The age-old commercial real estate question, “How long is it going to take you to sell my property?” This is something I have been asked at least once from every single client I have ever serviced. So, what is the answer to this, often dreaded, question? I think in most cases the majority of commercial real estate Advisors would answer, “There is really no way to tell. Some go under contract the first day we have it listed, and some properties sit on the market for years and years.” However, in my mind that is not the case.
There is always a good answer to “when will my commercial real estate sell?” and lucky for us that answer is always the same! The answer is simple and is my response 100% of the time. “Well Sir/Madam, that all depends on how we price it.” You see, it’s all about the money and the answer is incredibly simple!
Typically when I sit down with a potential client to discuss a new commercial real estate listing I already have three prices figured up and ready to go for when the big question inevitably comes my way. People like options, and I find that this is one of the best ways to get a potential client to agree to a fair sales price.
So what do these three commercial real estate prices I spoke about consist of? What do you mean pricing options? Provide your client with all three numbers from the below options and give them a few minutes to process the information, and hopefully start to ask some questions.
Pricing Option 1
“The number I’m about to give you is the number that will take the longest amount of time to generate a sale, IF it ever generates a sale.” This is going to be a high number, a number that only exists in its own little fantasy land with a resident of one…your client.
In order to actually ever obtain an offer for that number all the stars will have to align, during the spring equinox on, an even numbered year. In all seriousness, I am not saying it’s not possible but it is going to take a very specific owner occupant type of buyer.
Pricing Option 2
The second pricing option that I give the client is a “will possibly sell in 6 months to a year” number. This is a number that I have researched thoroughly and that is right at, or slightly over, current market rate for the area. It’s not going to fly off the shelves at this number, but it should at least still generate some interest in the commercial real estate asset and a phone call or two.
Pricing Option 3
The last pricing option that I give a potential client is my “fire sale” number. This is the number they will least like to hear, but If your client absolutely positively needs a check in their pocket in the next 90-180 days then they should consider an initial asking price that is, or is very close, to the “fire sale” number.
Bonus Pricing Option
Yes, I know I said there we’re only three pricing options, but this option is for you, the commercial real estate Advisor. As a licensed expert in the field you have to be in the position to be able to turn down the listing if the client insists on listing it at a price that your research shows to be well over current market value.
Being in the position to turn down the listing does two things: First, it shows the client that you are well informed and confident in your research and second, it makes them take a step back and think, “Wow maybe my number isn’t realistic. This Advisor is going to pass up a chance to make a six figure commission just because he doesn’t think it’s worth his time to market a property that will likely never sell anywhere near the crazy number I have in my head.”
Bottom line, listing a property for substantially more than its worth hurts your client more than it helps.
The first two weeks that a commercial real estate property hits the market are critical as this is the time that every new listing gets the most views. Its fresh, it’s new, it’s exciting. The first thing most commercial real estate Advisors do every morning when they get to the office is go to their online listing site and check to see what new listings have popped up that may work for one of their clients.
It is extremely important that when one of these Advisors click on your listing for the first time that the price they see is in line with similar properties in the market. If Joe Q. Real Estate clicks on your fancy new listing and sees a $1,000,000 price tag on a building that he knows is worth about half that, he will chuckle quietly to himself then completely disregard the new property and move straight on to the next one. You know, the more reasonably priced listing that he actually has a chance to make a commission on.
The Advisors first view has left such a bad taste in his mouth that in 2 months when you finally get the balls to convince your client that he has priced himself out of the market and blast it out to all the Advisors again with the reduced price, 95% of them won’t give it the time of day the next time it pops up.
Now that you know the three pricing options, and how critical the first two weeks on market are, I will once again say the answer to this question is, “It all depends on how aggressive you are willing to get on the pricing.” In the car business they like to say there is an ass for every seat if you’ve got the money right! The same holds true in commercial real estate. There is a buyer out there, just make sure that when they coms across your listing for the first time your client hasn’t priced himself out of the market. If you have questions, or want me to shoot it to you straight on how much your commercial real estate is worth, contact me at [email protected] or 225.367.1515.
About Troy Burton – Troy Burton has an extensive 15-year background in real estate sales within the Baton Rouge market. He was recruited into the commercial real estate industry in 2013, and hit the ground running due to his experience and vast network of connections. Troy has represented various buyers, sellers, landlords and tenants in over a hundred real estate transactions over the past few years. Troy also specializes in property assemblage, retail leasing, and the sale of investment properties. He is committed to earning a reputation for being one of the most hard working, knowledgeable and trustworthy agents in the area. If you would like to contact Troy, you may call him at 225.367.1515 or email him at [email protected].