Navigating a commercial real estate transaction can be challenging, and effective negotiation is key to ensuring a successful outcome. Here are common negotiation mistakes to avoid during a commercial real estate transaction to maximize the value of your deal:
Negotiation isn’t just about the price. Beyond the lease rate or sales price, explore other valuable elements such as tenant improvement allowances, commencement dates, close of escrow timelines, personal guarantees, building repair responsibilities, options to terminate, and executive use provisions. By broadening your focus, you can uncover additional benefits for both parties.
It’s easy to be emotionally attached to your property, but this can lead to unrealistic expectations. Work with your broker to determine a competitive sales price or lease rate by objectively evaluating your property. Ask yourself questions like: Would I want this property if it weren’t already mine? How much is my property really worth? What if my property doesn’t sell? What other value can I offer?
Holding too much power during negotiations can backfire. If the other party feels unfairly treated, they may walk away, renegotiate, or even take legal action. When you hold all the cards, make an extra effort to meet your own fairness standards and abide by relevant legal rules. Staying fair ensures smoother negotiations and better outcomes.
Many people overestimate how happy a win would make them feel and how devastated a loss would make them feel. A keen understanding of what will make you happy can help you make better choices in negotiation. Define your goals clearly before entering negotiations and focus on what truly matters for your success.
Here is an example to illustrate this point: A remote worker hires a carpenter to build a workstation for her home office. The contract requires 50 percent payment upfront, 30 percent halfway through the job, and 20 percent upon completion. When the job is finished, the woman discovers the cabinets are misaligned. She calls the carpenter and tells him she won’t pay the final amount. He tells her to keep her 20 percent.
Similar circumstances can occur between landlords and tenants. During negotiations, consider all possible scenarios, assess the other side’s commitment, and create a level playing field.
Negotiating without professional support is one of the biggest pitfalls. Hiring an experienced commercial real estate broker can make the process smoother and ensure your interests are well represented.
Avoiding these common mistakes can make a significant difference in the outcome of your commercial real estate transaction.
Meet our team of experienced brokers to ensure your negotiations lead to success.