The Potential Cost of Delay
When selling your commercial real estate asset, you want to get the best deal possible. For most people, this means getting the highest price possible. But what happens when offers don’t come in, and when one does, it’s well below asking price? Is it smarter to wait and hope a full price offer comes in eventually, or do you take the lower price to get the asset off your hands? Obviously, this will be a different calculation for everyone, and will change depending on a number of different factors. But you should be aware of the potential cost of delaying accepting offers. You may spend more money holding onto your asset hoping for a better price, so when that better offer does come in, you may not actually net more money. Here’s a few ways hanging onto that asset could be costing you:
Real Estate Taxes
Real estate taxes don’t stop when you move out of your building. As long as you own the property, you pay. For example, a property in Alexandria on the market for $3 million pulls in as much as $30,000 in real estate taxes. Is waiting another year for an offer worth $30,000? What this might mean is accepting an offer below asking to save yourself paying taxes on a vacant property.
Utility payments add up
Unless you want to deal with other problems down the line, you’ll need to keep the utilities at a reasonable temperature in your property while it’s on the market. While your payments will probably be much lower, you’re still paying. You can’t let the pipes freeze in the winter, or the space get hot and musty in the summer. The longer you hang on to your asset, the more you’ll be paying in utilities. The sooner someone else takes over, the sooner those payments are off your hands.
Maintenance/ insurance costs
Inevitably, in the time your property sits on the market, something will have to be fixed or updated. A vacant property means no one is there looking at it all the time, so issues take longer to become apparent. An undetected roof leak can cause major damage and expense. Check with your insurance agent if your property is going to be vacant and on the market. Coverage and costs can change. The longer you hold out on offers, the higher risk for a major risk arising.
Buyers lose interest
When your asset goes on the market, often there is a surge of interest. But if it sits, people often lose interest. They’ll wonder why it’s been on the market so long. If you hold out on those initial offers, it could be a while before you see more. If you wait on your perfect, buyer, you must take into consideration a realistic market price, current conditions of the market, and what the potential cost of delaying accepting an offer will be.
If you need assistance selling your asset, or would like to speak with an expert about options regarding your property, click here to contact Tartan Properties.
Tartan Properties Commercial Real Estate Services is an independent commercial real estate brokerage and consulting firm focused on office, industrial, and flex properties in Washington D.C. and Northern Virginia. Using the latest information technology and market knowledge, TARTAN provides creative and professional solutions for its clients’ real estate needs.
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