Don't Accept a Direct Offer for Your Medical Asset

You receive an unsolicited letter or call from a real estate investor: "We're interested in purchasing your medical office building. We can close quickly with minimal hassle. What would it take to make a deal?" The offer seems attractive—perhaps even generous. The buyer emphasizes urgency: "This is a limited-time opportunity. We need an answer within two weeks."

If you've received a direct offer like this, you're not alone. Institutional investors regularly send acquisition letters to physician property owners, hoping to secure off-market purchases at below-market prices. While these direct offers may seem convenient, accepting them without testing market value through a competitive process is one of the costliest mistakes physician-owners make—often leaving hundreds of thousands or even millions of dollars on the table.

Why Direct Offers Are Almost Always Below Market

Direct offers typically come from sophisticated institutional buyers who make unsolicited acquisition approaches part of their core strategy. Here's why these offers are systematically below market value:

1. No Competition = No Pricing Pressure

In a competitive process, multiple buyers bid against each other, driving prices up to true market value—or beyond. With a direct offer, there's zero competitive pressure. The buyer knows they're the only party at the table and prices accordingly.

Example:

• Direct Offer: $8 million
• Competitive Process Result: $9.2 million from winning bidder
• Value Left on Table: $1.2 million (15%)

This isn't hypothetical—we consistently see 10-20% valuation gaps between direct offers and competitive process outcomes.

2. Buyers Target Uninformed Sellers

Institutional buyers sending direct offers specifically target owners they believe:

• Lack sophisticated understanding of property valuation
• Don't have access to national buyer universe
• May be motivated sellers (approaching retirement, experiencing financial pressure)
• Will prioritize convenience over price

These buyers rely on information asymmetry—they know far more about market values, buyer appetite, and comparable sales than individual physician-owners. This knowledge gap allows them to make offers that seem reasonable but are actually 15-25% below what informed, competitive processes would yield.

3. "Wholesale" Pricing Strategy

Many direct offer buyers are wholesalers or flippers:

• Acquire properties off-market at discount pricing
• Immediately re-market to institutional buyer universe
• Capture 10-20% spread as profit

Essentially, you're allowing a middleman to extract value that should be yours—simply because you didn't create competitive dynamics.

4. Urgency Is Manufactured

Direct offers often include artificial urgency:

• "This offer expires in 10 days"
• "We have limited capital to deploy this quarter"
• "Our acquisition committee only meets monthly"

This manufactured urgency pressures sellers into accepting offers without proper diligence or market testing. In reality, qualified buyers remain interested for months if the property is quality—urgency benefits buyers, not sellers.

Real-World Examples: The Cost of Accepting Direct Offers

Case Study 1: Suburban Medical Office

Situation: Orthopedic group received unsolicited $7.5M offer for 25,000 SF building from regional investor. Offer seemed fair based on rough cap rate calculation. Buyer emphasized quick close (45 days) and minimal hassle.

What Happened: Group consulted healthcare real estate advisor before accepting. Advisor conducted 60-day competitive process, marketing to 35 qualified institutional buyers nationwide.

Result:

• Received 8 offers ranging from $7.8M to $9.4M
• Best offer: $9.4M from healthcare REIT (25% premium over direct offer)
• Value preserved: $1.9 million

Key Learning: Original buyer re-emerged during competitive process with revised $8.9M offer (up $1.4M from initial), confirming original offer was strategic low-ball.

Case Study 2: On-Campus MOB

Situation: Single physician owner received $12M direct offer from private equity fund for hospital-adjacent medical office building. Physician was 68, considering retirement, and offer seemed convenient.

What Happened: Physician's CPA recommended testing market value before accepting. Engaged specialized advisor who identified 12 qualified buyers, including national healthcare REITs and institutional funds.

Result:

• Competitive process generated $14.2M winning offer (18% premium)
• Sale structured as UPREIT transaction, deferring capital gains taxes
• Professional management eliminated ongoing landlord burden
• Total additional value: $2.2M in proceeds plus tax deferral benefits

Case Study 3: Multi-Specialty Building

Situation: Practice received $10.5M offer from local developer. Partners were busy with practice demands and wanted simple transaction. Direct buyer offered "no due diligence surprises" and 60-day close.

What Happened: One partner insisted on market testing despite majority wanting to accept. Hired healthcare real estate advisor for competitive process.

Result:

• Final sale price: $11.8M (12% premium)
• After advisor fees, net benefit: $900,000+
• Winner was national healthcare REIT original buyer wasn't aware of
• ROI on advisor engagement: 800%+

The Value of Competitive Processes

Proper competitive processes consistently deliver superior outcomes through:

1. Access to National Buyer Universe

Specialized healthcare real estate advisors maintain relationships with:

• Publicly-traded healthcare REITs (10-15 national players)
• Private equity real estate funds focused on healthcare (30-40 active funds)
• Family offices and high-net-worth groups (hundreds of potential buyers)
• Regional developers and syndicators
• 1031 exchange buyers seeking replacement properties

This buyer universe is 10-20x larger than what individual physicians can access independently. More buyers = more competition = higher prices.

2. Strategic Positioning and Marketing

Professional advisors present properties in optimal light:

• Comprehensive offering memoranda highlighting strengths
• Market research demonstrating location advantages and demographics
• Financial analysis showcasing stable cash flows and upside potential
• Professional photography and property materials

Direct offers evaluate properties based on minimal information. Proper marketing ensures buyers understand full value proposition.

