Average Overstatement of Square Footage in a deal?
We've been working through the purchase of stated 5,400 sq. ft condo. SBA 504 is approved and financing is ready.

Prior to execution of the purchase agreement (which has been lawyered by both sides), we requested a walk through to shoot some measurements of this condo.   It's stated \~2,000 sq. ft. ware house + 3,400 sq. ft. office (1/2 of this office is 2nd floor space).

We do the dimensions (accurately), it's about \~1,700 sq. ft. warehouse, 2,800 sq. ft office, and \~300 stairway / vestibule.  So call it 4,800 sq. ft actual.  We priced and agreed to the deal at $91.5/sq. ft. for 5,400 sq. ft.

Offer was $500k, and I said, okay, $460k now (it should be more like $440k for 600 missing sq. ft).

I knew it was going to be less than 5,400 sq. ft, but where would you put 600 missing sq. ft in the spectrum of seller | broker malfeasance / innocence?

The seller's broker was there and was incredibly salty and incredulous that we are requesting a price decrease.  She started going on about drawings and we asked for them, and she said doesn't have any, and was pretty flustered we owned a $15 laser measurer.

Side question:  The seller is really salty that we are pushing on these "due diligence" items and holding their feet to the fire prior to executing a contract.  They think we are stalling intentionally because we have no intent to proceed (and yet we hired and paid an attorney...?).  Am I acting in bad faith?   I think all the brokers just want a closed purchase agreement so there are no more showings and my attorney just wants more redline hourly circle games versus me and the buying broker really finalizing the contract and the lawyers executing the sale.

