How to Negotiate the Best Deal When Selling or Financing Your Hotel or Apartment Building

The headline price is the part of a commercial property deal everyone talks about, and often not the part that decides how much the seller keeps. Deposits, conditions, deadlines, closing adjustments and the promises each side makes in the contract all move money and risk between the parties. The same is true of a loan, where the interest rate is only one of a dozen terms that matter.

This article is for owners selling or refinancing a hotel, apartment building or other income property. It covers what to negotiate beyond price and how to approach it. It is general information; a real estate lawyer should review any agreement or loan commitment before you sign.

Know what you need before you start

Negotiation goes better when you have decided in advance what matters most. For a seller that is usually some mix of price, certainty of closing and timing. For a borrower it is usually some mix of loan amount, cost and flexibility. Write down your walk-away points, and know your alternatives: another buyer, keeping the property, or another lender. The side with a credible alternative negotiates from strength.

Get your own view of value before the first offer arrives, from a broker’s opinion or an appraisal, and understand how buyers will calculate theirs: usually net operating income divided by a market capitalization rate, cross-checked against comparable sales.

The terms that matter in a sale

Purchase agreement terms beyond price

Term	Why it matters to the seller	What sellers often ask for
Deposit	The money at risk if the buyer walks away without a valid reason	A larger deposit, an additional deposit once conditions are waived, held in trust
Conditions	Each condition is a way for the buyer to exit	Fewer conditions, clearly defined, with firm deadlines
Due diligence period	The property is off the market while the buyer investigates	A shorter period, documents delivered promptly to support it
Financing condition	The most common reason deals fail	Evidence of lender interest up front, or no financing condition at all
Closing date	Affects carrying costs, tax year and the seller’s next plans	A date that suits the seller, limited extensions with extra deposit
Representations and warranties	Promises about the property the seller is liable for after closing	Limited in scope, made to the seller’s knowledge, expiring after a set period
Adjustments	Rent, deposits, taxes and prepaid items split at closing	Clear rules, especially for arrears and tenant deposits
Assignment	Whether the buyer can pass the contract on to someone else	Only to an affiliate, with the original buyer remaining liable

In Nova Scotia, a brokerage that holds deposit money must keep it in a trust account supervised by a broker, under the Real Estate Trading Act.[1] When no brokerage is involved, the lawyers usually hold the deposit in trust instead.

Comparing offers

A higher price with a long due diligence period, a financing condition and a small deposit can be worth less than a lower, cleaner offer. When offers arrive, put them side by side on price, deposit, conditions, timing and the buyer’s proven ability to close. Many sellers counter on terms rather than price: accepting a buyer’s number in return for a shorter condition period and a larger non-refundable deposit once it ends.

Renegotiation after due diligence

Buyers often come back after inspections with a list of problems and a request for a price reduction. A seller who has already disclosed the known issues, and priced them in, is in a better position to refuse. Where a problem is real, alternatives to a price cut include a credit at closing, a holdback in trust until a repair is done, or the seller completing the work before closing.

The terms that matter in a loan

A loan commitment or term sheet sets out far more than the rate. Before you sign, compare offers on:

Loan terms to compare and negotiate

1. Amount and leverage

   The loan-to-value and debt service coverage tests that cap the amount, and how the lender measures income.

2. Rate and fees

   Fixed or floating rate, the lender fee, broker fee, and who pays for appraisal, environmental and legal costs.

3. Term and amortization

   How long until the loan must be repaid or renewed, and how fast principal is paid down.

4. Prepayment

   What it costs to repay early or sell: a fixed penalty, interest differential, yield maintenance or defeasance, or an open period.

5. Recourse and guarantees

   Whether the owners are personally liable, for how much and for how long.

6. Covenants and reporting

   Minimum coverage ratios, reserves, reporting deadlines and what counts as a default.

7. Assumption and transfer

   Whether a future buyer can take over the loan, which can add value at sale.

Prepayment terms deserve the most attention. They decide whether you can sell or refinance before the term ends without a large penalty. In Canada, the Interest Act lets a borrower repay a mortgage that runs longer than five years once five years have passed, on paying three months’ extra interest. That protection does not apply to a mortgage given by a corporation,[2] and many commercial properties are held through corporations.

How to negotiate

• Put the important terms in the letter of intent. It is usually non-binding, but points agreed at that stage are rarely reopened. Deposit, conditions, timing and major exclusions belong there, not only price.
• Trade, do not concede. Every concession should get something back: a shorter period for a price reduction, a larger deposit for an extension.
• Keep it in writing. Confirm verbal agreements by email and have the lawyers reflect them in the documents.
• Let advisers carry difficult messages. A broker or lawyer can push back without souring the relationship between principals who may need to work together until closing.
• Know when to stop. If a buyer keeps reopening agreed points, or a lender’s terms keep moving, your alternative may be the better deal.

Sources

1. Real Estate Trading Act (section 4, brokerage trust accounts) — Nova Scotia Legislature, November 20, 2014 (consolidation). Checked 2026-10-12.
2. Interest Act (R.S.C., 1985, c. I-15), section 10 — Justice Laws Website, Government of Canada. Checked 2026-10-12.