3. Competitive Tension and Deadline Management

Sophisticated advisors create competitive dynamics that maximize pricing:

• Simultaneous engagement of multiple qualified buyers
• Structured timeline with defined milestones
• Best-and-final offer deadlines creating urgency among buyers (not sellers)
• Transparent communication that multiple parties are competing

This process engineering routinely drives prices 10-15% above initial indications—and far above unsolicited direct offers.

4. Leverage in Negotiations

With multiple offers in hand, sellers have leverage to negotiate favorable terms beyond price:

• Shorter due diligence periods with fewer contingencies
• Higher earnest money deposits demonstrating commitment
• Seller-favorable closing timelines
• Better lease terms in sale-leaseback structures
• Reduced transaction costs

Red Flags: Signs a Direct Offer Is Too Good to Be True

If you receive a direct offer with these characteristics, be especially cautious:

Artificial Urgency

• "Offer expires in 10 days"
• "We need to move quickly to secure financing"
• "Another opportunity could take priority next week"

Reality: Qualified buyers remain interested for months. Urgency serves buyer interests, not yours.

Minimal Due Diligence

• "We don't need much information—trust our offer"
• "No need for appraisal or inspection"
• "We'll handle everything to make this easy"

Reality: Sophisticated buyers conduct thorough diligence. Minimal diligence suggests buyer plans to renegotiate after contract or is inexperienced.

Pressure to Not Seek Outside Advice

• "No need to involve brokers or advisors—we can negotiate directly"
• "Bringing in advisors will complicate the process"
• "We prefer to work directly with owners"

Reality: Buyers who discourage professional representation know advisors will identify below-market pricing.

Vague or Conditional Financing

• "Subject to securing debt financing"
• "Pending investor approval"
• "Contingent on partnership fundraising"

Reality: Strong buyers have committed capital or pre-approved financing. Vague financing suggests buyer may not close.

What to Do If You Receive a Direct Offer

If you receive an unsolicited purchase offer, follow these steps:

Step 1: Don't Respond Immediately

Thank the buyer for their interest and indicate you'll review and respond within 1-2 weeks. Don't feel pressured to provide immediate answer, counter, or property information.

Step 2: Obtain Independent Valuation

Before responding, understand market value:

• Engage healthcare real estate advisor for broker opinion of value
• Consider formal appraisal for properties over $5M
• Research comparable sales in your market

This establishes baseline for evaluating whether offer is competitive.

Step 3: Assess Your Situation

Determine whether you're actually ready to sell:

• Is this consistent with your timeline and retirement plans?
• What would you do with sale proceeds?
• Have you considered tax implications?
• Are there better alternatives (refinancing, retained ownership, etc.)?

Don't let unsolicited offer drive premature sale decision.

Step 4: Engage Healthcare Real Estate Specialist

If you are interested in selling, engage advisor to:

• Evaluate whether direct offer is competitive
• Identify 20-40 additional qualified buyers
• Create competitive process maximizing value
• Negotiate optimal terms and structure

Step 5: Test the Market

Run abbreviated competitive process (30-45 days):

• Market to qualified buyer universe
• Set deadline for initial offers
• Compare direct offer to competitive results
• Negotiate with top 2-3 bidders

This doesn't commit you to selling—but provides data on true market value.

Step 6: Use Direct Offer as Backup

If competitive process yields no better offers (rare), you can return to original direct buyer. But in 80%+ of cases, competitive process generates meaningfully higher pricing—often 15-25% above direct offers.

The Math: Why Testing the Market Is Always Worth It

Some physicians resist competitive processes due to time commitment or perceived hassle. Let's examine the math:

Scenario: $8M Direct Offer

• Accept Direct Offer: $8M proceeds
• Competitive Process: 60 days, results in $9.2M winning offer (15% premium)
• Advisor Fee: 2.5% = $230K
• Net Proceeds After Fee: $8.97M
• Net Benefit: $970,000
• Time Invested: ~10 hours over 60 days (meetings, document review, decision-making)
• Effective Hourly Rate: $97,000/hour

Even if competitive process only achieves 10% premium (conservative estimate), ROI exceeds 400%. There is no better use of 10 hours of your time.

Exception: When Direct Offers Might Make Sense

In rare circumstances, accepting direct offers without full competitive process may be justified:

1. Extreme Time Pressure

• Health crisis requiring immediate liquidity
• Imminent foreclosure with no time for marketing
• Partnership disputes requiring rapid resolution

Even here, abbreviated 2-3 week process to top 5-10 buyers usually yields better results.

2. Truly Unique Buyer

• Adjacent property owner paying premium for assemblage
• Hospital system acquiring for strategic campus consolidation
• Tenant exercising purchase option or right of first refusal

Still wise to test value through broker opinion before accepting.

3. Relationship-Based Transactions

• Selling to junior partners in practice transition
• Family member or close colleague buyers

Even in relationship transactions, obtain independent valuation to ensure fair pricing.

Conclusion: Your Property Is Worth What the Market Will Pay

The fundamental principle of real estate valuation is simple: properties are worth what willing buyers will pay in competitive, informed markets. A single direct offer—no matter how attractive it seems—does not represent market value.

Accepting direct offers without testing the market through competitive processes is one of the costliest mistakes physician property owners make. The convenience of avoiding a 60-90 day marketing process is rarely worth hundreds of thousands or millions of dollars in lost proceeds.

If you receive an unsolicited offer, view it as a market signal that your property has value—but not as a definitive indication of what it's worth. Take the time to engage specialized advisors, understand true market value, and create competitive dynamics that maximize pricing and terms.

The few months invested in proper competitive process will be among the highest-return time investments of your career—generating hundreds of thousands to millions in additional proceeds while ensuring you receive true market value for an asset you spent decades building.