I use to think buying a house with a ridiculous process, but commercial real estate takes the cake.  What an insanely expensive / litigious process versus buying a house.
[{"id": "irtw3j8", "text": "In my experience, \u201closs factor\u201d varies from market to market, mostly based on who has the upper hand in the market. But this should be easy: square footage should be in the condo plan. Just look it up and go with that, since your lender will use that as well.", "replies": [{"id": "iru18yb", "text": "I'm getting a bunch of pushback, that I'm acting in bad faith, and should be executing a contract and then working the price through a 30 day due diligence period....  Is that BS?\n\nI'm actually trying to just get the contract nailed down, call out any blammies, and sign the darn thing and move on...", "replies": [{"id": "irut1pg", "text": "That is the typical process of renegotiating after you have an appraiser and banker review the square footage along with renegotiating based on a property condition assessment.\nYou can reframe it and state you agree to this purchase amount per square foot based on you're measurements.\nThe seller broker is terrible that they can't even provide supporting docs showing square footage. yet complaining about you doing your own measurements.\nYou maybe dealing with more surprises if this is a condo, when you start looking at condo docs and fees.", "replies": [], "depth": 3}, {"id": "irv2du2", "text": "You\u2019re pretty clearly acting in bad faith. If you wanted to retrade that\u2019s fine. I\u2019ve done it on almost all my deals as a principal. But stop with the act. \n\nUnless the building literally shrunk from the time you signed the PSA until you measured it, you generally know the size when you make the offer. And you make the offer based on what you think the property is worth, or can be purchased at. \n\nIf exact square footage was so important to your operations, you would\u2019ve measured prior. You didn\u2019t. \n\nYou put in a price. It was given a price per SF based on the price. And now you want to negotiate it down. \n\nSaying that pricing of comps go for $100/psf means dogshit because I guarantee you have no clue if the comps ALSO measure load factor or if it\u2019s measured on exterior sf. \n\nYou just want a cheaper price. Period. \n\nAnd you can very likely get it. Especially since you called their bluff on getting building plans. But come on. Quit playing the victim.", "replies": [{"id": "irv53mq", "text": "Spot on!", "replies": [], "depth": 4}, {"id": "irw138f", "text": "It's a really curious system (like I said, I'm not doing this full time -- thank god).  \n\nWhat other transaction do you engage in where there is a \"loss factor\" in terms of what you are buying?   Do you anticipate a 10% loss factor at the gas pump?\n\nAm I the only ethical person who doesn't use a \"loss factor\" when I measure and sell my house?\n\nSo the alternative is if we hadn't made some measurements, executed the contract, pay $10,000 for our various assessments, and then find this out...?    \nSeller is still marketing the property and taking showings.  If they get a higher offer, I can't imagine they are going to feel bad about taking more money off the table.  \n\nIf somebody says the warehouse is 2,000 sq. ft, and it comes in at 1,700 sq. ft....?", "replies": [{"id": "irw230o", "text": "Loss factor is something that is REAL in certain instances (common areas in large office buildings, for instance), but has larger been distorted since there are no rules regarding them except for residential (most states).", "replies": [], "depth": 5}, {"id": "irwn4j9", "text": "If you by a 2\u201d by 4\u201d, it\u2019s really a 1.5\u201d by 3.5\u201d. \n\nBut you need the stud, so you buy it. You don\u2019t need the 8 cubic inches (x length). No. You need the stud.", "replies": [{"id": "irwv3tc", "text": "They should have signed our original offer instead of red-lining it and request a bunch of changes... They would have had us under contract and $10k in the hole going through all this of this before we caught this.\n\nHonestly, it seems better for them we made the measurements, we've brought this up versus taking the unit off the market for 30 days, and we exercise our due diligence exit on day 30 and having to pay a bunch of legal fees, bank appraisals, and at the end we are at the exact same point that they marketed and have made a claim in the PSA which is unsubstantiated   That's what everyone says we should be doing, and I don't get that logic one bit, other than the CRE tribe likes doing things this way.\n\nWe showed up to this condo, spent 10 minutes walking through it, put together an LOI and started on financing.   None of the brokers offered to hang for 2 hours while we measured the unit which supposedly we should have done earlier.   Why would I spend 2 hours doing detailed measurements, if the seller isn't in agreement on price from their list?  \n\nLikewise, why would I spend 2 hours doing measurements if the financing is a total dud (it's not, we qualify up to $2MM if really wanted to get after it...).\n\nThere's no re-trading in my mind at least, since we haven't signed a contract.  I'm doing this outside of the contract at this point and there's a bunch of empty exhibits about office furniture and all kinds of shenanigans since the owner went out of state and a whole bunch of loose ends.\n\nAnd the answer from everyone is we should just \"go under contract\" and pay legal fees for the two respective attorneys to differ about details and generate 27 versions of the end contract.\n\nI sure get the appeal of a lease deal...   Everyone is selling their property with overstated sizes / no agreed framework and then is saying \"what sort of feeling do you get from this box\" and in reality the only feeling I get is the money I save vs. leasing another box....  The difference in annual rent on a box size is $14/sq. ft in my market, so $8,400 a year is how much I care about the difference in space.   $8,400 bucks is a big difference in a baby deal to make the numbers work.\n\n(This was exactly a side question -- my principal inquiry is just how do folks tie up this square footage calculation, since I realize there inevitably is conflict on this.  All of the CRE people are annoyed in this transaction, and yet no has told us to buzz off since we have the bag of cash... so, clearly the price is not that appetizing to the market.  I'm sure if the owner has any drawings).", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "irwi3ab", "text": "pretty much it.. you offered a price for the unit. it met your needs (room count, layout, etc). the price is the price.