Posted by Eric C on April 07, 2000 at 01:16:34:
Hi Scott -
A kill fee is just a clause that limits my liability on a particular deal to a previously agreed upon amount. Simple.
There are other ways to accomplish the same thing; I might use an option. That way I could lock in the opportunity to complete a deal, but not the obligation to do so. Using an option in this manner, my liability would be limited only to the option consideration (under most circumstances).
No matter how you accomplish it, limiting your downside risk is always a smart thing to do.
People spend a lot of time trying to improve their “batting average” when the time might have been better spent learning to limit their risks – that way, they can “play” more often. After all, you can only “win” if you’re actually “in” the game.
So, learn to limit your liability. Put a financial safety net under your deals. That way you’ll have the confidence to make more offers and close more transactions. And you’ll sleep better too - I guarantee it.