Should I Drop My Price to Sell My Property?
Come to Us for Central Massachusetts Commercial Real Estate
Would you recommend that I drop my asking price in today’s commercial real estate market? Y
You’ll hate this answer since it seems to waffle, but my answer is, “it depends”.
After all, what’s the definition of value? “What a willing buyer will pay a willing seller”. If your property is priced to attract buyers in our current market and it’s not selling, then there may be other factors such as location, condition, visual appeal - or is it a specialized user building with a high conversion cost? These can prevent offers from coming in from buyers.
But if your property is priced - not based on the current market, but rather on what you paid for it, what your mortgage balance is or what you just plain want for it – then be prepared for a long wait. Buyers today are not the same as buyers of even two or three years ago. At that time, investors were over paying based on true economic value because they too often felt there would be someone else out there who would over pay at an even higher rate. And perhaps they panicked thinking that if they didn’t buy the building of their dreams then, it wouldn’t be there in a short time.
That period of buying frenzy is now a foot note in history. It’s best to forget it and form a strategy based on what today’s market will bring. No one knows what the commercial real estate market will look like in one, two or even five years. The smartest people I’ve listened to predict at least a five year period to return to a “normal” market, whatever that is. No one predicts that it will look like the hyper inflated market of the earlier part of this decade.
The Wall Street Journal reported that “Feds Fret About Commercial Real Estate”. More financial pain is expected as they force banks to recognize losses. There’s even one dire prediction that as many as 45% of loans could be at risk. If your mortgage loan is “under water”, perhaps you should consider how to dispose of the property before your lender decides to foreclose. Some strategies might include a short sale with the lender’s cooperation, a voluntary auction or simply adjust your asking price to current market rates.
Some sellers want to keep their price artificially high hoping that a buyer will make an offer based on that price. This seldom works. Most buyers won’t make the effort to offer what they feel to be the real current value because they “might insult the seller”, or just don’t feel it’s worth the effort to go through a protracted negotiation when there are so many other properties available today. In the meantime, the commercial market prices are still trending down and future pricing is guesswork. If the Wall Street Journal’s pessimistic outlook is correct, prices will fall dramatically.
So, what will your pricing strategy be? Our purpose here is to help you create a plan that will bring you the best value available - today. The past is histiory, the present is now and the future is, well, muddled at best.
We'll be glad to offer our help in developing that strategy with you, or use your own real estate professional. The most important point is to be aware of current market conditions and price your property to sell.
This article submitted by Robert L Yale, CCIM
contact Bob at bobyale@svn.com
Central Massachusetts Commercial Real Estate