Why Can’t I Sell My Tiny Office Building for $1M?
Selling your tiny office building for $1 million is a bit like winning the lottery: there’s a small chance you can do so, and a much larger chance that you’ll never be able to do so. See, if you found someone who had the cash and didn’t require an appraisal on the building before buying it, you’d be in luck. $1M, sold, to the highest bidder!
However, most people buying an office or industrial building need to get a mortgage to pay for it. Banks won’t give a loan on a building that doesn’t appraise. You may well love the building and think it’s heaven on earth—but the bank sees dollars and cents, and nothing more.
A good broker will go out and find sales comparable (also known as comps) on similar buildings to determine the price of yours. Don’t think that a brand new high rise is a comp for your old shabby 1950s office building. Realism is key here! One has to compare apples to apples. When you look for comps, find a similar building that has sold in the last 12 months, and come up with an average cost per square foot. If a property has a lot of extra land, you’ll have to value it differently. Land=value.
As a rule of thumb, I usually throw out the highest and lowest comp. That should leave you with a range of prices per square foot. You can then multiple your square footage to come up with the sales price, and voila! You now have a range of what you can ask for the building. Good luck!
Photo Credit: “Safe Locker With Golden Bars” by renjith krishnan Source: freedigitalphotos.net