Getting what you ask for vs. getting what you need

Posted: April 10, 2012 in Uncategorized

 

Your asked to feed the tigers at the zoo. Raw meat is given to you for the task. To feed the tigers will require putting your hand and arm into the cage to place the raw meat. While putting the meat in the cage, the tiger bites off your arm. Blood lose almost kills you but you survive. Your given no compensation for the lose of your arm since your arm was used for food to feed the tiger with the raw meat. You are not entitled to any compensation or recourse because your arm is considered food and the contracts you signed for employment do not differentiate feeding raw meat and your arm.

Work a commercial real estate deal without the experiences of a commercial agent and you are risking lose.

With any new activity or task, there is an element of danger from lack of experience. Experience teaches through trial and error. You don’t touch the stove after your mom cooks dinner. Holding a nail while someone else swings the hammer is not a good idea. Working a commercial transaction without experience and without a commercial agent can be very costly.

Have heard many clients state they feel comfortable with their electrician, HVAC tech,engineers, architects, contractors, lawyers, etc. and that they do not need anyone else to help them with their commercial transaction. The problem is all of these professionals are accountable for EVERY WORD AND SUGGESTION THEY MAKE! They are in a position to do exactly what you ask for. All of these professional carry liability insurance to protect them from lawsuits, improper advice, and oversights.

These individuals are conditioned to do only what they are told and limit their creativity. They will suggest exactly what is asked from them and will not cut corners or provide alternatives to get the job done since this will only expose them to possible legal recourse and also cut their pay for the services they are providing!

You will discover suggestions by these professionals are done  to “add to the cost of services” rather than to save on unnecessary services. For example, many lawyers will charge a client to “draw up a contract” when in most cases the standard Colorado Real Estate Purchase Agreement is adequate with some changes or an addendum or Exhibit. Title Companies provide much of the due diligence needed to find problems with a property and ordering an ALTA A survey should provide the necessary info to alert a lawyer of a problem with a property, yet clients are charged considerably for work done “by the hour” to research information that has already been acquired.

Contractors, architects, HVAC, and electricians have no incentive to streamline work needed on a property. Asking OR not asking the right questions could cost you $50,000 to $200,000 more in fees to complete work you need to be done on your commercial property. For example, we recently needed to have capacities of 2 HVAC units increase to accommodate a class “A” use for a client. Was told that 18 tons of A/C would be needed by the architect. Contacted a HVAC company who quoted a cost of $61,000 to replace 2  five ton units for 2 nine ton units. This about killed the deal, but this was the cost for what we asked for.

The quote sounded way out of line and I called the HVAC company. He insisted that to refit the apertures, and re enforce the roof and add the additional electrical for the HVAC  units would be expensive. The $61,ooo was almost half the price of the lease payments for the full term of the lease!!! Need to figure out something or would lose the deal!

The next step was to talk to the architect.

After chatting with the architect, who was very knowledgeable on the city requirements for class “A” use, came to find out the tonnage was based on the sq footage of the leased space. After asking  many questions, came to realize the new bathroom and areas where there would be no congregation, and closet space were not counted at the high rate of occupancy. IN other words, by taking out the new bathroom space and adding a closet, the tonnage requirement dropped from 18 tons to 15 tons.

With this new info questioned the HVAC guy to determine why it was costing so much to increase the tonnage from 10 to 18. Seems the labor and costs to re enforce the roof were adding quite a bit to the bid. Asked what was the highest amount of tonnage we could add to the existing 5ton ducts without incurring the expense of extensive electrical and re enforcement of the roof costs. The cost went down from $61,000 to $19,000 and I found A/C wall units that could be used if the tonnage needed to be increase by 2 to 4 tons.

At first, it seemed that the HVAC guy was trying to rip us off. $61,000 to upgrade 10 ton to 19 tons was a very high quote, but we were getting what we asked for. This gentleman did not ask why or what we were using the lease space for and he gave me exactly what I asked for. Seems that more and more companies only give you what you ask for which is many times NOT WHAT YOU REALLY NEED! There are only a handful of people that will take the time to find out what you  need and in many industries, there is too much risk to the company to suggest an alternative solution to your needs. Any employee that suggests something other than what you are looking for could lose their job if they are wrong and any business owner could lose his creditability or risk being sued if what is suggested does not perform or meet up to city or fire codes.

There are standards in all industries for electricians, architects, engineers, lawyers, plumbers, HVAC techs etc. and within these standards the industry has almost “hard loaded” profit margins that dictate prices to their clients. For example, there have been too many cases where my clients were told they needed fire sprinkler systems by contractor or city official when they were not needed! The additional costs to install these systems and the downtime to get this work inspected, etc. is disturbing and a re distribution of your allocated funds (or stealing!). What is more upsetting is the people doing the work, electricians, plumbers, contractors, architects, engineers will not mention anything about the additional work not being needed because it would cut their profit margins and work. Checking and questioning what seems to be incorrect is a full time job and no one can catch all of the superfluous spending, but having key people to keep an eye out can save you thousands.

In summary, something as seemingly simple as asking for what you want is not as simple as it seems and the difference from getting what you ask for as opposed to getting what you need could cost you tens of thousands of dollars more than what you need to spend. Paying professional such as lawyers, architects, engineers, and other professionally licensed techs are necessary for almost all projects and if they are utilized properly they could save you thousands of dollars. But keep in mind there responses and ideas are always going to be limited because of the liabilities they can incur. Cutting costs by omitting work or services is not a high priority in these industries since it increases the chance of a lawsuit or claim against their liability insurance AND LOWERS THEIR PROFITS! (Except for architects, engineers, and lawyers, since each time there is a correction or change, they can charge more).

Having an experience consultant or commercial real estate agent who has experience in real estate transactions is advisable. Unlike the above listed professionals, commercial agents can speak freely and assist in directing questions to save money and suggest ideas from previous transactions that could save time and money. Most times, the cost of a commercial agent are paid for by the seller or lessor and other times their fees are dramatically less than those of a lawyer, architect, or engineer.

 

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