Long Process, Strong Finish.

When you are dealing with the marketing and sale of complex properties, there are projects that can span multiple months and others that span years before they come to fruition. Often these timeframes are dictated by factors that need to be resolved before the buyer will close escrow, while other times they are the result of the challenge of finding the right buyer due to the specialized nature of the property. 

In the case of developable land, the value of the property is generally dictated by the property’s potential for highest and best use under state laws like AB 2097 which largely do away with parking requirements and allow density bonuses for low-income housing developments. The new guidelines can double what the land would have otherwise sold for, but until the property is fully entitled, there is always the possibility that what the buyer has planned won’t be allowed, so the risk lies with whoever owns the property until the intended development is approved.

As a result, these transactions will typically span a period of between 18-36 months, with the buyer passing money through to the Seller at key milestones to assure the seller of their commitment as the project meets the various stages of entitlement on its way to final approval, at which point the full value is confirmed and the buyer and their investors are comfortable moving forward with the purchase.

In other cases, environmental concerns need to be addressed before the lender will loan on the property, so the escrow is extended to allow for remediation to be completed at which point the  purchase can proceed.  Depending on the parties’ comfort levels with each other, and the level of enthusiasm the buyer has to move in, sometimes we are able to come up with workarounds to allow escrow to close sooner.

This is the case on a facility we currently have in contract in the Harvey West area, where a remediation plan was approved under which the parties have agreed to close escrow with a sufficient dollar amount to be held back and carried as a note by the Seller with most of it earmarked for the Environmental Contractor to guarantee the cleanup gets done over a projected 2-3 year period after escrow closes.

Other times, a project stretches out during the listing period, such as occurred with my large land listing in La Selva that has multiple permitting issues. I have been working off and on with the owners for over a decade to find a buyer who is ready wiling and able to take on its unique challenges, and now that we finally have the property in escrow with the right buyer, the focus has shifted to the logistics of clearing 30 years of personal belongings and effects, and this has my shifted our team’s focus to helping the sellers get everything handled before we close escrow. 

Of course, the multiple details to be addressed with these extended transactions are good issues to have, but these details can become problematic if they are not correctly handled, so it becomes more important than ever to make sure they are brought to their conclusion with a strong finish.