Correctly determining the on-target selling price for your commercial property is what can make the difference between a quick sale and a long, drawn-out process. Your commercial realtor should know the formulas and how to work the numbers that will determine the appropriate market value of your property.
Agreeing on that number can become a point of contention when owners want their property to list for a price that is unrealistic — and quite different than that recommended by their realtor.
Owning commercial property is good business! When that property houses a successful business, or, in and of itself, is property with escalating value, you hold a distinct advantage when you decide to sell. When either of those bottom lines is in the black, you and your commercial realtor have a firm foundation from which to set the value, determine the sell price, list the property and sell without unreasonable delay. If your property is troubled, for any of a variety of reasons, determining the sell price is a wholly different challenge.
Your commercial realtor should know that the numbers tell the story. However, in the marketplace itself, there are myths, hardcore beliefs and emotional persuasions that sometimes cause a seller to dig in their heels. Holding out for a sell price that is unreasonable for the specific market region can become costly, including the toll it may take in frustration, stress and disillusionment about your original investment.
Your trusted commercial realtor should look at the basic financial facts concerning your commercial property – the factors that influence your potential buyers. What is the condition of the property? What is the replacement value? Is the market saturated with similar properties? What is its historical income and projected, potential income — in the black or in the red? Occupied? Vacant? In addition to those (and many other factors that must be taken into consideration) is the important research concerning what similar properties are listed and selling for in your market?
Sometimes, you will get information you don’t like, with suggestions you don’t want to hear. Perhaps improving that profit margin with a higher sell price means repairs and renovations. Sometimes your advisor must dispel rumors about “what it’s worth.” They might have to encourage you to give up pie-in-the-sky-wishful-thinking numbers that are not grounded in sound, intelligent calculations and logical assessments.
A very large factor in the seller (or buyer) relationship with their commercial realtor is trust. Your commercial realtor brings many aspects of expertise to the table. He or she has no vested interest in under-selling your property! Knowledge of the marketplace, real estate disciplines and law, and experience are all working to your advantage. Confidence closely follows trust.
Remember that your commercial realtor knows you want to maximize the profit you can achieve with your sale. Your agent will be looking at every relevant factor to smartly position you for an appropriate listing, with quick and satisfactory results. He or she will walk you through the accepted and proven factors that must be calculated and considered – and respected – for your listing to be realistic, and your sale (or purchase) to move forward without unnecessary delay.
In my next column, I will discuss exit strategies for those of you who are thinking of selling in the next one to three years.