We like to tell our clients that we’ve seen almost everything in the real estate industry. There are many advantages of hiring an experienced Commercial Real Estate broker related to negotiating leases, purchase agreements, etc. However, one of the great reasons to hire one that is often overlooked is the ability to see a scam artist coming from far away.
The top 3 tenant scam attempts we have seen are:
The Lawsuit Settlement
This is probably the most often used and most obvious scam. This is when the person is bragging about the multi-million dollar settlement they are getting or have already received. Now they’re out shopping for that perfect building to open up their dream business and are just weeks away from cashing in. In order to weed this out, ask a few simple questions about the lawsuit. It will help you get a better understanding on how legitimate it is. You need to make them get specific about where the lawsuit stands now. Ask questions such as “Did they settle the lawsuit already?”, “Is there a timeline for getting the payment?”, or “Who is the one paying (insurance company, personally, etc)?”
Trust your gut on this one because we have never closed a deal with someone that brags about the settlement they are getting soon. If someone is receiving a settlement, they are usually smart enough not to talk about it because of the involvement of non-disclosures. Remember, if they have the money there is no need to brag about how they got it unless it’s pertinent to the deal.
The Full Price Offer on the First Showing
This doesn’t happen as often, and it doesn’t always equal a scam. However, when someone is willing to accept the asking terms immediately or barely negotiates, red flags should go up. There is an obvious presumption in commercial real estate that certain terms are negotiable. When you are purchasing commercial real estate, the due diligence timeline, the purchase price, who pays for the certain closing costs, and what equipment may or may not stay are only some negotiable terms. And when leasing a property, the asking rate, the length of the initial term, and the amount for the tenant improvement allowance are negotiable.
If someone comes in, walks around the place, and offers something on the spot for full price the odds that the deal will happen go down. Experienced business people want to get the best deal for their business to succeed, and immediately accepting someone’s first offer is not typically a smart business decision. Even if it isn’t a scam, their ability to run a successful business that is going to make it until the end of the lease should be a doubt in your mind.
Multiple Business Ideas for the Property
Another situation that is not as common and not always a scam, but still always a red flag. Buying or leasing a property is not usually the first step when starting your business. You need a business plan to even get a loan from pretty much any bank. So when a potential buyer or lessee touts that they have many different ideas for a property, it should automatically force you to reexamine the situation. Like when someone makes an offer without negotiating, even if this isn’t a scam the chances of the deal happening immediately drop.
People searching for a property are searching for a home for their business. Buying or leasing a property without knowing what business you’ll be starting is like buying an oven when you can’t afford the food. The property won’t generate any revenue for them any time soon, even if they have the money up front, and (especially if you’re leasing), you should expect that you’ll stop seeing rent soon after the deal is signed.
Latitude Commercial provides commercial real estate services such as purchasing, leasing, tenant representation, and property management throughout Northwest Indiana and the Chicago Suburbs. To find out how we can help you find a new home for your business, call us today at (219) 864-0200.