The Sales Process from Start to Finish

(10-minute read)

Author: James Cornell

Introduction

The sales process does not have to be complicated. Cornell Hotel Brokers seeks to make the process easier and much less frustrating. During the sale, timely progress updates are communicated by email, text, or phone. We don’t want to burden our Clients with complicated contracts or unnecessary paperwork. However, all necessary communication and documents will be delivered on time, accurately, and handled professionally.

Outline of Topics to Make Your Hotel Sale Less Frustrating:

1. Respect is the Basis for Great Broker and Client Relations

2. Initial Meeting Between the Principals

3. Decision to Sell or Not Sell – For How Much Will Your Hotel Appraise?

4. Choosing the Right Broker

5. The Seller (Client) Sets the Price and Terms of a Sale

6. What is the Probable Market Price for Your Hotel?

7. What is a Broker Price Opinion (BPO)?

8. Exclusive Right to Sell Listing Agreement

9. Cornell Seeks Only Serious and Qualified Buyers

10. Property Showings – Site Visits – Discretion Advised

11. The Buyer Makes an Offer to Purchase the Hotel

12. Creating the Purchase and Sale Agreement

13. Negotiating the Purchase and Sale Agreement Terms

14. Ongoing Communication is Imperative

15. Accepting the Offer

16. The Due Diligence Period

17. Scheduling the Inspection Professionals

18. The Buyer’s Lender/Banker Orders the Property Appraisal

19. Closing the Sale Transaction – Distributing the Proceeds

20. Final Thoughts

1. Respect is the Basis for Great Broker and Client Relations

We treat people with respect. Cornell is cordial and friendly. Both behaviors promote welcoming, pleasant, and approachable relations. These positive behaviors make the transaction process easier and reduce stress.

2. Initial Meeting Between the Principals

Generally, we arrange an informal meeting or telephone conversation to discuss the hotel property and your needs as the Seller or Buyer. Upon the Client’s request, we perform a market analysis and price valuation. Cornell conducts the research, prepares the market analysis, and determines the market price for the subject hotel.

3. Decision to Sell or Not Sell – For How Much Will Your Hotel Appraise?

You deserve to know exactly what your hotel will sell for in today’s market.  Call or email Cornell to get a hotel price valuation.  We will analyze your hotel and market and determine your property’s actual value.

After we complete your market analysis and price valuation, we will send you a written presentation.  You do not need to list your hotel with Cornell to receive this price valuation study.  However, we are confident that our professionalism in conducting your market analysis and hotel price valuation will impress you.

As mentioned, cordial and friendly relations are important.  We prefer to have your business, but there is no obligation to list your hotel with Cornell.  If you do not appreciate our work, a quick “no” will suffice.  There are no disappointments and no hard feelings.  If we do not do business now, perhaps we can do business in the future.  We believe mutual respect is a great way to conduct business.

4. Choosing the Right Broker

There are many things to consider when choosing a broker to sell your hotel(s).  Cornell enjoys a successful record of accomplishment.  We specialize only in hotel properties.

Read Library Article: “How to Choose the Right Broker”

5. The Seller (Client) Sets the Price and Terms of a Sale

Licensed brokers must always serve as faithful fiduciaries for their Clients’ advantage.  Cornell, as your fiduciary, will faithfully follow the Client’s directives.  The Client determines the price and terms of the sale.  Cornell aligns the purchase contract’s price and terms with the Client’s best interests.  Our team tilts negotiations to favor and protect our Client’s highest and best interests. We at Cornell are faithful fiduciaries.

6. What is the Probable Market Price for Your Hotel?

Cornell performs a professional hotel price valuation and market analysis for prospective Clients we want to represent. Our Broker Price Opinion (BPO) includes key financial metrics and current market trend data to establish a valid, market-based selling price. Owners who are ready to explore selling their hotel rely on this essential first step.

7. What is a Broker Price Opinion (BPO)?

Cornell prepares a Broker Price Opinion (BPO) to estimate the probable selling price of a hotel property. We determine value by analyzing the property’s physical condition, local market dynamics, neighborhood characteristics, macroeconomic trends, recent comparable hotel sales, and other factors that influence price.

We often rely on the highly effective “Band of Investment” method, which uses one stabilized year of income to value hotels. We apply this income-based valuation technique when the local hotel market anticipates no significant shifts in supply or demand, allowing us to reasonably assume that the property’s net operating income has stabilized.

8. Exclusive Right to Sell Listing Agreement

Cornell only lists hotels with an Exclusive Right-to-Sell Listing Agreement. Eliminating complex language (legalese) makes our listing agreements easier to understand.

The “Exclusive Right to Sell Listing Agreement” is a listing contract that grants the Broker the exclusive authority to sell the property. The Broker represents only one Client in the transaction and will act as the Client’s loyal fiduciary. Cornell, in its fiduciary role, will always defend, protect, and negotiate in the Client’s best interests.

The listing agreement is also called the “go-to-work agreement.” Once the Seller fully signs the listing agreement, Cornell prepares the marketing materials and begins the sales effort. We waste no time—our fiduciary duty to sell the hotel begins immediately.

9. Cornell Seeks Only Serious and Qualified Buyers

Initial Screening: The initial meeting with potential Buyers begins with a discussion of their needs. After gaining a thorough understanding of the Buyer’s needs and capabilities, the Buyer will be selected or eliminated as a good candidate for the sale. Large companies with a national presence will not need to undergo such a thorough selection process. Cornell Hotel Brokers seeks to identify the best-qualified Buyers who will best serve the interests of Cornell’s Client. We prevent hopeful but unqualified Buyers from continuing to pursue the hotel purchase. We vet potential Buyers for both financial and operational capabilities.

