The age-old commercial real estate question, “How long is it going to take you to sell my property?” This is asked with every seller ever involved in selling his or her property. So, what is the answer to this unanswerable question? Survey says — There is really no way to tell. Some go under contract quickly, and some properties stay on the market for years. In the end, the answer always comes down to PRICE – CONDITION – LOCATION!
There is no good answer to “when will my commercial real estate sell?” But the simplest ‘place holder’ is that all depends on how its priced to have any chance of selling! In the end, it’s all about the money and for those properties underperforming, in poor condition or just typically unsellable based on location or stigma, the best option is often to work with investors who can refurbish and rebrand the property to put it in sellable condition.
When I discuss a commercial real estate listing with our clients, I already have multiple prices ready to offer for when the question inevitably arises. Clients like options, and at Nouveau, we find that this is one of the best ways to get a potential client to agree to the best means to liquidate their property when it’s not in sellable condition – whether physically, financially or based on management. We provide every client with these three numbers from our options list and give them a few minutes to process the information, and hopefully start to ask some questions.
Your First Choice
The first figure is the steep hill that will take the longest amount of time to generate a buyer – if it ever generates a sale. This is the ‘Home Run’ number, and only exists in its own little fantasyland with a resident of one…the seller!
For such an offer – the moon and stars must align, during an eclipse, on an odd numbered year. The reality is that this is what most sellers expect, and though it’s possible, it will take a buyer who wants exactly what the sellers property offers – in other words, your odds are better in winning the lottery!
Option Number Two
This option is a “likely to take 6 months to a year” option. This number is based on market research thoroughly and is at current market rate for the area. It’s not going to sell quickly at this figure, but it may generate some interest in the property with a potential phone call or two – and a kicking of the tires.
The Rational Option
The last option is the ‘reality price’ number that investors will sniff out and validate as a real potential deal – and they’ll respond. This number will garner interest and at least catch investors attention, but If you absolutely as a seller positively needs a check in your pocket in the next 90-180 days – then consider this as your initial asking price, or very close, to that reality number.
But Wait – There’s More
I told you that there are only three pricing options, but this option is especially for the honest commercial real estate professional consultant – Nouveau Enterprises being one of them. As an investor and experienced advisor, former realtor and mortgage originator, I must always be prepared to turn down the listing if a potential client insists on a price that my research shows to be well over current market value – or more importantly, well over the value that their specific property would validate. What sellers must be in the end is to follow “The Rule of Three” 1. Honest with themselves – 2. Prepared to offer a ‘win-win’ for the seller and themselves, and 3. Deliberately leave some ‘meat on the bone’ for the buyer. If a seller can’t check these three off when pricing a property, their listing if in a commercial brokers’ hand, could ultimately end up on Loopnet where commercial property listings go to die a slow death.
To be prepared to turn down a listing as I am always prepared to do (and do often unfortunately) accomplishes the following: One: it shows the seller that you’re well informed and confident in your research and Two: it causes the seller take a step back and think about their decision. What I’ll hear occasionally is “wow maybe my number isn’t realistic.” This guy is willing to pass up an opportunity to earn income because he thinks I’m greedy, lack business sense, and it’s not worth his time to provide his services on a property that will likely never sell anywhere near the apparent absurd price I’ve suggested. In the end, listing a property for far more than its real intrinsic value hurts the client, wastes the buyers time and creates tension and a lack of trust all around.
The first 10-days that a commercial real estate property is listed on the open market are essential to its ultimate success, as that is the period in which new listings receive the greatest number of views. It’s the newest listing, it’s unknown, and it’s catches every investors eye. The first thing commercial investors and agents do daily is go online to check new listings and see what new listings have surfaced that may work for themselves or one of their clients.
It is extremely important that when one of these investors and agents click on a listing for the first time that the price notes is in line with like properties in that market and class. If they pull your listing and find a $1,000,000 price tag on a building that’s worth just over half of that figure, he’ll quickly disregard your property and move on to one with a reality based asking price. You see, the more reasonably priced the listing is, the better chance it has to sell in less than a year if at all!
When commercial agents list a property at that ‘Home Run Price’ it typically leaves such a bad taste in the mouth of anyone viewing it that it’s essentially dead in the water, and when the broker finally gets up the nerve to convince their client that he has priced himself out of the market and blast it out again with the reduced price, the property is already DOA and no one cares as they know that a greedy owner is on the other end of the deal.
So there you have it – 3-4 pricing options, the critical nature of the first 10-days the property is on the market, what do YOU think the answer is to the perverbial question “how long will it take to sell” might be – at the end of the day, it’s still “It all depends on how reasonable you are on the list pricing.” In the car business they like to say there is an ass for every seat if you’ve got the money right! The same holds true in commercial real estate. There is a buyer out there, just make sure that when they coms across your listing for the first time your client hasn’t priced himself out of the market.
