We’re currently participating in an interesting sale process, so thought I’d share the details.
The seller and listing broker have chosen to run their process differently than most and will, I think, achieve better than average results.
To understand what they’re doing differently, you first need to understand how a normal process works. In a normal process, the broker puts the property on the MLS, Loopnet, etc. at the highest price he thinks a buyer might possibly pay. Offers trickle in, the seller counters, eventually a deal is struck and then the buyer begins his diligence (inspections, etc.).
The downside to a normal process is this: If the buyer decides, for whatever reason, to walk away after inspections, the listing broker is left having to go back to the other potential buyers (if any) and try to rekindle their interest in the property.
The process in which we are participating is very different. Here’s how it’s being run:
- Property was marketed at a very reasonable price
- All serious buyers who submitted offers were invited to inspect the building thoroughly on the same day
- After inspections, buyers still interested are required to remove the physical inspection contingencies from their offers
- Those buyers receive access to a data-room with all of the relevant documentation, including leases, estoppels, etc.
- Buyers who remain interested are then required to submit their best and final offer on a totally non-contingent basis (eg with no way to back out)
Obviously, the downside of this new process is that buyers are required to invest considerable time and energy in the deal prior to learning whether they will actually get it, meaning that some buyers will be less likely to participate at all.
On the other hand, the seller is able to maintain competitive tension all the way through the inspections and documentation review. And, the seller knows that the winning bid is firm (eg that the buyer can’t easily want away).
Of course, there’s no way to know whether this process will result in a better outcome for the seller than a normal process would have (because we don’t get to run experiments in real life). But my guess is that it will, and I think more sellers ought to consider running processes like this one.