A deal’s “normal” procedure

The period 2004 – 2008 brought a great deal of “collateral damages”. It was not just that the price increase beyond any logic, or the deterioration of mentality, with millions of people having the impression that they are the “kings of the world” or “clever businessmen” (without having earned one euro through normal work). In my opinion the biggest problem is that a big part of Romania (like in other countries as well) got the impression that business is something “easy”, that transactions occur every “few minutes or hours”, or that “deals need a few hours or days to be prepared”.

Nowadays transactions need time

In today’s world, transactions are not signed so fast. Real clients are 10 times fewer than they used to be and they have 10 times more offers than they used to have. This means that they are not in a hurry to seal a transaction, even if it’s offered for… “nothing”. (There is an exception to this rule: Several “people with money” who don’t know a lot about business and are always ready to buy something immediately, cursing the others afterwards, once a mistake occurs).

Let us assume that today someone sends a very serious offer. It still needs time before we can reach the level of a transaction. This is not because the investors are not serious, but because what happened in the past was abnormal. From the “extreme” of immediate transactions, we are close to the extreme of very slow transactions. Why is that? Simple: Ask the bankers to tell you what they discovered after all these “fast” deals. In many cases not even the bank had all the documents of the property! This is why nowadays transactions need time…

An apartment is not the same with a big property or a green energy project

Many people, without bad intentions, do not have the necessary experience to understand the difference. I personally did not know it myself, until my clients taught me (and after I tried to learn). But many of us should understand that a big property is not an apartment that you see and usually buy fast, once you like it. (This is also a big mistake, but let’s not open this discussion now. I have written a whole book about advices on how to buy an apartment in Romania).

A project of green energy or an important property are different deals and require a great deal of time. Treating them without respect simply hurts the whole procedure and most probably stops the deal. “What is the usual procedure then?”

A “normal” procedure

We always say that “we should be like THIS or THAT country”. Ok, if we really want to advance, let’s start with the basic procedures of a deal, as they are followed all around the world. So, a normal situation would be something like:

·         A Real Estate consultant receives an interesting property

·         He asks and receives all documents (without the owner telling him “bring me the client first”)

·         He verifies the situation and asks additional questions.

·         Once he is ready, he prepares a presentation.

·         He sends it to the clients he has

·         The clients reply in a few days, expressing their interest and asking for additional questions

·         Some clients ask for their bank’s approach, as nowadays no one invests a big sum of money just by using his equity (cash).

·         They also ask their collaborators: lawyers, architects, engineers etc. Sometimes this is necessary in order for them to verify the deal’s real potential.

·         A few of them even pay for a market study on the proposed deal.

·         Once they receive all the answers, they study the case. Some of them return with an offer, some others keep it in their archive, in order to discuss it again in some weeks – months

·         The offer is sent or is transmitted during a meeting with the owner. Assuming that it is accepted, this does not mean that we’re done.

·         A pre-contract must be signed, which is usually subject to new negotiations.

·         A due diligence will start, where new documents will be asked.

·         If everything is ok and the bank finishes its internal preparation (usually it lasts much longer than it is initially announced), we are ready for the final contract.

Sometimes there are more steps, depending on each case. All these also include hidden costs for the investors, which no one calculates once he wants to estimate the size of the investment.

All this takes time, but they are necessary for a serious transaction. Otherwise don’t expect careful investors to “throw their money out the window”, just because “a gentleman is in a hurry”.