🤔 Retrading on Commercial Properties! 🤔

[Kyle Curtin]

Gooood mornin’ BP!

I have heard on several podcasts about the concept of “retrading” (the term for going back to the seller after you are under contract and asking for credits, concessions, etc.) and how it could potentially be detrimental to that deal as well as potential deals with that seller in the future.

I have not personally done a commercial multifamily transaction YET, but I am curious of your guys thoughts around this.

As most of us are familiar with, retrading in the residential multifamily space (2-4 units) is extremely common and happens on most deals.

The difference that I have heard from multiple folks, is that when you are buying bigger commercial properties, you want to make that transaction go as easy for the seller as possible, because you may do more business with that individual in the future. If that seller knows, likes, & trusts you and you are able to provide the most seamless purchase as possible, in a perfect world, who will be the person who is top of mind when they are ready to 1031 or cash out and liquidate more buildings?

I have heard on a few podcasts that asking to retrade should be the absolute last option, even after potentially leaving a deal altogether first to preserve the relationship and just tell the seller that it wasn’t the one for your team.

Thinking bigger picture, if there is something negatively impactful with the property and it costs 10k to fix, it may be much more lucrative to eat that 10k on one purchase upfront instead of asking for a credit, to then make it on the backend, and potentially with more deals from that seller in the future because you were a buyer who made that particular transaction as easy as possible…

Really cool concept, especially coming from the residential multifamily world where everyone does this pretty much all the time and it is very common…

I would love to hear your guys thoughts!

Have a kickass Tuesday! 😁

-Kyle

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[Scott E.]

Quote from @Brian J Allen:

@Scott E.. I guess my curiosity is how the buyers' agent and the buyers didn't know the age of major components.  This should be addressed prior to making an offer.  Roof, Windows, HVAC, Electrical, Plumbing.  These are as important as the rent roll, and the expenses.  But on the flip side, Sellers and their agents often do the same.  Take a higher offer from someone who they think will Retrade after inspection instead of the offer from an educated buyer.  They hope they end up with a higher price from uneducated buyers.  The goal of these transactions is for the agents to level the playing field on both sides so there is a mutual gain from trade.

I respectfully disagree. The due diligence period is literally intended for what you are describing. That 30 day window is meant to request rent rolls, review expenses, review personal guarantees, do a property inspection, interview the tenants, talk with the HOA if applicable, etc etc.