Price to Sell Quickly
- The most important decision among the many decisions you will make is the selling price. No one wants to leave money on the table but asking an unrealistic amount for your property is a recipe for a no sale.
- In the stock market, if the spread between the bid and ask price is too great, sales volume drops off due to the inability of the stock broker to bring the two parties together.
- In the real estate market, if the spread is too great, sales volume also drops off; and if the spread becomes too great, sales practically stop.
- Based on a study of area sales of income properties the eventual selling price averaged between 91 to 93 percent of the asking price. This study did not include the properties that did not sell and if they would have sold the spread between the asking price and the eventual selling price would have been even greater.
- The main reason they did not sell is because the asking price was so far out of line with reality of the market that very few buyers considered them serious offerings and did not even go through the process of making an offer.
- Listing an income property at an unrealistically high price, the seller hurts only himself. Why… a real estate broker and a potential buyer will realize quickly that the property is overpriced once they get a look at the property’s operating statement.
- Investors in income property are savvy, that’s why they are investors. They know the value of property based on rents, expenses and financing. You are not going to fool these people.
- Question: So how do you determine what is the Action Price?
1. NO, you don’t guess.
2. NO, you don’t ask a friend for their opinion.
3. NO, you don’t decide how much you need out of the property to come out even or money ahead. What’s done is done, life does not rewind. If you have made questionable decisions in managing the property don’t expect to overcome them by asking more money than the property can support.
- Answer: Look at the numbers. You estimate value by;
1. Sales comparisons of other similar properties
2. Replacement Cost of property less depreciation
3. Income revenue vs. costs
- Question: Who performs the Estimate of Value?
Answer: A commercial Appraiser or knowledgeable real estate Broker.
What Factors Contribute to the Asking Price?
1. Leasing Income – the most important factor
2. Vacancy Percentage
3. Fixed Expenses – taxes, insurance, maintenance.
4. Variable Expenses – (utilities) single-metered building or individually metered
5. Lease Terms – NNN or Gross
7. Age of building
8. Condition of building/property: roof, mechanicals, interior condition
9. Rehab/Move-in Costs