How long does it take to sell an Assisted Living Community? – by Jason Punzel
One of the most common questions we get asked as brokers is, “How long does it take to sell an Assisted Living Community (or Skilled Nursing, Independent Living, Memory Care)?
It’s been our experience, while selling nearly 100 properties annually, that most transactions take 4-6 months, from start to finish. While each transaction process is unique, there are multiple phases involved in each sale process.
The process starts with us, as brokers, making confidential phone calls to financially qualified buyers throughout the country. Senior Living Investment Brokerage has 15 brokers that work together to cover buyers throughout the country. Unlike many other firms, we market facilities with complete confidentiality, never sending out email blasts or posting listings on our website.
If a buyer is interested, a confidentiality agreement is sent for the buyer to sign before they receive an Offering Memorandum. An Offering Memorandum is a 20-page marketing document that highlights the property, location, demographics, financials and competition. We also prepare an online secured data room to disperse additional documentation such as floor plans, site plans, environmental studies, detailed financials, etc. Upon reviewing the Offering Memorandum, the buyers have many questions that we work with the owners to answer.
This initial marketing process takes about 3-4 weeks and the buyers will start submitting offers in the form of Letters of Intent (LOIs). Typically, 4-7 financially qualified buyers submit LOIs. After discussing positives and negatives of each LOI with the sellers, we prepare counter offers for the best 3-4 LOIs, asking the buyers to submit their “best and final” offer 1-2 weeks later. During this period, these buyers will take a physical tour of the facility, conduct more detailed due diligence and ask additional questions.
After receiving the best and final offers, the seller chooses the offer they prefer and signs the LOI. A Letter of Intent is a non-binding 3-4 page document that details all of the business terms of the offer. The next step is negotiating the legally binding Purchase Agreement (also called a Definitive Agreement or Purchase and Sale Agreement/PSA). This document is 30-50 pages long and is heavily negotiated by the attorneys of the buyer and seller. Negotiating the PSA takes between 2-4 weeks. Upon signing the Purchase Agreement, the Due Diligence process officially starts and is 30-60 days.
The Due Diligence process is the time in which the buyer conducts third party tests (survey, appraisal, environmental study, property condition report), additional site visits with their team, and thoroughly reviews the financial statements. During the due diligence period, the buyer’s earnest money is completely refundable and the buyer can terminate the Purchase Agreement if they choose. Although rare, there are occasions that a buyer cannot get financing or discovers something in the third party reports that they deem as significant enough to terminate the transaction. This is one reason why it is so important to choose a broker with significant experience to help determine which buyers have a good track record of closing.
Upon the expiration of the due diligence period, the closing takes place within 30-60 days. Some buyers apply for their license during the due diligence period and some buyers wait until the expiration of the due diligence period. Most states take between 30-90 days from the time the buyer submits their application to issue a license. There are also ways for the buyer to temporarily use the sellers’ license until they receive their license. When closing on an Independent Living Community, there is no license required and the closing can take place as soon as 15 days after the end of the due diligence period. Thus, from the start of marketing to closing, the process takes about 4-6 months.
If you would like to discuss the time line to close your Senior Living Community in more detail, please contact Jason Punzel at firstname.lastname@example.org or 630-858-2501×233.