When a Forbes magazine article on buying high-priced homes came out recently it reminded me of the variety of Buyer interactions I’ve had this year. I felt that the Forbes points were valid for buying any real estate, so thought I’d adapt them to buying a B&B because I see so many Buyers who are not ready, willing, and able.
In real estate, “ready, willing and able” refers to a prospective buyer of property who is legally capable and financially able to consummate a deal.
“Ready and willing” means the Buyer is ready to accept the Seller’s terms and is willing to enter into a contract for sale. The Buyer is not “ready and willing” when there are conditions like the need to sell other real estate first or wanting an extended closing (making the closing date an unreasonably long period).
“Able” requires that the Buyer is financially capable of complying with the terms of the sale in both the initial cash payment and any necessary financing.
It’s not uncommon for me to get calls from prospective Buyers who say they aren’t ready to buy a B&B for several years or who don’t have the necessary funds to buy one when they do find one they want. But they call wanting detailed information on inns for sale, some being out of their price range. Familiarizing yourself with the market and educating yourself to the amount of money you’ll need to buy the B&B you want isn’t unreasonable. Expecting Sellers and/or their Agents to provide all of the inn’s financials and to show you the property is unreasonable.
When you put yourself in the Seller’s shoes you may better understand why it’s unreasonable. Would you want to prepare your quarters, an area of the inn that’s not typically kept up as well as the B&B, for a person who’s not “now” a prospective Buyer? Would you want to share detailed information about the inn’s income and expenses with someone who’s not going to buy “today”? No, you wouldn’t want to go to that kind of effort for nothing. You wouldn’t want to go to much effort for someone who’s not willing to share about themselves either. Neither does a Seller.
The Forbes article shares seven tips for buying seven-figure homes. The information is pertinent for buying a B&B of any price. Forbes’ seven points are to get a good agent, get your finances together, make contingency plans, look for termites (conduct Due Diligence), what’s next door [more Due Diligence], prepare to negotiate, and take it easy. From the B&B industry perspective, let’s look at the first three points in this issue. We’ll cover the remaining four points next time.
- Get a good Agent. It’s a common misconception to think you save the cost of the commission in a lower sales price by not using a broker to represent you. If the Seller has listed their home/inn with an real estate firm, the listing agent gets paid and will likely get paid the entire commission, rather than splitting it with another agent — the one who could represent you — so you may as well let them pay someone to represent your best interests and help you avoid the pitfalls their experience may find! If the Seller hasn’t listed with a real estate firm it’s because they want to save the commission; you both can’t save the commission, and you can be sure that the Seller will be the one to save it.
Team up with someone who can help you connect with the properties that truly fit your needs so that you don’t waste your time looking at B&Bs that don’t satisfy your situation. An Agent can also guide
you to lending institutions, lawyers, inspectors, and title companies so you can close the deal faster and with fewer complications.
- Get your finances together. Be prepared to demonstrate financial ability. Your Agent can better counsel you on appropriate inns if they know what you can really afford to buy. Many listing Agents won’t allow a showing if they aren’t informed of the Buyer’s financial ability.
When buying a house you would have your financing in place before starting to look at homes. That’s not as easy to do when buying a B&B because it’s the combination of your strengths and the specific B&B you’re buying that determines your “loanability” (learn a bit more about getting a mortgage loan at MortgageRoxx.com). Though you can’t get pre-approved for a loan when buying a B&B, at least present a summary of your finances to your Agent so they can qualify you and be able to summarize you financial situation to Sellers and Listing Agents. Some Listing Agents will require you to fill out a financial statement form, not even taking the word of your Agent you are qualified, before allowing a showing.
- Make contingency plans. Do you have to sell a home before buying a B&B? Can you qualify for a bridge loan or second mortgage? Are there other conditions that have to be in place before you’ll be able to buy a B&B? The offer you write should provide for any contingencies, which include for qualifying for financing. Do be aware that many B&B Sellers won’t be interested in taking an offer with a contingency that would keep their inn off the market for an extended period of time because they wouldn’t want to lose a ready, willing, and able Buyer who might come along after you make your offer.
There are Agents listing B&Bs who will show you the B&B and its financial records without ever learning your time frame or financial ability. But the professional Inn Brokers I’ve observed want you to be a “ready, willing, and able” buyer before working with you. Do your homework so you can get the best help available.
Next time I’ll discuss the last four issues covered in the Forbes article which come into play once you have a contract to purchase on the B&B you want to buy. More Innfo next time!