How long does it take to sell an Assisted Living Community?

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How long does it take to sell an Assisted Living Community? – by Jason Punzel

One of the most common questions we get asked as brokers is, “How long does it take to sell an Assisted Living Community (or Skilled Nursing, Independent Living, Memory Care)?

It’s been our experience, while selling nearly 100 properties annually, that most transactions take 4-6 months, from start to finish.  While each transaction process is unique, there are multiple phases involved in each sale process.

The process starts with us, as brokers, making confidential phone calls to financially qualified buyers throughout the country.   Senior Living Investment Brokerage has 15 brokers that work together to cover buyers throughout the country.  Unlike many other firms, we market facilities with complete confidentiality, never sending out email blasts or posting listings on our website.

If a buyer is interested, a confidentiality agreement is sent for the buyer to sign before they receive an Offering Memorandum.  An Offering Memorandum is a 20-page marketing document that highlights the property, location, demographics, financials and competition.  We also prepare an online secured data room to disperse additional documentation such as floor plans, site plans, environmental studies, detailed financials, etc.  Upon reviewing the Offering Memorandum, the buyers have many questions that we work with the owners to answer.

This initial marketing process takes about 3-4 weeks and the buyers will start submitting offers in the form of Letters of Intent (LOIs).   Typically, 4-7 financially qualified buyers submit LOIs.  After discussing positives and negatives of each LOI with the sellers, we prepare counter offers for the best 3-4 LOIs, asking the buyers to submit their “best and final” offer 1-2 weeks later.   During this period, these buyers will take a physical tour of the facility, conduct more detailed due diligence and ask additional questions.

After receiving the best and final offers, the seller chooses the offer they prefer and signs the LOI.   A Letter of Intent is a non-binding 3-4 page document that details all of the business terms of the offer.   The next step is negotiating the legally binding Purchase Agreement (also called a Definitive Agreement or Purchase and Sale Agreement/PSA).  This document is 30-50 pages long and is heavily negotiated by the attorneys of the buyer and seller.   Negotiating the PSA takes between 2-4 weeks.  Upon signing the Purchase Agreement, the Due Diligence process officially starts and is 30-60 days.

The Due Diligence process is the time in which the buyer conducts third party tests (survey, appraisal, environmental study, property condition report), additional site visits with their team, and thoroughly reviews the financial statements.   During the due diligence period, the buyer’s earnest money is completely refundable and the buyer can terminate the Purchase Agreement if they choose.  Although rare, there are occasions that a buyer cannot get financing or discovers something in the third party reports that they deem as significant enough to terminate the transaction.   This is one reason why it is so important to choose a broker with significant experience to help determine which buyers have a good track record of closing.

Conclusion:

Upon the expiration of the due diligence period, the closing takes place within 30-60 days.   Some buyers apply for their license during the due diligence period and some buyers wait until the expiration of the due diligence period.   Most states take between 30-90 days from the time the buyer submits their application to issue a license.   There are also ways for the buyer to temporarily use the sellers’ license until they receive their license.   When closing on an Independent Living Community, there is no license required and the closing can take place as soon as 15 days after the end of the due diligence period.  Thus, from the start of marketing to closing, the process takes about 4-6 months.

If you would like to discuss the time line to close your Senior Living Community in more detail, please contact Jason Punzel at [email protected] or 630-858-2501×233.

 

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Timeline for selling a Senior Living Community?

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One of the most frequently asked questions by a seller of a senior living community is, “what is the process and timeline for selling a senior living community?”

The transaction process of selling  senior living communities is complex, incorporating the sale of both the real estate and actual business.  With the ultimate timeline for each transaction of a senior living property varying, based on factors including licensing, buyer financing, environmental surveys and capital improvements, the typical timeline from start to finish is 3-6 months.

Senior Living Sale Timeline
Timeline for Sellling a Senior Living Community

At Senior Living Investment Brokerage (SLIB), we sell over 90 properties nationally each year, and have found the previously mentioned transaction timeline of 3-6 months to be standard.

It is worth noting that a 3-month timeline from start to finish is very aggressive, while the more typical transaction is somewhere between 4-5 months, with anything over 6 months being a prolonged transaction cycle.

During the process, there are two core components of the listing and subsequent sale of a senior living community, which to be aware of; the marketing period (4-8 weeks), the closing period (8-12 weeks).

To break each down; the marketing period of the assignment involves the preparation of the offering memorandum, confidential phone calls, not emails, to qualified buyers, and thereafter responding to buyer inquiries, receiving Letters of Intent, property tours, and ultimately selecting a final offer with a preferred buyer.

