Whether you’re planning to sell your commercial property in the next few months or just studying up for that eventuality, there’s no time like now to prepare. If buying a commercial property seems complicated, selling involves even more responsibilities and expenses.
Here are some common steps to selling your Commercial property:
1. Prepare Your property for Sale
Before we’re ready to plant that “For Sale” sign in front of your property, there is work to be done to prepare it for viewing and sale.
Remember how keen your eye was to every small detail and defect in the property you saw as a buyer? Now that entry door that never quite closed properly or the leaky faucets that you never got around to fixing will be seen by a potential buyer with that same keen eye.
Start making the obvious repairs today – even if you don’t plan to sell until a year from now. These repairs can cost money and take time. Plus fixing it now will allow you to increase rents, income, and get a competitive CAP Rate.
If you plan on doing some improvements before the sale, the best place to start is where the buyers start: at your curb. Potential buyers base a large part of their decision on a property’s “curb appeal,” so make yours say something positive. That means a tidy front yard, a parking lot with well-painted trim, a tidy driveway and clear, welcoming entryways.
Inside, the biggest return on your investment continues to be improvements to the units, followed closely by improvements to the cosmetics and funtionality of your property. If you’re making these improvements shortly before selling the property, consider painting and decorating the units in neutral colors, the most appealing choice to the greatest number of potential buyers.
Inside and outside, start reducing the clutter. When it comes time to show your property, less will mean more. Potential buyers don’t want to see how your tenants put trash everywhere, how every common area feels cramped with unnecessary clutter, or how the landscaping is unkepted or dying. So downsize and clean-up now; it not only will make the preparation for showing your property easier, it also will make the inspection move faster.
2. Find a Real Estate Professional
If you’ve been through the Investment Property-buying process, you already know how complicated the real estate business can be. While you can opt to sell your property yourself, it can be time-consuming and often not worth the money saved on commissions.
However, if you do hire a real estate professional as your selling agent, do your homework. Ask collegues, business partners, friends, and family for recommendations, interview several candidates, and ask to see them in action by showing you other potential investment properties to add to your portfolio. Do you think this person would present your property as well to potential clients?
Look for someone who is a REALTOR®, a Member of NAR & CAR, that adheres to their Code of Ethics. Look for professional designations. They reflect experience and a committment to continuing education. A professional will have access to a network of contacts and can draw from extensive market knowledge to help pinpoint the right buyer for your property quickly. And can help you structure your deal to save money, negotioate the best price for your property, avoid legal pitfalls, all while guiding you through the paperwork
When interviewing me or another candidate, ask him or her to prepare a “comparative marketing analysis,” an "Income and Expense Statement", and/or a "Listing Flyer" for your property. This might include a demographic of the neighborhood, aerial views and/or maps of the property, and a suggested list price for the property.
If you’ve chosen me or another real estate professional to help sell your property, you’ll have to sign a contract stating that you’ll work solely with them for a designated number of months, often between one and six months. This means no other real estate professional will be allowed to sell your property on your behalf during this time.
So put some thought into the professional you choose and if you decide to choose me, I will help you sell your property to a qualified buyer for the highest market price in the quickest, most convienent timeline.
3. Get Your Paperwork Together
After you sign the Listing Agreement with me, I will need a lot of documents from you to prepare your property for sale. Among the things she will want to see are:
• Income and Expense Statements (Rents, Maintenance Expenses, Utilities Paid, Vacancies, etc.)
• Current Mortgage and Financing Information.
• Assessments or Easements: If there’s a tax assessment or easement on the property, documents stating such will have to be included in the purchase contract.
• Property Taxes: Proof of property taxes paid.
• Utilities: Provide a record of the past 12 months’ utility bills.
4. Price Your Property
There are a number of factors that will affect the success of your property sale. They include: location of the property, interest rates, economic conditions, time of year, condition of the property, marketability of the property, terms of the sale and accessibility to the property, and last but not least...the income generated by your property!
