Are the Stated Hotel Sales Prices Negotiable?
"'Of course it is allowed to negotiate the purchase price, monthly lease, or ongoing management fees - courtesy and respect will increase your chances of success!"
You have chosen one or two hotel properties, now it's about that all-important money!
Your specialist broker for hotel and hospitality real estate has presented you with numerous properties which meet your search criteria. You have spent a lot of time and effort looking at hotel real estate and hospitality real estate. You have scrutinized and compared the properties with your wishes and ideas, and checked that they are within your budget. The funding is also lined up, now it all comes down to negotiating the final purchase price or monthly rent, as well as finalizing the acquisition conditions with the owner to such an extent that you can then hire a lawyer / notary to complete the purchase contract or, in the case of a lease, the final lease contract. The following tips are not intended to "lecture" in any way, but please allow us to present some practical information that we have gathered over the years for potential clients to read up on.
Are the stated sales prices and monthly leases for hotel and restaurant real estate negotiable?
It's a definite yes, of course they are. The stated sale price or monthly lease rate reflect the hotel property, revenues, profits, condition, location, future prospects, occupancy rates, financial position, hotel focus, type of property, etc. but there is usually a margin for negotiation with the owner. What you ultimately end up paying for a particular hotel or restaurant property largely depends on you and your negotiating skills. Respect, courtesy and openness in all areas and stages of talks are the greatest aides you can have in these negotiations and will provide you with an advantage over your fellow prospective buyers.
Practical tip: Refrain from making an offer that is too far below the owner’s asking price. This could be seen as an insult most likely closing the door to future discussions and negotiations.
What value is used to calculate the brokerage commission to be paid by hotel / restaurant property buyers, tenants, renters, and investors?
The amount of commission to be paid by buyers / tenants can be found in our advertisements or is detailed in the particulars of the respective property. However, in many cases the purchase price / lease amount might change during negotiations. You might negotiate a significantly lower purchase price / lease rate. You might only buy part of the property at hand, or part of the property might be removed from sale. You might decide to buy additional parts of the property or other properties from the owner, or to lease them. The broker commission fee, the fee that the buyer or tenant has to pay after the successful conclusion of the purchase/lease contract, is calculated using the final price as stated in the contract concluded with the owner. Even if this price is significantly more or less than the original purchase price / lease rate stated in advertisements, or in the property particulars.
You do not wish to conduct the negotiations yourself
You have decided to purchase or lease a specific hotel or rental property. You have a clear price in mind but for various reasons you do not wish to negotiate with the owner yourself. That is no problem whatsoever! In this case, you can request that your ASP hotel broker perform binding negotiations with the hotel owner. Of course you specify the price you would like to pay (the best solution is to set a price range). This is his job and, of course, it is also his job to see to it that the two parties arrive at a consensus.
Tip from a hotel real estate expert when the lowest price stated by the seller for a sale or a lease is still too high?
But you definitely want this hotel property but at the price you envisage. Then we recommend that you proceed with a special binding approach. You submit a binding purchase / lease offer that is 100% binding in accordance with your price expectations for the hotel real estate / hospitality real estate. You can obtain the contract from your ASP Hotel broker. You hereby agree to obtain the hotel property for a certain amount under certain conditions, etc., to buy or to lease. This document is signed by you and presented to the hotel owner by your hotel broker. If the hotel owner signs and accepts your offer, the contract becomes binding requiring acceptance and delivery of contract terms by both parties. This approach cannot guarantee success, however, approximately 70% of all real estate owners accept such binding purchase offers even if it is a little below the set reserve price!
This process should and must only be used, if you are 100% sure you will be able to meet the purchase price within the time period stated or you have guaranteed financing. Please keep in mind that in some countries certain regulations must be observed (notary required for binding purchase offers in Germany, clause suspensive in France, etc.). Your ASPI hotel real estate agent will advise you accordingly.