Common Commercial "For Sale by Owner" Mistakes

Due to our commercial for sale by owner, co-marketing program, we witness many commercial property owners market and go through the "process" of selling their buildings, without the aid of a real estate broker. Although the experience can be painful, selling on your own is doable; especially if you know what you are doing.

Below are a few of the common mistakes we see owners make.

Over Pricing Property

Over pricing the property is a huge deterrent and major common mistake that sellers make. Most buyers that feel a property is over priced quickly move on. Serious buyers normally inspect many properties and learn market values. Sellers often think that if a buyer is interested, they will just submit a lower offer; that idea rarely works.

Many sellers are simply unrealistic and fail to do their homework on value. Getting "comparable recent sales" information is needed. Understanding the income approach to value is also critical. Hiring an appraiser is the most reliable and accepted way to determine market value. Information on other buildings sold in your city can be found at the assessing department as well.

This is a painful point for many sellers if they have put a lot of money into a property. Especially for owner occupants (Business that own and operate out of the building). The hard fact is that it is very possible to over improve a property.

We see owners try to sell on their own for many months, carry the costs of ownership, give up, then list with a broker - only then to lower the asking price.

Lack of Knowledge on Handling Paperwork.

Selling a property, especially one with issues (environmental concerns, title issues, zoning infringements, etc.) can be complicated. The paperwork can be intimidating and needs to be done correctly. Not knowing how to handle the paperwork will quickly kill any potential deals.

The buyer needs confidence that they can successfully close, without violating any laws or creating long term legal issues. Not teaming up with professionals to help with the details can be a mistake.

Putting the Property Under Contract without Pre-Screening (Pre-Approving) the Buyer First.
We have seen much wasted time and effort on buyers that could never qualify for a loan in the first place. It is a needless mistake.

Sellers are anxious that they have an offer and want to move forward. They put their property under contract with the buyer, taking the building off the market (perhaps missing a legitimate buyer) and incur the carrying costs while they wait (often for several months) for the buyer to perform its due diligence and obtain the needed financing. Only later to learn that the buyer could never have been qualified in the first place.

Besides the frustration of this scenario there are legal issues (risks) and costs of putting your property under contract as well. Although there will always be risk of losing buyers (for many reasons), you can avoid this one by requesting that your buyers books are reviewed and receiving "pre-approval" letters from finance companies.

Not Being Accessible

Pretty simple, buyers are demanding, forgetful and busy. If they try to schedule an appointment to inspect your property and you can not accommodate their schedule, or return their calls, they'll give up and move on to the next facility.

Property not Presentable

Common sense stuff here as well but we see many owners fail to clean the facility adequately and or not having basic components of the building functioning (Roll up doors, broken windows, HVAC units, alarm systems, etc.).

Unrealistic about Marketing

Simply having a sign on the front of the building is not enough. Perhaps one of the neighboring businesses will be interested, but counting on that alone will probably be a mistake - resulting in increased marketing time and thus increasing your carrying costs. The idea is to maximize your buildings exposure to get it in front of as many buyers as possible.

Listed are some creative marketing ideas we have heard other owners successfully implement:

• Mailers/postcards to local tenants in your area, in your building type (office, Industrial, etc). Real estate brokers sometimes do this; list is typically 500 - 1000 names.

• Internet marketing. It's been estimated that 75-85% of all buyers now start their search on the internet.

• Professionally designed exterior signs. This is a way to build credibility with potential buyers.

• Professionally designed feature sheet. Also a way to build credibility and highlight the key features and information they need to be able to qualify a building for their use.

• Classified ads in local paper. You can take it a step further and advertise in trade journals especially if you have a "special use" building - restaurants, medical facility, etc.

• Referrals - Informing the professionals you hire and work with can be effective way to get the word out. Accountants, lawyers, etc. typically know of other businesses that need space.

• Teaming up with industry professionals (title companies, finance companies etc.) that can help with the various details will assure you of the best possible chances of successfully closing the sale of your facility. It's their business to know the market and know how to get it done.

Building not Salable, from the Beginning

Many owners fail to recognize issues with their buildings that may hinder or otherwise make it impossible to sell and or to finance the property.

Environmental issues can dramatically complicate a sale and may eliminate the possibility of conventional financing. Although there continues to be changes in legislation, governmental financial support, and clean up techniques, the costs and time frame of selling properties with environmental issues is significant.

Structural and or building condition is another issue. Roofs are a typical example. The costs of repairing or replacing roofs can jeopardize the financial ratios and cash needed to close. Often lenders will not release funds until repairs are completed as well. Determining who will pay for the costs is often a sticking point. Perhaps neither the seller or the buyer has the additional cash.

Structural issues can be a more serious problem and often completely eliminate the possibility of conventional financing.

Title issues are another problem and can make financing all but impossible.

Building owners can be prepared to deal with these issues by resolving them before putting the property on the market or by having adequate information (For example, repair estimates, phase one completed) on hand before attempting to sell the property and adjusting the sale price accordingly.

Commercial Finance Advisors offers a (free) co-marketing programs with building owners. For example, we promote properties online, produce flyers and send out mailers to local business's, etc. More information can be found at http://www.cfa-commercial.com

Rauth is President of Commercial Finance Advisors, Inc out of Bloomfield Hills, MI. He specializes in Commercial Real Estate Loans between $100,000 - $5,000,000. Offers unique loan programs such as Commercial 30 Year Fixed and 90% non SBA, financing. He can be reached at 248 885-8797. SBA 7a Loan or Commercial real estate loans.

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