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If you own commercial real estate, there may come a time when you decide to sell. Selling may make sense for your overall investment plan, or you may have a mortgage coming due. Your financial goals and overall market conditions may also influence your decision to sell.
Timing your sale can affect the profit you make on your transaction. If you understand the real estate marketing process and are patient, you can develop a strategy to get the best price possible. Sellers who choose the right broker often see great results, too.
To plan the timing of your sale and get the best price, follow these steps:
Consider the sales process
The average sales process for commercial property in a major market usually takes about six months. It takes two to three weeks to gather information and create a brochure. Then another month or two to get as much exposure as possible. Sending out contracts and waiting for buyers to get financing can take several more months.
In some cases, sellers may not be able to take this period into account. Owners may decide to wait until market conditions improve and risk delaying the sale for too long. Also, when considering the selling process, keep in mind that commercial real estate is not seasonal. However, you may need to keep holidays in mind. For example, at the end of summer, people may be traveling.
Be a patient seller
When there is uncertainty in the market, buyers and sellers tend to prefer to stay on the sidelines. Buyers may decide to wait to see if more opportunities come their way later. I have seen this happen recently, starting in mid-2022, when interest rates began to rise. Long-term investors may be willing to take on debt at a conservative level. Rather than trading in a high-interest market, they may pause purchases until conditions improve and interest rates fall.
With this in mind, if you're a seller and you can be patient, you'll increase your chances of getting the best outcome. You can wait until the buyer is ready to act and then evaluate the bids that come in. If you can avoid a situation where you have to trade, you can spend your time looking for a higher price. You can learn more about taking a long-term approach in my conversation with William Rudin, co-chairman of Rudin Management Company, on my podcast, “The Insider's Edge of Real Estate Investing.”
Work with the right broker
Your relationship with the broker who will oversee the selling process on your behalf can make a difference in the outcome. We discuss how to work with a broker in step 3 of the book “The Insider Edge of Real Estate Investing.” Make sure you know their plan for selling the property. Is the broker trying to get as much exposure as possible? If so, you'll be more likely to generate interest in your property and get higher bids. Also, look at the broker's track record and whether they have experience dealing with the type of property you want to sell. Evaluate the broker's team as well to see what type of resources and attention you can expect during the selling process.
Selling commercial real estate typically involves multi-million transactions and is not completed overnight. Understanding that the selling process may take at least six months, being a patient seller, and choosing the right broker can help you navigate the complexities of the market. This approach will help you maximize your return on investment and set you up for long-term success.