May 10, 2017
tartan properties

Tips For Selling Commercial Real Estate

March 1, 2016 -Perhaps this is the first time you have undertaken selling commercial property, or perhaps it has been a number of years since your last transaction. We have complied this short list of Tips for Selling Commercial Real Estate that we hope will aid you in your next deal. In either case, it’s good to know the key factors that can make the process run more smoothly and get you to closing at a price and in a time frame to meet your expectations.

  1. Realistic Valuation. Accurately determine the value of your property through market-based and factual data. The property is actually worth what someone will pay for it, not necessarily what your city assessment says or what you think it is worth. Be realistic and not emotional. If you overshoot the market with your listing price, you will only increase your marketing time to get to closing.
  2. Position and Promote the Product. Select a broker that has specific product knowledge of your property type and can implement a coherent and systematic marketing strategy. Also, develop detailed marketing materials not only highlighting the property’s features and strengths but answering as many specific questions about the property as a prospect might have. This will save time and energy with each of the prospects you will interact with.
  3. Survey the Competition. What other similar properties might your prospects be considering? Know the most direct competition in the market and how tight the competition is overall. This information will help you set pricing, determine an effective marketing plan, refine buyer prospects, and establish expectations about potential marketing time.
  4. Stage the Property. The practice of staging properties was once done only in the residential real estate industry. As the market became more challenging after the 2008 crash, attention to detail became more important in the commercial real as well. Fix the small issues and take care of any obvious flaws that stand out. Catch up on deferred maintenance; consider modest enhancements. Don’t give a prospective buyer cause to negotiate against you on the small things.
  5. Prepare for Negotiations. Be ready for all the objections that a buyer may put forward to drive down the price. Know in advance the real costs of any obvious improvements or upgrades to the building. You don’t want to 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 (such as a sooner or delayed closing date), you may need to make concessions.   Also, be patient. Unless you’re in an urgent or “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.
  6. Consider the proceeds from the sale. What do you plan to do with the money you receive when you sell the property? If you don’t need it for other purposes immediately, you might consider a tax-deferred exchange to avoid possible capital gains tax exposure. Also known as a “1031 exchange,” this Internal Revenue Code mechanism requires no tax or limited tax due at the time of the exchange.
  7. Get Legal Representation. You probably have heard this before but it bears repeating: You wouldn’t operate on yourself, so why would you try to sell a building without a real estate attorney? There are many complexities to a commercial sales agreement including estoppel certificates and special warranty deeds. Make sure you have a skilled real estate attorney looking over your shoulder as go through the process to manage liability and risk.
  8. 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 the buyer is allowed to terminate the contract for and know when the purchaser’s money goes at risk if they don’t go to closing.

If you follow these tips for selling commercial real estate you will can avoid many of the headaches of the sales process that can be complex and anxiety producing. We always recommend assembling an experienced team and have a well thought out plan in place so a successful settlement will be more likely.

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