Selling to a Developer? Charge for extensions in PA!!

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Best-PracticeAs a licensed Broker and an Attorney, I have the unique perspective of understanding the art of the deal as well as the power of protective language and funds.  In 2017, there is a lot of redevelopment occurring across Minneapolis St. Paul metro.  In many cases, developers are assembling multiple parcels for purchase that will require them to go through an entitlement process while under contract and prior to closing.

Most if not all developers take the position:  “I will not pay any hard money until I receive my full entitlements. I am conducting tests and adding value to your property.  There is no room to add non-refundable money.”  Well, I can tell you from first hand experience–that is just not true.  If a seller has a unique piece of property special to a developer, they will agree in purchase agreement to put up hard money in a strong market.

Typically, I recommend sellers agree to standard 60 day free looks with refundable earnest money, but tie all time after 60 days to one time transfers of refundable earnest money from the trust account into non-refundable payments to the Seller in increments, say on the 61st day after the effective date and every 30th day after (91, 121, etc.).  Exactly how much depends on the value of the property, etc.  It is important for Sellers to not get too greedy, but to ask for something in the purchase agreement that has a high likelihood of acceptance.

Brad Schaeppi

Brad Schaeppi

MMSBA Certified Real Property Law Specialist - Brad is a licensed attorney, experienced real estate investor and property manager. Prior to founding his Brokerage and Law practice in 2011, Brad held “stripe-earning” positions in real estate as a project manager for a local developer (PAK Properties), a Senior Project Manager for a publicly traded company (Vail Resorts), to an investment sales associate for a large local real estate brokerage and management company (Welsh Companies).

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Security Deposits and Purchase Agreements

Most if not all developers take the position: “I will not pay any hard money until I receive my full entitlements. I am conducting tests and adding value to your property. There is no room to add non-refundable money.” Well, I can tell you from first hand experience–that is just not true. If a seller has a unique piece of property special to a developer, they will agree in purchase agreement to put up hard money in a strong market.

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