Financial Qualifications: Strong financial candidates are preferred. A Buyer’s financial Pre-Approval Finance letter from a lender will help either screen out or include potential Buyers in the selection process. Cornell will initiate Buyer qualification procedures before releasing confidential hotel information. 

    • Buyer’s background will be investigated for the following:
    • Operational Qualifications
    • Experience in the hotel industry
    • Ownership history
    • Organization
    • Financial Stability
    • 10. Property Showings – Site Visits – Discretion Advised

Cornell will coordinate with the Client to schedule a time for prospective Buyers to visit the property. Before allowing a prospective Buyer to view the property, they will have already been screened and evaluated to ensure they are capable of making a purchase. Cornell will escort prospective Buyers as needed to maintain discretion and avoid alerting staff. After a property visit, prospective Buyers are asked to keep hotel information confidential.

11. The Buyer Makes an Offer to Purchase the Hotel

Letter of Intent to Purchase (LOI): An LOI is a written document that outlines a Buyer’s intention to purchase a Seller’s real estate and business. The Buyer and Seller use a non-binding LOI to demonstrate mutual understanding by listing the proposed price and terms. The non-binding LOI serves as the foundation for a future written Purchase and Sale Agreement. Negotiations need not be completed between Buyer and Seller in order to draft a non-binding LOI. As mentioned, the non-binding LOI precedes the more formal, binding, and detailed written Purchase and Sale Agreement.

12. Creating the Purchase and Sale Agreement

In every state, the law requires the Seller’s (Client’s) lawyer to participate when the transaction reaches the point at which the parties need a binding Purchase and Sale Agreement to complete it. The law also requires all parties to the agreement to involve their lawyer(s) in drafting and approving the Purchase and Sale Agreement.

All state laws prohibit Brokers from drafting Purchase and Sale Agreements for commercial properties. By contrast, State Real Estate Commissions permit residential Brokers to use pre-approved purchase contracts, which lawyers write and State Real Estate Commissions approve.

Cornell has been through the hotel purchase cycle many times and is thoroughly familiar with how to keep all parties working toward a successful sale. The coordination of paperwork and communication among all parties is a professional skill developed over many years in the hotel sales business. You will need an experienced broker to help you sell your real estate property.

Read Library Article: “Small Brokerage Firms versus Large – The Advantage Goes to Small Firms”

13. Negotiating the Purchase and Sale Agreement Terms

The purchase offer and acceptance will be negotiated and settled upon when the Buyer and Seller (Client) have a meeting of the minds. The sales process does not have to be complicated. However, when multiple parties are part of the deal structure, it will need proper oversight.

Cornell seeks to make the process easier and less stressful. As your fiduciary representative, Cornell will stay abreast of all developments affecting the deal and keep you, our Client, informed of any necessary updates.

14. Ongoing Communication is Imperative

Ongoing communication and timely replies will help keep everyone interested in completing the hotel sale. Cornell will work diligently to keep everyone informed and on track to accomplish a successful sales transaction.

15. Accepting the Offer

When the Buyer and Seller agree on the sale terms, each party’s attorney must oversee and approve the signing of the Purchase and Sale Agreement.

16. The Due Diligence Period

The due diligence period will be specified in the Purchase and Sale Agreement. Third parties will conduct inspections and perform their respective tasks to facilitate the successful completion of the sale.

17. Scheduling the Inspection Professionals

Federal and state laws govern real estate transactions. Brokers, attorneys, title companies, surveyors, appraisers, contractors, and environmental inspectors are all certified and permitted to practice their trades under government oversight.

The Purchase and Sale Agreement requires that third-party professionals involved in the transaction be permitted to perform their roles in the legal transfer of the real estate.

18. The Buyer’s Lender/Banker Orders the Property Appraisal.

Bankers will require an MAI-certified appraisal from an accredited appraisal company. During the due diligence period, the Banker’s chosen appraiser will need to arrange an inspection of the hotel. Typically, the Buyer’s Banker will choose an appraiser they trust.

Buyers should understand that not all hotels appraise at market value. If the appraisal comes in low, the Client’s Broker may need to find another Buyer or convince the Buyer to contribute additional funds. If the Buyer refuses to budge on price, they may use the Purchase and Sale Agreement’s contingency clause to walk away from the deal.

19. Closing the Sale Transaction – Distributing the Proceeds

The escrow agents will collaborate to complete the transaction. The Title Company and/or Attorneys calculate and collect the Buyer’s payment and distribute the net proceeds to the Seller after deducting fees, taxes, liens, and commissions. This final step in the closing process completes the transfer of ownership and ensures prompt payment—often the same day via wire or check—per local practices.

20. Final Thoughts

That wraps up our brief discussion of the sales process. We at Cornell Hotel Brokers are with you all the way, from start to finish. We are available to handle any intermediation between parties to the transaction. We are always there to handle rough spots in the sales process.

Visit the Library Article for more interesting articles:

    • “How to Choose the Right Broker”
    • “Hotel Valuations – Correct NOI Calculation”
    • “Calculate Cap Rates Using Regression Analysis”
    • “Hotel Market Analysis & Valuation Software”

 

 

Attributions

      1. Jan deRoos, Ph.D., and Stephen Rushmore, CHA, MAI, “Hotel Valuation Techniques,” https://hvs.com/content/Bookstore/HotelValuationTechniques.pdf