Help with purchase negotiations!

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myschae

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We've recently made an offer via Letter of Intent to purchase a small Bed and Breakfast. We have hired a consultant in the B&B business and his letter was pretty standard and included: the inn, the furnishings, the client list, licenses, etc. When I looked it over, it seemed fairly straightforward.

We submitted it last Thursday; I know, right before the weekend. Heard back yesterday that they want to counter but it seems mainly concerned with terms. We're negotiating through our consultant rather than directly with the owners - much like you do with typical real estate transactions.

Is this the best way to do it?

I ask because one of the reasons I think they're concerned about conditions are things that I'm happy to remove from consideration. For example: the letter of intent has a generic statement about a non-compete agreement. We already know that one of the owners has owned/operated vacation rentals in the area which predates their purchase of the Inn. We never expected that to stop. I just read the non-compete clause as meaning don't set up another rental with the exact same name or some such and, honestly, my eyeballs skimmed right over it. (I'm new at this.) The other owner expressed a desire to move closer to family which is the prime reason for selling the B&B.

I suppose I need to take a deep breath and learn to practice patience but I would love it if we could hash some of this out on a conference call or something then put it in writing. It was so nice when we met them, sitting around the table and talking - I just wish negotiations were more similar.

So, yeah. That clause needs to go and I probably should've caught it. But once you find a place, how the heck do you go about negotiating for it? I don't want to undermine my consultant, but I also don't want this to drag on playing telephone when most of the stuff is likely not a major point for us in the deal.

How would you like this to be handled if I was buying your Inn?

Help!
 

Morticia

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The non-compete also includes them not running off with the guest list and sending out an email saying, ‘hey, we’ve moved on from xyz inn, you can now find us at abc short term rental.’ Because guests will move on with them without giving you a chance. It’s not just ‘don’t open another inn within 25 miles’ or whatever it says.

You really want to go thru the person who is representing you instead of thinking you can do this face to face. You’re probably spending more money than you’ve ever spent before. Let your agent work for you.

Make sure your terms include the website and the inn name.

It takes longer, but being one step removed takes some of the emotion out of the deal. We were all happy-go-lucky, too, and then the crap hit the fan and we had to have our lawyer get involved. The innkeeper space was filthy (lawyer not involved in that) and the previous owners were unbelievably rude to us in front of guests (we told them they no longer needed to show up for the remainder of the training period, we’d figure it out on our own). The lawyer was involved in getting the website wrested away from some third party who said they owned it.
 

myschae

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The non-compete also includes them not running off with the guest list and sending out an email saying, ‘hey, we’ve moved on from xyz inn, you can now find us at abc short term rental.’ Because guests will move on with them without giving you a chance. It’s not just ‘don’t open another inn within 25 miles’ or whatever it says.

You really want to go thru the person who is representing you instead of thinking you can do this face to face. You’re probably spending more money than you’ve ever spent before. Let your agent work for you.

Make sure your terms include the website and the inn name.

It takes longer, but being one step removed takes some of the emotion out of the deal. We were all happy-go-lucky, too, and then the crap hit the fan and we had to have our lawyer get involved. The innkeeper space was filthy (lawyer not involved in that) and the previous owners were unbelievably rude to us in front of guests (we told them they no longer needed to show up for the remainder of the training period, we’d figure it out on our own). The lawyer was involved in getting the website wrested away from some third party who said they owned it.
This is why I need you guys.

Yeah, you're right, this is why we engaged a consultant in the first place. I knew better (know better) but, man, is it hard to contain myself. Thank you for reminding me not to walk on ledges.

The non-compete is a separate line item from their client/reservation list. I hadn't much considered repeat clients - though, obviously, I should. I suppose in our lives, we had a few places we tended to return to (like where we got married) but it was more about the destination and that being the literal only place to stay that wasn't camping.

This is a HUGE investment. Like, we've got to make this work if we want to retire someday, investment. I'm just antsy. I want this to work or, if not, move on to something else; which, I suppose is how everyone feels. This is the reason for the consultant (and my angst).

Reached out to our guy, he had a conversation with the owners reassuring them. We should have a counter offer (number only) shortly. Unfortunately, there's been a family problem on the other end which will require their attention for a few days after that and, of course, we understand that. I hope the number is one that we can use to move forward with our end (financing and loans). I'd do it anyway but it doesn't make sense until you've figured out a location and price.

And, really, I should remind myself we're doing OK. We've already seen the place, found a local banker and a local attorney that works well with their attorney (local with 30 years exp) to help us if and when we can get to a number. The Business Plan is about 80% complete: just missing some wordsmithing, a few sections, and updated financial numbers. Just please let that number be something we can work with! ;)
 

GoodScout

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Unless you have 2,000 friends coming to stay with you the first year, you're going to need those repeat clients. That, goodwill, and the inn's reputation are HUGE assets that often get overlooked by buyers. I would argue in some cases they are more valuable that the physical assets.
 

Morticia

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Unless you have 2,000 friends coming to stay with you the first year, you're going to need those repeat clients. That, goodwill, and the inn's reputation are HUGE assets that often get overlooked by buyers. I would argue in some cases they are more valuable that the physical assets.
Those 2000 friends never materialize or, they think they shouldn’t have to pay. We have siblings who have never been here.
 

seashanty

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Along with the website, make sure the domain is transferred to you. Sounds like the same thing, but sometimes it's not. Friends bought a place a few years back and the sellers would not give over the domain to them as part of the transfer ... even offered it up for sale to the highest bidder (it is a great domain ... I can't share here because they are STILL litigating) but they never expected that to be an issue.

You also sure do want the email contact list to be YOURS, not just names and addresses ... having former owners send out an email blast to all their prior guests that they've moved elsewhere is no help and can hurt you.

Contents of the place along with the property? Pictures of what's there pre-sale so there are no disappearnces or cheap substitutes. That can also happen. I've seen it myself, seen pots and pans, dishware, chairs, you name it, go missing only to be told that was personal property and not part of the sale.

I don't want to rain on your parade, I really don't ... I assume a representative is watching all this for you.

It's an exciting time. I hope it all works out great.
 
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