Five Biggest Mistakes Sellers Make

 

With the plethora of information that is just a couple of clicks away on the Internet, commercial real estate is becoming more and more “efficiently priced”, just as other tradable markets and as espoused by the economic theorists. Sophisticated buyers have quantitative tools to quantify the risks and returns.  With this in mind sellers need to avoid these top five mistakes:

 

1- don’t skimp on providing full information.  For income properties the most basic information used is the “rent roll”. These are typically spreadsheets that spell out the particulars of the various tenants of the property: square footage, rent rate, lease terms, etc.  These rent rolls should be as complete as possible otherwise the buyer is going to assume the worst which will reflect a lower offer price.  The buyer is going eventually find out these details during the contract’s inspection period at which time the buyer may very well look to “re-trade” the deal.

 

2- don’t be unrealistic on what your property is really worth.  While a lot of real estate may have values that are difficult to quantify (such as raw land or areas that undergoing rapid transformation or where there just aren’t many comps), most properties are going to fit into a general range. Just because you may have bought the property back during the last real estate bubble don’t assume you will be able to get all your money back.  It is only what the market thinks it’s worth, not what your cost basis is.   A good commercial real estate professional should be able to give a solid range of values.

 

3- don’t assume buyers are stupid or unsophisticated. If there is an issue or blemish with the property don’t assume it can be swept under the rug or ignored….they will likely be discovered during the due diligence inspection period and you will have just wasted everyone’s time and the price will certainly be “re-traded” (think price reduction). Some owners erroneously think their property should be marketed to the foreign buyers, assuming such investors are unaware of current real market values and trends…I have yet to find such a buyer and if I did I certainly wouldn’t hesitate  to bring them up to date myself as I don’t want to see either side of a transaction not have both eyes open.

 

4- don’t be rigid…be willing to compromise. A good deal is a win-win deal. Seldom are buyers going to pay the full asking price so adjust your expectations (and initial pricing) to allow for some negotiations and compromise.  Don’t get hung up on small inconsequential deal points or minutiae that take your eye off the big issues or stop you from getting to the finish line.  Make sure your legal counsel is also a deal maker not an attorney that will get everyone hung up on issues that have no real importance (unless you are ok with getting your legal bill jacked up needlessly).

 

5- don’t be indecisive. My biggest mantra has always been “time kills deals”.  When you have identified a strong buyer make sure your team is prepared to act timely and ready to make the deal.  Time is money and you never know how long until the next buyer will come along.

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