backs out at the 11th hour, or even earlier but after everyone else was sent home? Simply put, a cloud of suspicion and staleness immediately forms to follow the sellers and their brokers back to the graveyard of the aforementioned rejected of-
ferors and worse – the haunted landscape of “reduced price!” re-marketing, effectively leav- ing the sellers holding a wet paper bag. Sellers (as well as brokers, attorneys, and title profes- sionals) get paid the same amount at closing, regardless of the original deposit sched- ule. An upfront, nominal, non-refundable deposit is an investment to purchase the sellers’ trust in the buyers’ desire and full intentions to close. The result is a potential catapulting of the buyer from the bottom of the list to the
top, thus winning the deal. Managing Director, Gil Neuman, and Investment Associate, Cyrus Kashfian, represent Mid-Atlantic retail sales at Greysteel, a national commercial real estate in- vestment services firm. n Gil Neuman Cyrus Kashfian
FOR LEASE - QUICK POSSESSION- 4301 N. Delaware Ave., Phila, PA Buildings C & D
40,000 Total Sq.ft. --Divisible
Buildings C & D (20,000 sq.ft. each) Will Divide
Building Size: Description: Sprinklered:
Brokerage Directory
Newly Renovated One Story Bldgs.
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a section of the Mid Atlantic Real Estate Journal P.O. Box 26, Accord, MA 02018 781-871-5298 • 800-584-1062 fax 781-871-5299 MARE journal.com Section Publishers Linda Christman lchristman@marejournal.com Alissa Aronson aaronson@marejournal.com
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Port Richmond Area. Richmond St. & Aramingo – Near Delaware Expressway I-95
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For Additional Information and Inspection: CALL SIDNEY E. GABLE ASSOCIATES, INC. AT 610-272-6400
Information is purported to be from reliable sources. No representation is made to the accuracy thereof and is submitted subject to errors, omissions, change of price, prior sale, and withdrawal without notice or other conditions. Company/000Scan and Brochures/4301 N Delaware Ave Brochure June 2016.doc 831 Lincoln Ave D1 West Chester Brochure.doc831 Lincoln Ave D1 West Chester Brochure.doc831 Lincoln Ave D1 West Chester Brochure.doc831 Lincoln Ave D1 Wes 831 Lincoln Ave D1 West Chester Brochure.doc 831 Lincoln Ave D1 West ChesterAvD1 West Chester Brochure.doc 831 Lincoln Ave D1 West Chester Brochure.doc t Chester Brochure.doc831 Lincoln Ave D1
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