Commercial Sales Process
Selling commercial property is more complex than selling residential property. Buyers of commercial property have a different mentality than those of residential homes. Residential buyers tend to be concerned with the emotions of living in the home, while buyers of commercial property view the property as an investment designed to generate income. If the numbers make sense, a bidding war is likely to occur. If the numbers do not make sense, the sale could be tough.
Seller’s Goals Analysis.
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Most real estate brokerages assume that the sellers want all cash at closing. Receiving all cash at closing may or may not be in your best interests. The first step in selling a building is to determine the goals of the seller for selling it. result.
We ask questions such as:
We must point out that for those who qualify for Medicaid, your benefits may not be available if you have too much cash in the bank.
All of these questions are necessary to structure a customized transaction that will fit your needs. By doing so, our agents help you obtain greater negotiating power, and many times end up achieving a higher sales price as a result |
Property Valuation.
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While the valuation process may include finding comparable sales in the local area, the buyers of commercial property are primarily interested in the income that the building may generate. The value of a commercial building is directly tied to its income, and the value of the building is determined by dividing the net operating income by the capitalization rate for the area. Sometimes, the business owner happens to own the building the business is located in, and is selling the building and the business in one transaction. In this case, additional pricing considerations need to be taken into account as well.
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Marketing Packet.
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Every commercial sale needs to be supported by a professional marketing packet that shines the best light on the property. Rather than giving the buyers information piece by piece, it makes the buyer’s purchase decision much easier by giving them all the information at once. Sometimes, the buyers need to be shown why your building is worth this much, and the marketing packet is the tool that sells your building to potential buyers.
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Contact Qualified Buyers.
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Now that the marketing packet is ready and the listing agreement is completed and signed, we begin to contact our database of qualified buyers. We also use the latest technologies in marketing the building across the nation. It is not unusual for a buyer from out of State or out of country to purchase commercial real estate here.
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Interview Buyers.
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Unlike residential real estate, all buyers are interviewed to ensure that they have the proper background, resources, and interest to acquire and manage property successfully. Many deals fall apart at the end because the buyers were not properly interviewed at the beginning. We conduct an extensive interview on the qualifications of each buyer, so your time is not wasted by unqualified buyers.
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Educate Buyers.
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It is a know fact that many buyers believe the 3 most important words in real estate are “location, location, location”. While the location is important, it is not the only factor buyers should be interested in. We believe the 3 most important words in real estate are “location, terms, and expand-ability”. It is sometimes necessary for us to educate the buyers and expand their vision, so they see the possibilities of the building in question. All it takes is a little education, and buyers can go from saying no to saying yes.
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Sign Confidentiality Agreement.
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There are times when the seller wishes to keep the transaction confidential. If this is the case, the buyers must sign a Confidentiality Agreement, commonly known as a Non-Disclosure Agreement (NDA). This agreement protects the seller in the event of litigation.
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Give Marketing Packet to Buyer.
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We are now ready to provide the buyer marketing packet to allow them to review details of the property. These details will allow him or her to gain a general overview and understanding of the building.
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Seller and Buyer Meeting.
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If the buyer is interested after reading the marketing packet, the next step is for us to arrange for the seller and buyer to meet in person. The broker will be present at this meeting, coach the seller on what to say, and steer the conversation in the right path.
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Offer and counteroffer.
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If the buyer is not working with an agent, we will help the buyer draft an offer, which can include the following:
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Due diligence.
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Once an offer is accepted, the buyer will begin the due diligence process. The broker will facilitate the process to provide the buyer with the information he or she needs, while ensuring that the tenants do not know the building is for sale until the deal is closed.
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Building inspection.
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In most instances the building will need to be inspected by an inspector, engineer, appraiser, general contractor, and various other sub-contractors. We will facilitate the process and can be a great resource for the buyer, which increases the likelihood of the deal going to closing.
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Negotiation with Bankers.
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The professional marketing package on the building is not only a tool to show buyers, but also an important tool to convince bankers to finance the deal. Bankers like it when they have all the information they need presented in an orderly manner. We assist the buyers in getting financed so the deal is more likely to close.
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Waiver of Contingencies.
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Once the due diligence period is over, the buyer signs a waiver of contingencies. After this point, the buyer cannot back out from the deal without forfeiting the earnest money.
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Closing at escrow.
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Having a good escrow agent is important because it will make closing a smooth, pleasant, and organized process. Having a good broker at closing is also important, because the broker can smooth out the process should emotions ever run high at the closing table.
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