As you are currently witnessing, the Feds are becoming more aggressive throughout the year increasing rates in an effort to reduce inflation.
How does this impact you as an investor in commercial real estate?
Currently, we are seeing “re-trades” taking place quite often in the marketplace. A re-trade is the practice of renegotiating the purchase price of the property by the buyer after initially agreeing to purchase at a higher price.
As interest rates continuously rise, re-trades may become more common. While there is no guarantee this can work for your particular deal, we are noticing this trend as of late. We also know this is not ideal and a topic most want to avoid. This is why it’s important to be armed with enough knowledge BEFORE you go under contract.
What do you do if this happens to you?
Consider some options/questions….
How long has the property been on the market? If the seller goes back to market today, would they be able to obtain the same price?
If the seller is not amenable to a re-trade, is it worth it to proceed with the acquisition or cancel the contract? Can those same returns or similar be achieved if you continue with a higher rate?
Don’t be afraid to reach out to the broker and discuss your situation!