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "irtw7a3", "text": "Also, fwiw, less than 10% loss factor isn\u2019t bad at all.", "replies": [], "depth": 1}, {"id": "irtz4f2", "text": "never heard of agreeing to purchase a building at $/sf.  you might convert the price to a $/sf to compare to comps, but i have never bought/sold a property (except land or property outside of US) on $/unit.\n\nyou can measure a building every which way to sunday.  even boma measurement can have variances.", "replies": [{"id": "iru0fql", "text": "I'm in for one purchase:  but it is like clockwork out in Chicago here:  $100/sq. ft is like prevailing price for right now for flex spots.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iru71gl", "text": "Does your market go off of paint-to-paint?  Center of wall to center of wall?  Or horizontal air space based on condo plat survey for the condominium?  Mezzanines?", "replies": [{"id": "iru7i09", "text": "All great questions.  So far, based on this one unit...  Seller makes up a number and you get to decide if you think the number is a real number or not. ;)  \n\n\n(You are right, it's a 2 story office, so does the mezzanine count as a full floor for pricing... got me).", "replies": [{"id": "irubzf7", "text": "You mention a laser measurer, so you are only measuring paint-to-paint. I've never seen a commercial property measured that way, it's usually middle of the demising walls and to the outside of any exterior walls, which can easily add a bunch of square feet. You need to find out how square feet are defined in your contract, and if it is not, then industry standard takes over, which is BOMA. You would then need an architect to measure square feet for you. Did the contract mention the actual square footage of the condo, or are you going off of marketing materials? Is anything actually based on square feet in the contract?", "replies": [{"id": "irucqso", "text": "The contract did mention square footage, which was a redlined item from the seller's and changed from the marketing materials.  The dimensions aren't defined in the contract, so I'm open to the idea of an alternative measurement if there is something we can all point too once I am in the \"bucket\" so to speak.", "replies": [], "depth": 4}, {"id": "irw16ru", "text": "This is exactly it.  Whenever I lease a commercial space the SQ footage I list is from demising wall to wall.  For commercial space this is usually how it is.  As long as the interior walls are not load bearing a tenant can possibly reconfigure the space how they like it altering the usable SQ footage.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "irubn6n", "text": "The price of the building is the price. You are converting the price based on $/sqft which could be a valuation metric you use. It that\u2019s not the price you pay", "replies": [{"id": "irukwy8", "text": "Fair, but  of the price per square isn't reflecting the marke (because there is a bunch of feet missing from seller &amp; market/ appraisal calculations) you're going to run into an appraisal issues especially with a 504 loan.", "replies": [{"id": "irusrnq", "text": "Yes, I thought of this too since on all the paperwork I have 5,400.   The bank wants us to order up all these expensive surveys and appraisals and it's like if I go under contract and spend  $10,000 on various crap, the seller has me pinned and a bunch of sunk costs versus getting the price right and tie'ing out a real appraised value", "replies": [], "depth": 3}, {"id": "isu41hf", "text": "So, guess what... a week later: the seller agreed to sell the unit at $90/sq. ft based on the smaller dimensions....   There's a lot of hocus pocus about \"what you see if what you get\" here, but I don't see how not focusing on sq. ft per cost (to equalize vs. a rental) wouldn't be reasonable...?  \n\n\nIf I can lease for $10/sq. ft, the only metric I care about is how much I am paying per sq. ft for the equivalent purchase....", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iruer19", "text": "https://www.boma.org/BOMA/BOMA-Standards/BOMA_Floor_Measurement_Standards/Industrial.aspx", "replies": [{"id": "irugg0l", "text": "This.\n\nBOMA measures from the exterior, not the interior. I can assure you the $15 laser isn\u2019t accurately reflecting the actual square footage.\n\nEdit -\n \nI would put it under contract and have a new survey done (which is required by your SBA) and then use that as leverage to renegotiate prior to the expiration of your feasibility period.", "replies": [], "depth": 2}], "depth": 1}, {"id": "irunvm7", "text": "I mean, everyone is retrading deals just because right now. Your cost of debt is going up every week. They should be thankful you\u2019re not just walking away.", "replies": [{"id": "irusjbb", "text": "Yeah... There's a bit of that too.   The numbers pencil as an owner / user, but Chicago commercial real estate is not a great appreciating asset either.   You gotta scrap to make the numbers stay within the target.", "replies": [{"id": "iruvd71", "text": "If they\u2019re a motivated seller, then you should take your pound of flesh. The next buyer won\u2019t hesitate.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "irv5ugo", "text": "Since this is a purchase and not a lease, you stick to you offer price. Didn\u2019t you pull any city records in your DD? \nLaser measure is only good for leases because it measures paint to paint as others have mentioned. But in a purchase, you go with public records sq ft.", "replies": [], "depth": 1}, {"id": "irvgp33", "text": "Call the town and see what they have on record since they should have it for tax purposes. It sounds like you\u2019re a user since you\u2019re going through the 504 process. Nothing cost more than a lost deal when you need to operate a business out of it and time kills deals. If you continue to drag your feet or \u201cput their feet to the fire\u201d the seller can very easily get deal fatigue and still not choose to sell to you. I\u2019ve seen it happen", "replies": [{"id": "irw0i7c", "text": "Yes, we had our attorney issue a Freedom of Information request to the city to request the records (evidently this is how this is done in my neck of the woods).   Theoretically there could be some kind of square footage in there.", "replies": [], "depth": 2}], "depth": 1}, {"id": "irz41qv", "text": "You measured the interior sq feet and often in commercial property ,its measured on the outside wall or from the middle of a party wall. Im not sure this would makeup 600 sq ft but that could have been how the space was originally measured", "replies": [], "depth": 1}]