Special offer

"Good Faith"

By
Real Estate Agent with Keller Williams

I'd be curious what other members of the AR community, especially commercial agents think about this. This is a post from my "other blog". 

"Good Faith" is a term that one sometimes hears around a real estate transaction. I've recently had some first hand experience with negotiations, and what happens when they are not conducted in "good faith".
Because my husband and I own a retail store, we were involved in negotiations for a commercial lease.
I usually represent clients in residential negotiations. These are often emotionally charged, but usually fairly brief. It is possible to have a residential contract negotiated in a matter of a few hours; rarely does the process go beyond a week.
So, I was completely unprepared for the six week roller coaster ride we were in for. No, we were not buying a multi-million dollar commercial building. No, we were not negotiating with the management company of a large commercial strip. We were negotiating with a private owner of a relatively small, vacant piece of real estate that we wanted to lease and renovate.

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We should have known trouble was on the horizon, when the agents representing the owner refused to name the asking price. They named some vague parameters, and encouraged us to make a proposal. We did. We lobbied for fairly modest rent in exchange for very extensive rehab that was needed to bring the building to the state of habitability and code compliance (we're talking everything: electrical, plumbing, HVAC, walls & framing, extermination of rodents, you name it).
In making this proposal, we simultaneously put our existing leased space at risk. We had no choice but to notify the current landlord of our intent to move, and he put our storefront on the market.
Throughout the negotiations, we were under the impression that we were just working out the details. Again, we should have spotted trouble when the owner waited days, sometimes weeks to address our inveriably prompt responses. At the end of six weeks, he responded with a rental amount that was more that 30% higher than what we had been negotiationg. Waste of time. Fortunately, we were able to hold on to our present storefront.
Lessons and questions that came out of this:

  • Agents really want to make a deal, especially after they've been working on a property for a while. They want to get paid. Did this guy's agents mislead us because they were hoping against the odds to make it work, or was the owner just a flake?
  • Unless you're negotiating with a corporate owner or bank, where internal beuraucracy may legitimately slow things down, beware of the slow responders. They may be considering other options, and stringing you along. This will usually turn out to be a waste of your time.
  • Do not counter a vague offer. Insist on knowing exactly where the other party stands. After the initial offer, most residential negotiations in Chicago are verbal, but you can ask for a written summary of the counter offer, especially if numerous points are being negotiated.
  • This is a hard one, but try not to get so emotionally invested in a property, that you open yourself to unreasonable risk or loss. If something seems too good to be true, chances are it is.
  • When you participate in negotiations, be aware that the other party has dreams, hopes and aspirations, and is counting on you to be negotiating like you mean it -- in GOOD FAITH.

Comments (1)

Greg Zaccagni
The Federal Savings Bank - Wheaton, IL
Illinois Mortgage Lender

Sorry to hear about your troubles.  When I have long pauses I figure they are trying to play me against another mortgage lender and I start putting less energy into the deal. Here is the name of a great commercial leasing agent and fellow AR member.  Please tell Keith I say HI :-)

http://activerain.com/keith7

 

www.GregZaccagni.com

 

Jul 02, 2008 06:06 AM