Advice needed on making offer for commercial building, condo conv

[Michele G.]

I would very much appreciate feedback from experienced developers. 

How do experienced developers make an offer on a building knowing that it would require 30+ days for due diligence to see if the project is feasible? I would I secure the option to buy with the understanding I could back out in 30 days for any reason while I assess the project. I won’t be doing an inspection on the building.

The building is about 12k sq feet with architectural plans already in place to convert to 12-14 condos. I walked the building with experienced contractors last week and they will provide an estimate of the cost. There are other elements of the deal that I have to assess like parking, tax credits, speak to the city planners, bank lending structure etc that I estimate will take 30 days to evaluate whether the deal is good or not. 

Thank you. 

Michele

[Greg Dickerson]

Originally posted by @Michele G.:

I would very much appreciate feedback from experienced developers. 

How do experienced developers make an offer on a building knowing that it would require 30+ days for due diligence to see if the project is feasible? I would I secure the option to buy with the understanding I could back out in 30 days for any reason while I assess the project. I won’t be doing an inspection on the building.

The building is about 12k sq feet with architectural plans already in place to convert to 12-14 condos. I walked the building with experienced contractors last week and they will provide an estimate of the cost. There are other elements of the deal that I have to assess like parking, tax credits, speak to the city planners, bank lending structure etc that I estimate will take 30 days to evaluate whether the deal is good or not. 

Thank you. 

Michele

 First for commercial you always want to run the contract by your attorney before you submit to the seller or respond to an ofer from a buyer. This applies to leases as well.

For a project like this you should ask for at least 90 days due diligence to vet all approvals, conditions, financing, inspections etc. Once 90 days is up you set closing for 30-45 days after that. That is fairly typical timeline unless there is a lot of competition and you need to shorten time frames but 30 days will pass very quickly.

That being said you word the offer to purchase exactly as you describe. The due diligence period is "X days" where you can cancel and get EMD back anytime during that period for any reason. Once you determine you are moving forward you remove the contuingency in writing and the EMD goes hard.