COVID-19 is Creating Unique Challenges at the Closing Table

May 1, 2020

The process of buying and selling self-storage properties is detailed and complex, and COVID-19 has made it even more-so. As a seller, you need to be more prepared than ever before you decide to start that process. From delays in due diligence stemming from government mandated shelter-in-place orders, to an increased difficulty in getting buyer financing approved. The best way to combat these issues as a seller is to be prepared and to have a team of experts by your side to ensure your deal gets across the finish line. A successful transaction requires several important steps, and a plethora of tasks that must be closely and efficiently managed.

Advice for Sellers

Sellers need to keep the big picture in mind, understand the human side of the process, and pay close attention to detail. They must identify their top priority, whether that be achieving the highest value or the quickest closing, or finding the most hassle-free buyer. Sellers must monitor broader economic trends such as interest rates, and keep track of closing documents. Finally, they must complete the following steps:

  • Create the purchase and sale agreement.
  • Develop a timeline.
  • Put the buyer’s deposit into escrow.
  • Engage in the due-diligence process.
  • Gather the final documents.
  • Close the transaction.

Before even listing your property, take care of any deferred maintenance issues to ensure your property is positioned in the best light to attract buyers. You’ll also want to hire a good, deal-making real estate attorney. This will help the whole process run smoothly.

Look to hire a quality broker who has a proven track record in closing self-storage transactions. You want to work with someone who has your best interests in mind. An experienced broker will serve as an intermediary and trusted advisor during a potentially stressful process. He’ll make sure deadlines are met and everyone leaves the transaction achieving their goals. He’ll also assist in managing all the documentation required for the sale. This is a lengthy list that can amount to as many as 160 documents. Due to COVID-19, it’s now more difficult than ever to source the proper  documentation when it requires coordination with surveyors, the city government, and other third-parties who are all now either working remotely or not at all.  

The transaction process is very detailed, and it’s important that you do everything possible to keep the train moving. During the creation of the purchase and sale agreement, for example, there could be up to five or six drafts going back and forth. It’s important to keep this exchange as short as possible, since every day that passes without a fully executed agreement can affect your ability to close due to changes in the economy.

The timeline should keep the process moving forward per the contract, ensuring everything runs efficiently. Maintain tight deadlines and make sure everyone is communicating clearly, particularly about dates for deliverables, to keep negotiations as quick as possible.

For your own security, make sure the buyer’s deposit goes hard as soon as possible. Remember, the buyer can back out of the deal with no loss incurred until the end of the due-diligence period. In the current environment, more buyers will look to get out of deals, due to the volatility of the market and economy. Though the process can be frustrating, act with a sense of urgency, put your best foot forward and assist the buyer with everything he needs.