Some of these are not within your or my control – location of the property, interest rates, economic conditions. The other factors are items you should discuss with me to determine what would benefit the sale of this property most.
For example, marketing your property in more innovative ways, such as on an Internet site like this one, may broaden the pool of potential buyers. And pricing the property effectively can make a huge difference in whether a property is snapped up within the first several weeks of listing or sits on the market for more than a year.
To price a property effectively, you and I will have to study the local market, research comparable properties and consider current market conditions. This is where the “comparative marketing analysis” you requested when interviewing for a listing agent will come in handy as a place to start.
Now check around your market area, your newspaper and Internet sites like this one for:
• Your competition: Are there many properties just like yours for sale in your area right now?
• Listing prices: What are other properties like yours listing for?
• Selling prices: What are other properties like yours selling for?
Based on these findings, I have the experience to help you price your property at the right price for a sale that benefits you.
5. Market Your Property
Products that sell well usually have a good marketing strategy. The same can be said for your property. Work with me to decide where you want to advertise. Will the property be advertised only with a sign? Do you want your property listed for sale not only in newspapers but also on Internet sites like this one? When can your tenants make the property available for showing?
6. Prepare Your Property for Showing (Here's where you need to do a little work!)
Now that you've decided with me on the market price and how you will market your property now there’s little time left to get your property ready for potential visitors and/or drive-by investors!
Now is the time to put on the finishing touches:
Outside: Keep your landscaping trimmed, the rose bushes pruned, the weeds tamed. Put away the garden tools and tracktor. Make sure the exterior lighting fixtures are all in working order. Be vigilant about removing flyers, handouts, and business cards left on your lobby areas and driveways.
Inside: Brighten the hallways by opening the drapes, turning on the lights, cleaning the windows. Clear the clutter on the lobby, public bathrooms, coffee machines, and couches. Clean all your bathroom and kitchen fixtures. Do a quick vacuuming throughout the building, being sure to catch any cobwebs in the corners along the ceiling. Finally, have the trash picked up an extra day each week.
Now leave all the hard work to me!
7. Respond to an Offer
Depending on market conditions, you may receive one or more offers for your property from interested buyers. Each offer will include the proposed offer price, proposed closing date, Due Dilligence period, financing, and contingencies that may include an appraisal or sale of the buyers’ current property (1031 Exchange.) Let me help you sort through the variables to determine whether you should accept, counter-offer or reject the offer.
If there are multiple offers, each offer will be presented to you in the order registered. You don’t need to decide anything until after you’ve seen all the offers. If you do accept or counter more than one offer, you are required to establish an order of precedence noting which is the primary offer, followed by the backups in order. This will help you avoid selling the property to more than one buyer.
8. Complete the Settlement
Once you have accepted an offer to buy your property, expect to make some or all units available for viewing and inspection by the buyer, a certified property inspector, a termite inspector, an appraiser, and other inspectors. After seeing the results of the inspections, the buyer may request additional work is completed before purchase, such as repairing a damaged roof or fixing a leaky faucet. You should consult with me to determine whether to comply with the buyer’s request or risk losing this offer.
During this flurry of activity, try to keep your property in show condition. The deal has not closed and still may fall through, which may mean showing your property to more potential buyers.
In the meantime, the buyer is working with a lender to secure a loan for the purchase, completing his/her Due Dilligence in reviewing the income and expenses, and assesing the property's future income potential. When the buyer has written loan approval, a closing date can be set.
There will be a final walk-through before all signatures are collected and the deal considered done. The buyer will go room by room, unite by unit, store by store to check that everything is in working condition and, if you had agreed to do so, any additional work requested after inspection is completed.
Now you can prepare for your own transfer...notify your tenants and utility companies of the transfer date and billing by the new property owner/landlord. Congratulations, you’ve sold your property!
Contact Me with any Questions You May Have!