July 30, 2020

Selling Commercial Real Estate

The Commercial Real Estate world, for a first-time buyer or seller, can be daunting without proper guidance. In this five part series, we’re going to be sharing the process that TARTAN goes through with our own clients to try to demystify selling, buying, and leasing commercial real estate.

Selling Commercial Real Estate

The TARTAN Way

Selling commercial real estate is a transactional process, and the thoroughness of your process will dictate how successful you are. By following the basic steps in TARTAN’s Selling Process, you are more likely to achieve your objectives of pricing and timing. Our goal is to get you to settlement having achieved the market price in the shortest amount of time with as little drama as possible.

Preparation

Once you decide to sell your property, there is often a temptation to rush to market. First, we must do the necessary pre-marketing research so that we present your property to the public in the best possible light with detailed descriptions and professional quality photography.

  • Property Valuation. TARTAN will help you accurately determine the value of your property with a combination of market-based data and our years of experience. We will consider the property’s value both to an owner occupant and to an investor. Realistic market-based pricing will always lead to the best result. We will encourage you to be realistic when setting a listing price. Ultimately, overshooting the market with an inflated listing price only increases the time it takes to sell the property.
  • Survey the Competition. What other similar properties will prospects be considering? Know the competition in the market and the velocity in which properties are selling. This will help not only with pricing your asset, but in developing an effective marketing plan, and in setting our expectations regarding a reasonable marketing time.
  • Promote the Product. We will develop detailed and compelling marketing materials highlighting the property’s features and strengths to answer any specific questions a prospect will have. The marketing package for prospective buyers is disseminated electronically to active commercial brokers, targeted investors, and potential, likely users for that type of property. TARTAN’s online presence provides maximum exposure for our client listings, both on our website as well as on our social media platforms.
  • Stage the Property. The practice of staging properties was once done only in the residential real estate industry, but the 2008 market crash demanded that greater attention to detail be paid in the commercial real estate industry as well. We’ll recommend that you fix the small issues and take care of any obvious flaws in the property. Now is the time to catch up on deferred maintenance. Consider modest enhancements. Don’t give a prospective buyer obvious negotiating leverage.

Engaging the Right Prospects

  • Tours and Broker Events. Once we have a comprehensive understanding of your property, we can gather qualified buyer prospects as well as specific commercial brokers who can bring buyers to us. Touring prospects through a property is not just about showing up to open the door. There is a method to leading a prospect through the property and telling the story to create value in the mind of the buyer by highlighting features and benefits of your property over others.
  • Qualifying Buyers. We quickly assess if a prospect is truly a likely buyer for the property. Does the zoning work for their intended use? Can they afford to purchase? Can the space be adapted to meet their needs? We will look for answers to all of these larger questions engaging negotiations prematurely, which simply wastes your time and resources.

Negotiations & Sales Contracts

  • Prepare for Negotiations. We will be ready for any and all objections that a buyer may put forward to drive down your price. You should know in advance the real costs of any obvious repairs or upgrades to the building. Don’t negotiate in a vacuum. Know what the most important pieces of the deal are to you. Remember that price is not everything; sometimes to get terms you need, you may need to make concessions. Be creative and flexible. Understanding what the buyer needs and finding a way to accommodate them will help you achieve your needs and wants in the transaction. Also, be patient. Unless you’re in a “fire sale” situation, be responsive to buyers but deliberate in your actions. To get the best deal, you can never be in a hurry when negotiating.
  • Plan for the Proceeds from the Sale. What do you plan to do with the money you receive when you sell the property? Have you considered the tax implications of a lump sum at closing? If you don’t need the proceeds for other purposes immediately, you might consider a tax-deferred exchange to avoid paying capital gains tax. Also known as a “1031 exchange,” this Internal Revenue Code mechanism allows you to defer paying taxes or limited amount at the time of the exchange.
  • Get Legal Representation. There are many complexities to commercial sales agreements including contingencies, personal liability, estoppel certificates and special warranty deeds. Make sure you have a skilled real estate attorney reviewing and drafting all legal documents to manage risk and minimize liability.
  • Watch the Calendar. Follow all the dates set out in the contract for the buyer’s financing, earnest money deposits, and study period. Know exactly what conditions the buyer is allowed to terminate the contract under, and when the purchaser’s money goes “at risk” at the end of the study period. Staying on top of the details can give you an advantage.

 

The sales process for commercial property can be complex. Working with the experienced team at TARTAN to follow this process can ensure a more successful outcome with your real estate transaction.

 



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