Pealing the Formica back

When you peal the Formica back on a kitchen counter you can see if it is really wood or just particle board. This is what it means to peal the Formica back. In terms of real life, it is knowing what is underneath the surface.

One of the toughest roles we play in hotel brokerage is knowing who is real and who is not. We get many calls from investors looking for this type of deal or that type deal and in some of the cases, the person is either not real or not serious.

In a commercial transaction, you may get a second try, but usually you get one shot to pick the right buyer who will follow through and consummate the transaction. The larger the deal the easier this is because we know most all the institutional grade buyers. We run into this “validation” more with smaller deals. Buyers will tell you anything you want to hear so they can get awarded the deal. The problem is once they get awarded the deal, we must tell the other interested buyers the hotel is under agreement. This means they go away and turn their attention to other deals. So, you want to make the best decision you can when you pick a buyer. Every now and then you can get the backup buyer interested again, but it doesn’t happen often. Hence, the need to pick the right buyer the first time.

I could tell you funny story after funny story where buyers turned out to be boneheads. In the movie Jerry Maguire, there is famous line/ scene called “show me the money.” This is the fastest way to separate the wheat from the chaff or in other words, see if they are real. I have a philosophy on the subject. It is simple. If the buyer won’t show you the money, they don’t have the money. Isn’t that easy? Buyers who have the money have zero problems showing proof of funds, whereas the other buyers will have all kind of reasons they can’t show you the money, but the main reason is, they don’t have the money.

So, there is my nugget of real estate wisdom for the day. KT

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