I’ve been thinking a lot about the real estate mistakes I’ve seen since I started my company 30 years ago. It is a topic I cover extensively in the Nonprofit Real Estate 101 class that I teach for The Real Estate Council. As an “anniversary present,” I thought I would share some of the major mistakes I’ve seen and, in some cases, unsuccessfully tried to prevent.
1. Falling in “Love” With Real Estate
Falling in love with real estate generally happens in two different situations. The first occurs when I take a client to see a property that is for sale or lease and, no matter how hard I have tried to caution them in advance, the client begins gushing about how the property is absolutely perfect—in front of the owner or the owner’s broker. Prices or rates harden, and negotiations become much more difficult because the owner knows they have the upper hand.
The second example is where a client owns a piece of property that has substantially increased in value but will not sell when it should because the client has a “vision” that can only be met with this singular piece of real estate.
A nonprofit purchased a tract of land but didn’t have the money to build its new building. Eventually, the developer who had acquired the remaining three-quarters of the block offered to purchase the land. The initial offer was 15 times what the nonprofit had paid for the land. The owner wouldn’t sell for any price because the organization had a vision for that specific tract of land. It was not the highest and best use of the land. The developer built a high-rise office building next to the land on the remainder of the block. The lot by itself is not large enough to build a high-rise office building. The nonprofit could have sold the land and made enough to purchase less valuable land somewhere else and had the funds to build their new building. But the owner was in love with its real estate and lost out on an opportunity.
2. Talking About a Deal Before it is Under Contract or a Lease is Signed
The propaganda poster from World War II, “Loose Lips Sink Ships,” is advice we give our clients. The meaning is to avoid careless talk that can result in a disaster. Unfortunately, many excited prospective tenants or buyers talk about a deal before a lease is signed or the property is under contract. This careless talk can attract the attention of another potential tenant or buyer who makes a better or faster offer and gets the deal.
3. Closing Before Zoning is Approved
Getting an owner to extend closing until a change in zoning or a specific use permit is approved can be challenging. Frequently, it requires the buyer to agree to …….