Friday, December 1, 2017

Are you a Commercial Real Estate Dreamer or a Seller?

Image attribution: www.pinterest.com
One of the nasty by products of a seller's market is an un-realistic seller - one who is motivated by the price he will accept vs. the best price his property will fetch.

Also known as dreamers, this brand of seller approaches the market in this fashion - "well, I understand my building has issues, but I still want more than it is worth."

We as commercial real estate professionals are then confronted with a dilemma; do I accept the assignment to sell the building - albeit at an inflated number with all of its fuzz - and hope the market will persuade him to be realistic? Or, do I turn down the listing and hope I'm contacted if the first guy fails?

Because available buildings are so scarce these days, too many of us take the assignment, let the market activity be the bad guy, and pray for divine providence.

So, to all you sellers of commercial real estate out there, before you send your broker into the market without a story - the reason for the price, the upside potential, a solution for the challenges - something, please consider the following:

Your broker is not a magician. Unless your representative is named Houdini, chances are he cannot remove a mystical rabbit from his hat - AKA find you the needle in the proverbial haystack. Buyers these days are savvy. They are successful business owners or investors who understand risk. Generally, buyers are willing to be flexible and work around problems - but not if the other side is un-realistic in its expectations.

The valuation your broker gave you is accurate. Brokers are paid to close deals at the highest possible price in the shortest amount of time. Period. Why would we tell you your building is worth half what you believe?

Your broker has considered the challenges. Countless are the number of buyer tours we conduct and amount of feedback we filter. When you contend "I know my roof needs replacement but I'm not willing to bend on my price" - we've heard the buyer's comments. "Well, if the seller is unwilling to fix the roof or reduce the price, who is supposed to pay for that?" Listen to your professional. He is telling you the truth.

Credibility is at stake - yours and the brokers. When a building hits the market fraught with issues, the market place reacts in one of two ways - wow! The seller must be smokin' the good stuff or the broker must have puffed the price to convince the seller to list with him. Either way is a loser. Typically, the universe of potential buyers simply ignores the new offering as unrealistic and unworthy of a second look.