The Top 5 Ways to Verify Your Buyer
Hello and welcome to the daily Blunt, today is Thursday, September 1, 2017 and probably will be all day.
Today we’re doing a segment that we like to call “Ask the experts” and the Question of the day is “How can I be sure my buyer is legit?”
So here it is, the Top 5 Ways to Verify Your Buyer
Question: How do you find legit buyers to bring your deal together?
Answer: Buying or Selling a Cannabis Company takes 12 times longer than most any other business. There is a lot of back and forth between the buyer and seller. Tensions run high when you waiting for the state to respond or even start reviewing a file.
Instead of wasting 6 months or more in an endless dance with a buyer who isn’t committed, here are the top 5 ways to see if they are willing to stick it out to the end.
Think of this like your buyer pre-approval. It’s no different than when a buyer gets pre-approved for a loan before shopping for a house. Get your buyer pre-approved to shop for a cannabis company instead.
- RESIDENCY. Is your buyer a resident of Washington State? Can they provide you with the adequate identification from the list of state references? If not, then who is the real buyer going to be and get their residency information instead.
- PROOF OF FUNDS. Can the buyer provide proof of funds for the whole purchase? Do they have a financier who will fund the transaction? You want to get the documents in order for financing before you even begin. If the buyer can’t provide you with information, then how will they be able to get through the state screening when it’s time? Waiting until later tends to cause deals to die… so don’t wait.
- BACKGROUND. Will your buyer make it through the state background check? Are they 100% sure? There is nothing stopping you from requiring a buyer to show you their FBI background check and order the screening in advance. It’s inexpensive, but it does take time. So, start early.
- EARNEST MONEY. Just like when a buyer purchases a home, then write an earnest money check or make a sort of good faith deposit. These funds can’t go to the seller’s company with Washington State cannabis rules (at least without penalty to the license), but they can go to an attorney’s escrow account to be held until approval. If you buyer is serious, they should show you they are serious by making a good faith deposit to escrow.
- FEASIBILITY. There is usually plenty of time for a feasibility to ensure the license is in good standing before getting to the formal contract stage. Many attorneys require this information prior to drafting a contract. However, if your buyer still insists on a feasibility period even after all that work is done up front… then they should pay for it and there should be a deadline for review. The last thing you want is getting all the way to the end for approval, just to have a buyer change their mind at the last minute and not follow through on the agreement.
Remember sellers, even if your buyer is legit and approved… you as the seller still need to make it through the questions and calls with the state as well. Both parties need to stay actively engaged and open with each other from start to finish to make it work. Make sure you have a good team in place who will go the distance.
If you need help with the buyer verification, we can help you out. It does require cooperation from all parties, but it is one way that helps prepare you for a smoother closing.
Give us a call at (206) 466-4020 or firstname.lastname@example.org and we’re happy to discuss what our buyer verification service includes.