RESIDENTIAL REAL ESTATE FILLER CONTENT AS NEEDED-
THE NEW AGE OF RESIDENTIAL REAL ESTATE SUCCESS STRATEGIES-
Home sellers can get discouraged if they have their home on the market for a long time and have yet to get a single buyer to make an offer. Maybe you’ve spent a lot of money on home advertising, made a number of price reductions, and still, nobody calls you. After a time your home will become an expired listing. Do not despair because there are still actions you can take when your home does not sell.
Postpone Selling Your Home
It could just be the case that it’s not a good time to sell. If it’s a buyer’s market, perhaps you should take your home off the market and wait for inventory to drop. When there are fewer homes for a buyer to choose from, your home may be snapped up.
Timing can be everything, too. There are certain times of year that can be difficult to sell your home, especially tough because buyers expect bargains. You may lose money if you try to negotiate during holiday stresses. Selling in the winter is overall more difficult than during warmer months because there are typically fewer buyers. (It’s often a good time to sell a troubled home by comparison.)
If you can afford to wait, selling in spring might bring an offer because spring months bring more buyers into the marketplace. But if every other home is better than yours, waiting until spring will not help.
Consider Taking Out a New Mortgage
If you need to sell is based on financial reasons, it might make sense to take out a home equity loan, providing you can afford to pay a higher monthly payment. If your existing loan is an adjustable-rate mortgage, and a higher interest rate has raised your payment to the extent that you can no longer afford to pay it, you might be able to renegotiate a loan modification plan with your lender or convert that ARM into a fixed-rate mortgage at a lower interest rate.
Before you decide to borrow more money through a refinance of your existing loan or by taking out a second mortgage, first meet with a trusted advisor to discuss your financial situation. Don’t talk with any real estate professional who has a vested interest in your affairs. Speak with a tax accountant or your real estate lawyer.
Rent Out Your Home Instead
Some home sellers have no choice. For a variety of reasons, from job promotions to family-related matters, a home seller might be forced to relocate to a new area and leave an existing home behind.
Even if you can’t receive enough rent to cover your mortgage payments, paying a small amount of negative cash flow every month might be easier on your wallet than forking over thousands of dollars for a vacant house.
Some sellers make a killing through Airbnb or other short-term rental sites. If you can rent the home for more by the night, consider it.
Tips On Renting:
Be aware that many homeowner insurance policies do not cover a vacant house for more than 30 days; however, you may want to talk with your insurance agent about changing the policy to insure only the structure without contents.
Some HOAs prohibit renting or limit the type of rental periods you can negotiate.
Hire a reputable real estate management company to screen tenants and hire tradespeople if repairs become necessary. You don’t want midnight calls from tenants if a toilet leak.
Ask neighbors to keep an eye on your home and to notify you if they suspect problems. Give them your e-mail address or cell phone number to call in the event of an emergency. Encourage them to call the police and report suspicious activity.
Consider a Short Sale
If you’ve purchased your home before a market downturn and the market has since tanked, you may owe more than your home is worth. A real estate agent who specializes in short sales might be able to negotiate with your lender to accept less than your mortgage balance. Before you consider doing a short sale, here are a few things you should know:
Discuss the ramifications with a real estate lawyer to make sure you understand the consequences. Moreover, not every seller qualifies for a short sale, and not every lender will accept a short sale.
Realize that short sales affect credit, and redeeming a pre-foreclosure on your record could prevent you from buying another home for a while.
You may owe the IRS taxes on a short sale. You may receive a Form 1099 from the lender for the amount of forgiven debt, but that is considered standard protocol. Talk to your accountant about it. It might be nothing.
Offer Your Home on a Lease Option
You might talk to your real estate agent about doing a lease option purchase versus an outright sale. Lease options are appealing to borrowers who, for a variety of reasons, might not be in a position to purchase a home through conventional financing. Maybe they can’t decide whether to buy or rent. Make sure your lawyer reviews all documents before you agree to a lease option.
Lease options give a tenant the opportunity to purchase your home at a predetermined price later. For a tenant who is on the fence about buying a home, it lets them live there while deciding whether to buy.
Typically, lease option payments are higher than a regular rent payment, which might eliminate negative cash flow for you. A tenant who has a stake in the home might take better care of the home, and sometimes lease option agreements make the tenant responsible for all repairs.
Ask Your Employer About Relocation
If your employer is transferring you out of town, you might ask about a guaranteed purchase program. Many employers hire relocation companies that offer buyouts for employees. You might not even know that your employer has a relocation program if you don’t ask. It could be free money for you.
Lower the Price to Under Market Value
This option is referred to as a “fire sale” in real estate marketing lingo. It means reducing the price to a rock-bottom value that is attractive to the equity purchasers and cash investors who are always on the hunt for a steal. Anything will sell for the right price. Find out what that right price is by slashing it and then strongly consider whether you can live with the results. Sometimes the benefits outweigh the negatives.
And every so often, this strategy will result in multiple offers. Everybody wants what somebody else wants, even the home that you could not sell previously.
Call or email Nouveau Enterprises TODAY for a FREE consultation and more information about our services!