Re-trading in the Senior Living Sales Process – by Jason Punzel
Often times, we get asked about buyers “Re-trading in the Senior Living Sales Process.” Re-trading is a term used by the industry when a buyer asks for a price reduction during the Due Diligence process. Buyers can vary widely on their philosophy on re-trading and how they use this tactic. Some buyers intentionally make higher priced offers to get the property under contract and then find excuses to try to reduce the price or re-trade. This is why it is so important to use a broker that has significant experience in the industry to help sellers choose a buyer with a good reputation in closing transaction and not re-trading.
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.
There are times the property condition report (PCR) could detect that the property has a defect, such as a bad roof, HVAC, etc. While it may be considered a re-trade for the buyer to ask the seller for a credit to fix the defect, it is generally considered as a legitimate request from the buyer. Most sellers are accommodating in either fixing the problem or crediting the buyer at closing.
Other reasons why a buyer could ask for a price reduction are because the census drops, Net Operating Income drops, they have a market study conducted and find out there is significant competition in the area, the appraisal comes in lower than the purchase price, etc. Buyers can use these reasons as justification for a price reduction, sometimes as much as 10% of the purchase price. While each request must be evaluated on its own merits, many of these situations are simply the buyer trying to find an excuse to reduce the price.
Conclusion:
Understanding the reputation and track record of the buyer is vital in a successful sales transaction. Almost all buyers will tell a broker and seller that they never re-trade and are great buyers to work with. However, the only way to truly know is past history. As a firm, Senior Living Investment Brokerage, Inc. has closed close to 1,000 communities in the past 20 years and knows which buyers have good track records and which do not.
For more information on selling your Senior Living Community, contact Jason Punzel at punzel@slibinc.com or 630-858-2501×233.