Once a preferred buyer has been selected, the closing period consists of contract negotiation, due diligence process, licensing, transition phase and actual closing of the transaction.

Closing

When considering the selling a senior living community, it is important to be aware of all factors involved in the process of the transaction.  Senior Living Investment Brokerage, Inc. can assist from start to finish, providing a realistic timeline and lending our vast industry experience during each step, to ensure a successful outcome.

Contact Information

To discuss how we can assist you with the sale of your Senior Living Community, contact Brad Goodsell of Senior Living Investment Brokerage, Inc. at 630-858-2501 or [email protected].  We are available to prepare a no obligation property valuation analysis for you.

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Re-trading in the Senior Living Sales Process

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Re-trading in the Senior Living Sales Process – by Jason Punzel

Often times, we get asked about buyers “Re-trading in the Senior Living Sales Process.”   Re-trading is a term used by the industry when a buyer asks for a price reduction during the Due Diligence process.  Buyers can vary widely on their philosophy on re-trading and how they use this tactic.   Some buyers intentionally make higher priced offers to get the property under contract and then find excuses to try to reduce the price or re-trade.  This is why it is so important to use a broker that has significant experience in the industry to help sellers choose a buyer with a good reputation in closing transaction and not re-trading.

The Due Diligence process is the time in which the buyer conducts third party tests (survey, appraisal, environmental study, property condition report), additional site visits with their team, and thoroughly reviews the financial statements.

There are times the property condition report (PCR) could detect that the property has a defect, such as a bad roof, HVAC, etc.   While it may be considered a re-trade for the buyer to ask the seller for a credit to fix the defect, it is generally considered as a legitimate request from the buyer.  Most sellers are accommodating in either fixing the problem or crediting the buyer at closing.

Other reasons why a buyer could ask for a price reduction are because the census drops, Net Operating Income drops, they have a market study conducted and find out there is significant competition in the area, the appraisal comes in lower than the purchase price, etc.  Buyers can use these reasons as justification for a price reduction, sometimes as much as 10% of the purchase price.  While each request must be evaluated on its own merits, many of these situations are simply the buyer trying to find an excuse to reduce the price.

Conclusion:

Understanding the reputation and track record of the buyer is vital in a successful sales transaction.   Almost all buyers will tell a broker and seller that they never re-trade and are great buyers to work with.   However, the only way to truly know is past history.   As a firm, Senior Living Investment Brokerage, Inc. has closed close to 1,000 communities in the past 20 years and knows which buyers have good track records and which do not.

For more information on selling your Senior Living Community, contact Jason Punzel at [email protected] or 630-858-2501×233.

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What Does Confidential Senior Housing Listing Really Mean?

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Specific to the seniors housing market, confidential, is a common term used throughout the transaction process.  But what should, or more importantly does confidential really mean, during the course of a senior housing listing and subsequent sale?

Most seniors housing brokers will make some mention of how they work confidentially to market a listing, however reality is often a very different case, varying greatly by broker and brokerage firm.  An example of this is often found on websites featuring a brokerage’s listings…listing a ‘confidential’ property on a website.  Yes, you read that correctly!

Another example of a seniors housing listing confidentiality breach, is that of mass-marketing a property through email.  I know firsthand that this happens, why, because I am the recipient of many such emails.

When considering selling a senior housing property, each seller should consider their level of appetite for news of the pending sale reaching the local community, greater marketplace, residents and existing staff.  As such, true confidentiality ought to be expected and required.  With this in mind, Senior Living Investment Brokerage (SLIB) takes a unique approach, holding fast to true confidentiality in each senior housing listing process.

At SLIB our process is truly confidential, from start to finish.  It begins with initiating personal phone calls, not emails, to gauge interest of financially qualified buyers by providing a generic property description.  If interested, prospective buyers are then forwarded a confidentiality agreement.  Only upon receipt of this signed agreement does Senior Living Investment Brokerage disclose full property details.

While our approach takes more time and effort, it has proven over time to be more effective, while also keeping the integrity of our relationships paramount.

Closing

In the world of senior housing listings and transactions, confidential, can mean many things to many people.  It is up to seller to confirm their chosen brokerage’s approach to this essential issue.

Contact Information

To discuss how we can assist you with the sale of your Senior Living Community, contact Brad Goodsell of Senior Living Investment Brokerage, Inc. at 630-858-2501 or [email protected].  We are available to prepare a no obligation property valuation analysis for you.

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