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Tips on negotiating the Purchase and Sales Agreement (PSA)

Updated: Jun 30, 2022

The PSA negotiation process usually takes a few passes back and forth so you and the seller can come to an agreement on the finer terms. Here are a few points of wisdom when negotiating a transaction:

1.) Don’t get frustrated with the process. Negotiations are normal with commercial real estate.

2.) Don’t get hung up on the smaller details that don’t really matter. I’ve seen many great deals fall apart because the buyer or seller’s ego gets in the way and they fail to concede a small issue that, in the long run, is immaterial. Does that extra $5K in transfer taxes the seller wants you to pay really make a difference when you force appreciate the property over $1M in 12 months? Nope.

3.) Understand what’s important to the seller. Hint, it’s not always price. Often, it’s about the speed of the transaction, the seller’s confidence in your ability to close, your track record, how you will treat the residents, the structure of the deal, and other non-price terms. We’ve been able to secure fantastic deals simply because we asked the question, “what’s important to you, Mr. / Mrs. seller?

4.) I believe that everybody needs to win in any business transaction. Too many people subscribe to the philosophy that they need to get all the benefit, leaving nothing for the other party. I’ve been very successful in life because I’m always trying to understand what’s important to the other party and then work hard meet their needs while meeting my own. Another example of this relates to selling a commercial property. The buyer must have some upside in a deal. Leave some meat on the bone for them to make money.

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