Determining Value - The Seller's Point of View



Congratulations, you've made the decision to list your commercial property or that prized half-acre parcel, a cherished inheritance from your wife's family, now nestled in the heart of your bustling town's business district. Now, the million-dollar question looms large: What is the true worth of your property? It's tempting to give the cheeky response of, 'Well, it's worth what someone is willing to pay for it,' but in reality, determining the right asking price is a delicate balancing act. You want to attract potential buyers without deterring them, all while ensuring that you, the seller and owner, get the best and most accurate value for your property. 

The initial step in this process is to seek guidance from a seasoned professional in the world of real estate brokerage, specifically one who specializes in your local market and possesses an intimate understanding of its dynamics. An experienced commercial real estate broker, with their finger on the market's pulse, should be able to swiftly provide you with a valuation range using two time-tested methods.

One commonly used method is the market data approach. This approach involves scrutinizing the sale prices of comparable properties in the vicinity. While this method may seem straightforward, don't be too hasty in drawing conclusions. Even in bustling markets, each property is as unique as a fingerprint. A skilled commercial real estate broker can identify the distinctive qualities of your property, ensuring a more accurate valuation.

Another method, known as the income approach, is employed for income-generating properties. This technique is relatively straightforward – it involves calculating the total rental income minus operating expenses and applying a suitable capitalization rate. However, just like the market data approach, there are nuances to consider. Properties may have intricate income and expense structures, further underscoring the need for a professional's discerning eye.

These two valuation approaches will furnish you with a range of possible sale prices for your property. In over three decades of experience in the commercial real estate industry, I've yet to encounter an owner who wishes to set an asking price at the lower end of that value range. Naturally, we all aspire to secure the highest possible return on our property investments. Therefore, it falls to the commercial real estate broker to assist in setting a price that does not discourage potential buyers due to an exorbitant figure but still guarantees that you, as the seller, receive a fair and competitive offer.

In all, determining the right asking price for your commercial property or cherished piece of real estate is a pivotal decision that demands a delicate touch. The path to an accurate valuation begins with the guidance of a seasoned local real estate broker who can employ both the market data approach and the income approach to establish a range of potential sale prices. While the uniqueness of each property necessitates an expert's discernment, the ultimate goal is to strike a balance between attracting potential buyers and securing a competitive offer for the seller. With the guidance of an experienced professional, you can embark on this journey with confidence, ensuring that your property's worth is assessed with precision and fairness.

All The Best To You, 

Brad Neihouser 
765-427-5052
bneihouser@shook.com
Cut Through The Noise. Get Straightforward Advice. 


Comments

Post a Comment

Popular posts from this blog

A Listening Ear.

Image
  Compassion is a helpful quality in many professions; however, when you think about commercial real estate, compassion may not come to mind.  Let me tell you a story. I was recently asked to visit with a potential seller to discuss a property they were considering putting on the market. Prior to our meeting, I had been briefed on the situation, did some preliminary research, and felt confident I would get the listing and make the sale. When I arrived, the prospect had a different idea. She had just lost her husband, who, according to her, was the face of the business. The conversation centered mostly around the man her husband was, what he meant to her, how much she missed him, and everything he had poured into their business. This woman was looking for a friendly ear, so I listened. How could I not? Towards the end of our visit, we did transition to why I was there and got down to the business of it all. I left with the hope that I was able to provide her with good, dependabl
Read more

A Commercial Building Sale from Soup to Nuts

Image
  Selling a commercial building is not something that is done spur of the moment. There are only a few reasons why an owner would choose to sell a valuable commercial building. #1 Retirement. The owner retired and sold their business and no longer needs the building. #2 Expansion. The owner may have outgrown the building and is purchasing another building. There is an immense about of thought and tax planning that goes into selling an established commercial building. But, once the decision is made to sell, the owner selects a commercial broker to handle the marketing and sale of the property. The next step is to d etermine the asking price with your broker. This is where it gets really interesting… The asking price is crucial for attracting potential buyers. Some brokers may suggest a pie-in-the-sky value just so they can secure the listing (A horrible idea ). However, a more prudent approach is to price the property approximately 15% above the market value to maximize the return. Th
Read more

Prospecting: The Thoughtful Way

Image
Prospecting: The Thoughtful Way In any kind of sales, especially commercial real estate, you will most likely need to do some kind of prospecting for new clients. An old mentor of mine once said that new business doesn’t just walk in the door all the time, and wow, is that true. When you think of prospecting, the first thing to come to mind is probably the dreaded “cold call”. Everyone knows what I’m talking about, whether you’ve received them or done them yourself. The pitch for the latest service, investment, or product always seems to be the same and generally ends the same as well, without commitment. Instead of blind, cold prospecting, what about taking the time to research potential clients, obtain a base level understanding of their property, and make a “warm call”? What would that look like? Try sending an introductory letter or other mailed version of outreach. Perhaps include a photo or map of their property, including comparable sales, other current listings, and/o
Read more