Waiver Date Part 2

by Steve DeVoe
February 20, 2018

How to Manage Your Conditional Period and Beat the Waiver Date

In Part 1 of our Waver Date article we discussed the importance of the Waiver Date and what the Waiver Date really represents. We outlined how it is established, the lead up to it, and the push and pull between Buyer and Seller over the Setting of the Waiver Date. Finally, we pointed out the significant implications of the Buyers actions at the Waiver Date.

Now in Part 2, I would like to discuss in greater detail the time leading up to the Waiver Date and how you can better manager the Conditional Period to make sure we are as prepared as possible for the Waiver Date.

First a quick review: you have found a property that you are interested in, you have gone through some preliminary due diligence and you’ve decided to try to put the property under contract. As part of your offer, along with price, terms, financing, and closing dates etc. you are also in effect offering to buy the property with the proviso that you have a certain amount of time to work through an inspection and approval process. This time frame leading up to the Waiver Date is called the “Conditional Period” or the “Buyer’s Condition”. As the name suggests it basically provides for a window in the contract allowing you to examine all the pertinent aspects of the property and then make a decision on whether you are willing to proceed or not.

As a buyer you will set for yourself specific performance deadlines through the Conditional Period. Your contract should be drafted to specifically state the time and dates by which the seller must provide the Deliverables as well as how long or to what specific date the buyer has to evaluate those items.  In plain English, the seller will disclose any and all information known to them and the buyer then has the right to inspect the items and the property at the buyer’s expense and determine if it is satisfactory or unsatisfactory. If it’s unsatisfactory, you can still walk away at this point with only the cost of your time and the inspections to date.

Every offer you make SHOULD have a Conditional Period!!

The key point here is this: if you waive your conditions, you have now agreed to the contract and there are no further options other than to proceed to closing. You’re now committed to the deal financially and legally!

It is also important that you know how the Conditional Period relates to your Waiver Date. The Conditional Period is simply a negotiated time frame that both the buyer and the seller agree on that allows the buyer to carry out the various inspections and receive the necessary approvals he or she requires to complete the purchase. It could be 30, 60 or even 90 days; perhaps longer or in rare cases shorter. It depends on how long you need to carry out your work and how long the owner is willing to allow you to have your exclusive look.

Managing the Conditional Period is critical in the completion of any transaction!

Here are some tips and strategies on how to establish your Conditional Period, as well as managing and preparing for your Waiver Date:

  • Have your due diligence team assembled, in place and ready to go. For me that team is my lawyer, lender, environmental engineer, and structural inspectors.
  • Make sure you take thorough notes on your early drive by or tours. For example, if you note the roof is old then a roof inspection will be required, and your Conditional Period will need to allot for completion. If by chance there is a gas station next door or even a hint that there may have been a similar use some time in the past you will undoubtedly be looking at not only a Phase 1 but a Phase 2 environmental inspection for the lender. These can take weeks, even months, and no lender will lend without it if there is any question whatsoever. You will need to negotiate the extended time requirement for this right up front. In fact I would make the owner aware of this when offering. He likely already knows but if not, he will have to understand reality.
  • Discuss with your lender right up front what their requirements for approval are, and once provided, what a realistic time for financing approval is.
  • Almost all lender and CMCH require an application submittal. Make sure you know when this happens and what the time frame is once submitted
  • If you are using CMCH you need to ask them the very same question.
  • Avoid setting Waiver Dates on Mondays and Fridays.commercial investment
  • Use checklists to ensure details are not missed. One piece of missing information can set the whole process back. Checklists are an absolute necessity for the whole due diligence process but critical as part of managing your Conditional Period.
  • Establish which items will take the longest to achieve, most likely financing approval, and then work backwards. For example, if your lender says 6 weeks for approval and that is the longest time frame then mark that on your calendar as a potential Waiver Date and start plugging in all the other items to fit in that window. Think of it as a puzzle and all the pieces need to fit within the boundaries.
  • Be aware it is not just a physical puzzle but a monetary puzzle as well. For instance; here is a scenario I have often seen. The Conditional Period is set for 30 days, and you know that Phase 1 will be at least 2-3 weeks so you contract to have it started immediately. Now the owner takes a week to supply you with all his due diligence information, but once it’s all there you see a problem. Doesn’t matter what it is, but a problem significant enough to put the deal in jeopardy. You can see the issue, on one hand you just spent $2000 on an environmental report that you started early to make sure you could meet the Waiver Date, however if you had waited until you had all the information you may not have proceeded with the report at all. On the other hand if you don’t get it started you don’t make your dates.

There is no easy answer but try to schedule the expensive reports back in the process as far as possible so you get a good picture before you start spend significant money.

  • Make sure you have put in your contract a specific date as to when the owner will have supplied all the information you have asked for. It should include wording that says you will acknowledge in writing when you are satisfied that all you asked for has been received.
  • This is VERY IMPORTANT, make sure the Conditional Period does not commence until you have signed off that you have received all the information required. I have been involved in many deals where the owner’s information comes in dribs and drabs for weeks after the agreement is signed. Which, by the way, is ok with me as long as the owner understands that the Waiver Date keeps moving back until I have what I’m entitled to.
  • Avoid setting a specific Waiver Date if possible. I prefer wording like this “Waiver Date to be 45 business days from acknowledged receipt for all the Deliverable”.
  • Always specify business days. You want every working day possible and weekends should not be included in your Conditional Period.
  • On occasion if the owner is being difficult with allowing enough time, I will break the process into several Waiver Dates. For instance I might waive my inspection condition if everything is ok earlier in the process. I may then waive on the environmental when it’s completed and finally on financing at the end. This gives the owner some security that should he give you 60 business days for example, by the time you are getting to the end your ability to walk as been narrowed to only one or two items.
  • I share my schedule with the seller right up front. Sellers are always suspect of purposeful delay or stalling. But if I’m asking for 45 or 60 business I show them right up front what I’m doing and the times I have allotted. If they want to debate them, I’m always willing listen and if they think they have someone who can handle a piece quicker then I’m happy to explore.On more than one occasion I have had an agent or seller tell me my offer is not as attractive as another because of the Conditional Period I have asked for. I give them my schedule; I challenge them to ask for something similar from the other offer and if they even have one, compare and tell me where the differences are.  I have been doing this a long time and I know how long the process takes. If it is significantly less, then they are putting anything in to get it accepted and will then be back for extensions at the Waiver Date, or they have missed something, or they are willing to waive without a financing condition (which also could eliminate Phase 1 or 2). If this is the case I couldn’t compete anyway, but shenanigans become apparent and it often brings a bit of reality to the seller.
  • Finally, be relentless in your follow-up with all the various actions you have going on. Do not let anything go for more than a day or two without checking on progress. More than once I have not heard from a party for a few days only to find out some item is on a desk somewhere and has not moved.

I have found in my experience over the years, working thorough Conditional Periods and being prepared at the Waiver Date is onerous, time consuming and quite frankly the most stressful part in any transaction, at least for me.

However, if you use the tips above, plan carefully, use checklists, and stay on top of it you can hopefully meet you dates and keep the stress to a minimum.

***All the resources I use, as well as my book “See All And Know All Before You Buy” which details the entire Due Diligence Process, including the checklists, can be found at our website www.mcommercialrealty.com


Sign Up for our Newsletters

Be the first to receive commercial real estate updates, articles and videos.

We respect your privacy. Your information will not be shared with any third party.


Leave a Reply

Your email address will not be published. Required fields are marked *