A client of mine made on offer to purchase some land the other day. The Seller's Letter of Intent (an often used first step in the offer process) was pretty fair but it had a couple things I didn't particularly like.

The Seller's lawyer was to hold the rather substantial deposits, and was to submit these deposits immediately upon condition removal to the Seller.

The first part, Seller's lawyer holding deposits, is certainly in the Seller's best interests but is not in my buyer's best interests. In the unlikely event of a dispute, the Seller's lawyer is bound to obey his client's legal instructions with regards to that deposit and is quite unlikely to release that deposit to the buyer without legal action.

The second part, releasing the deposits to the Seller before possession allows the Seller to use/control the Buyer's money before the transaction has completed.

Now in the great majority of situations, everything will work out fine, the transaction will occur and this will all turn out to be a non-issue - but that is not my job. My job is to protect my client the best I can while ensuring the transaction goes through. So I requested that the deposit be held by the Seller's real estate brokerage and only released to the Seller 15 days before possession, an entirely reasonable request...or so I thought. Apparently the seller's lawyer couldn't understand why I was "up in arms",  that this was easier for everyone, and that this was the standard. Apparently I am...

DIFFICULT TO GET ALONG WITH

After all "this is standard". I'm not sure on which planet this is standard, but apparently somewhere. And it is "easier for everyone". How I am not sure, but apparently somehow. I guess I must just be difficult to get along with. So what is my point?

WHAT'S MY POINT?

Commercial real estate transactions involve a lot of money. Wherever a lot of money is involved, funny things happen. There are a lot of subtle intimidations in this business aimed at parting people from their money. My favourite saying in this regard is "When a person with money meets a person with experience, the person with the experience ends up with the money and the person with money ends up with an experience". And as I mentioned earlier, it is highly likely the transaction will proceed smoothly and this will be a non-issue. But every now and then, disputes occur, and my job is to ensure my client is not in a weak position if a dispute occurs. In the aforementioned transaction, if something did go sideways my client would have been in a very weak position. Now the seller is a very large developer so this probably won't happen but what if the Seller goes out of business? What if this, what if that? That is the essence of my job; to protect my clients from the unlikely but possible what ifs.

STRATEGIES FOR RISK MANAGEMENT

So how can one protect oneself from the subtle intimidations of the (usually) larger party in a real estate transaction? Sometimes it is difficult and sometimes it is impossible. If there is limited inventory and the seller has the only suitable property for you in the area, then you have a tough decision to make. You either walk away and risk not finding another suitable property or you take the deal and hope nothing goes awry

But if you are not in this situation, the best way to protect yourself is to write down the possible risks and make the decision whether to proceed or to stand your ground. The best preparation for a transaction is to decide beforehand where you are going to dig in and stand your ground. And standing your ground is the difficult part. It's infinitely easier to stand your ground when you are not in the midst of an important negotiation.

An agent in our office was involved in a foreclosure transaction. I advised him to put a caveat on the property because the bank, the seller and the purchaser would likely do the transaction and there would not be enough money left over for his commission. He reluctantly agreed and boy oh boy did the fireworks start. The lady from the bank demanded in no uncertain terms to remove our caveat and to reduce our commissions to some ridiculous level and she was good. She was very convincing and he was wavering. I told him to stand his ground and it took everything in him to do so. This lady was good, throwing every possible threat in the book at us. Possession day approached and she was relentless. I told him to hold his ground which he reluctantly did. Little old independent brokerage versus the big national bank. This lady was good. She would not quit. Finally at 5 minutes to 5 pm on closing day she completely caved in and we got paid full commissions (we gave her $500 just to give her something to take to her bosses).

So know your walk away points, and stand your ground. But always remember the main objective is to complete the transaction and think carefully before walking away.