"How do I qualify?" and other questions
I am asked questions daily by my clients. Problem-solving is what us brokers do because there will always be issues, conflicts, and dilemmas that come about.
Below are actual questions recent clients have asked me.
Is a finalized building permit enough to show legal status of the units?
You may have read my previous article about an office building being converted to apartments years ago with no certificate of occupancy provided by the city. The seller was told by the city when the conversion occurred a certificate of occupancy was not always issued, but the finalized building permit is just as good.
When a building permit is issued, all the city departments are involved to ensure any improvement meets with not only building codes, but fire codes, zoning ordinances, and public works requirements. Therefore, the cleared building permit is sufficient to show compliance.
I don’t show all my income from my business, how do I qualify?
A moral and financial conflict may present itself when an applicant pursues a site to lease for their business and does not state all their income on their financial statements and tax returns.
In the past few month's I have had multiple business owners who do not qualify to lease a space I am representing due to the fact they “hide” some of their income and cash.
Besides the moral conflict one would need to rationalize, it can be difficult for me as the broker to qualify a potential tenant for leasing a property. How do you qualify a tenant who does not show their actual income, has two sets of books or manipulates financial reports? Alternatively, this may be a moot point as many property owners would ask themselves, “Is this a tenant I would want to create a long-term landlord-tenant relationship with anyway?”
Do you think I should take this offer even though it is well below the asking price?
Sometimes, but not very often, I will accept an engagement of a property listing the owner feels is valued higher than what my research shows the market will support.
There was probably one time a listing I represented sold close to the owner’s suggested value--I was wrong. However, in other cases, the property did not sell, and a price adjustment was warranted.
I had an over-priced listing with a seller who was firm in his price because years ago he received an unsolicited offer for that price. I told him, “Today is a new market, plus who knows what would have occurred with the unsolicited offer--would it have even closed?”
We received an offer at the market value--not the asking price and I was finally able to convince the seller after again showing comparable sales and the potential direction of the market that the offer in hand was good. He accepted it, but unfortunately, it was after his asset sat dormant for a long time not producing any income.
I am always looking for good questions to include in future articles.
Burt M. Polson, CCIM, is an active commercial real estate broker. Reach him at 707-254-8000, or firstname.lastname@example.org. Sign up for his email newsletter at BurtPolson.com.