Commercial real estate transactions can be quite different from their residential counterparts. They certainly involve more money. And sometimes, sellers seem overly eager to get to closing. If you are a real estate investor, have you ever wondered why that is?
Sellers have their reasons for disposing of properties. It is natural to want to get an offer and get to closing as quickly as possible. But if a seller seems overly eager, to the point of being willing to make serious concessions, an investor needs to wonder what is going on.
On the other hand, the combination of an eager seller and quickly arranged financing through a hard money loan could mean a fantastic investment for the buyer. Whether or not an investor benefits really depends on the reasons behind a seller’s eagerness.
A Seller Facing Financial Pressures
A seller might be eager to get to closing because he is facing his own financial pressures. Maybe he has pending debt that needs to be paid off. Perhaps he is at risk of foreclosure. Whatever the case might be, a quick closing gets the property off his hands and gives him access to the cash he needs.
Decent people never want to see others facing financial pressure. But from a purely business standpoint, financial pressures help investors. They can get better deals from sellers who need to get out as quickly as possible.
A Property Has Issues
Seller eagerness might be due to issues that may be known or unknown to buyers. An unscrupulous seller might know he is selling a money pit to an ignorant investor. Or he might be selling to a buyer who knows full well what he’s getting into. Yet the seller still wants to get the deal done quickly before the investor changes his mind.
Market Conditions Are Shaky
Some seller eagerness may be due to market conditions. In a hot or shifting market, things can be shaky for sellers. So it is in their best interests to make a deal as quickly as possible. Once made, getting to closing his imperative. The seller wants out before market conditions warrant having to renegotiate the deal.
Risk and Uncertainty
Even if none of the three previous conditions apply, risk and uncertainty motivate a lot of sellers to get things done quickly. Unfortunately, a deal is more likely to fall through the longer a property remains under contract. So a seller wants to button things up as quickly as possible.
Financing is one of the things that creates uncertainty in commercial real estate transactions. An investor might get preliminary approval from a bank only to have the bank back out weeks or days prior to closing. It happens more often than you might think. Fortunately, investors have an out in private lending.
Going Where Banks Won’t
Private lenders like Salt Lake City’s Actium Lending are generally willing to go where banks will not. Actium once funded a loan in less than one business day after a client’s bank backed out of the deal. The bank backed out on Friday morning while the deal was scheduled to close the following Monday. Actium appraised the property in question, approved the loan, and sent both documents and funding to the title company on Monday. Crisis averted.
There are any number of reasons a seller might be eager to unload a piece of commercial property. Sellers are motivated by all sorts of things. This is good for investors. An investor backed by a solid private lender can take advantage of seller eagerness to get some really great deals.