Every
real estate deal has a clock. Sometimes that clock moves fast. Sometimes it
slows down because the buyer needs time.
That
time might be for a board approval. It might be for a tax deferred exchange to
line up. It might be for a buyer of land who wants to secure entitlements
before taking ownership.
When
that happens, sellers usually ask the same question.
Why
should I wait?
The
answer depends on the market.
In a Strong Market, Time
Is a Concession. In a strong market, sellers have
options. Buyers are plentiful. Properties move quickly. When a buyer asks for
extra time, it feels unnecessary and risky.
That
reaction makes sense.
Waiting
in a strong market means giving up flexibility. It means passing on other
buyers. It means betting that nothing changes while the clock runs.
That
is why sellers in strong markets rarely agree to wait unless they are
compensated.
That
compensation can come in several forms.
A
higher price.
Money
that becomes non refundable.
Clear
deadlines that limit how long the seller is committed.
In a
strong market, time has value. If a buyer needs more of it, the seller should
be paid for it.
In a Weak Market, Time
Can Be an Advantage. Down markets tell a different
story. When activity slows, buyers become cautious. Financing tightens.
Fewer offers come in. Sellers often discover that speed is no longer the prize
it once was.
In
those markets, a buyer willing to work through approvals or conditions can be
valuable, not problematic.
Time
in a weaker market can mean progress instead of stagnation. It can mean a deal
that moves forward while others sit still. It can mean locking in a committed
buyer when alternatives are uncertain.
In
those situations, waiting may reduce risk rather than increase it.
Not All Delays Are the
Same. Regardless of the market, sellers should understand why a buyer
needs time.
There
is a big difference between a buyer who must complete a specific step and one
who is simply unsure.
Approvals
with clear timelines are different from open ended requests. A tax deferred
exchange with a signed sale is different from one that is still theoretical.
Entitlements already in process are different from those that have not yet
begun.
The
clearer the reason and the timeline, the safer the delay.
What Sellers Should Focus
On. Whether the market is strong or weak, sellers should focus on
three simple questions.
Is
the buyer committed.
Is
the timeline clear.
Am I
being protected while I wait.
If
those questions are answered well, waiting can make sense. If they are not, it
usually does not.
The Bottom Line. In
strong markets, waiting is a concession and should be treated as one.
In
weaker markets, waiting can be a strategy.
The
key is understanding the difference and structuring the deal accordingly.
Time
is neither good nor bad. It is simply a tool.
Used
properly, it can close deals. Used carelessly, it can cost them.
Allen C. Buchanan,
SIOR, is a principal with Lee
& Associates Commercial Real Estate Services in Orange. He can be reached
at abuchanan@lee-associates.com or 714.564.7104. His website
is allencbuchanan.blogspot.com.
