The Do’s and Don’ts of Negotiating Contracts
Contract negotiation isn’t the first thing you think of when it comes to property management. Though not glamorous, contracts are a critical necessity in the investment world. It’s tempting to want to skip the negotiation process and the mountain of paperwork. After all you don’t want to “miss a good deal.”
No matter how good the deal seems, contract negotiation is almost always necessary to make sure both sides benefit from the agreement. When it comes to protecting the money and assets you’ve worked so hard for, it’s important to slow down and document terms the right way. Keep these Do’s and Don’ts in mind when preparing to negotiate contracts.
Get Everything in Writing. Everything.
It sounds simple enough, but can get more complicated than you expect. What you take as a harmless phone call or friendly discussion can get misconstrued and land you in court. If you expect to include it in your agreement, you must have it documented. The rules are not black and white when it comes to what the courts allow in a verbal agreement and from where. Getting everything in writing is less costly and less time-consuming for everyone involved.
Review the Contract Carefully During Negotiation
If you’re fortunate, you’ll be able to start with a term sheet and harmoniously agree. In most cases, it’s not that simple. The contract will exchange hands more than once, especially if more than two parties are involved. Cover yourself by reading the contract at each exchange.
If anyone requests a modification, review the entire document. Even if they already signed the contract, take time to review it again. You want to make sure you agree with the modification and how it’s written. Make sure no one took the modification process as an opportunity to slip in changes or insert additional pages. As an extra precaution, consider requiring initials and dates on each page of the agreement.
Thoroughly Gather Information and Documentation
When putting the contract together, you will need certain documents and information. Once you’ve agreed on doing business, go ahead and ask for the information upfront. It will make the process go much smoother. Avoid the hassle of making several phone calls or trips to get documents. You may also have a challenge getting the information after you both have signed the paperwork.
Make a checklist of all the documents you need like W9 forms, licenses, and any proof of residence or income, etc. Include a list of information you need to complete the contract also. Get all contact information for each party involved. Gather information for the main person of contact person, authorized signer for contracts, and accounts payable and receivable departments.
Don’t Get Overly Emotional During the Negotiation Step
The first version of the contract or proposal may not look exactly how you imagined, but that’s the point of negotiation. Stay calm and be flexible. There’s give and take in contracts. Make a note of what concerns you most, what you want and need most, and what has to happen in order for you to agree. Once you’re clear about where you stand, communicate it calmly and confidently.
Don’t Agree to Terms that Make You Uncomfortable
If you know there’s something in the contract that you’re unwilling or unable to do, speak up. Making promises you can’t or won’t keep will only cause more problems later. You also don’t want to be in the middle of illegal activity. If something about the contract doesn’t feel right, don’t commit yourself to it.
Don’t Sign Without Letting Outside Professionals Review
You’ll be well equipped to negotiate and understand your contract, but a second opinion won’t hurt. Your partner, attorney, and even a property manager should review the contract and share their advice or opinions. Your partner may have additions that will benefit you both. The attorney and property manager can point out areas of concern based on their expertise and experience.
Even though you should participate in the contract negotiation every step of the way, it helps to have a team behind you. Smart investment includes having experts to help you make the best decisions. See http://www.harkinscommercial.com/ to get help with your contract negotiation strategy and meet your investment goals.
« Previous Next »