The Encyclopedia of Commercial Real Estate Advice

CHAPTER 6Adding Value in the Selling Process

This chapter is all about getting the best price and adding value when selling your commercial property. Discussed are why and how commercial properties increase and decrease in value, a power real estate broker's method of determining the highest sales price, 12 mistakes to avoid when selling, doing value-adding before selling, whether you should do a for sale by owner, whether you should owner-carry, and doing a master lease purchase.

DETERMINING THE MAXIMUM SALES PRICE

Let's start out by looking at six reasons why commercial property values go up.

First, there is an expectation that they will increase. From the moment an investor decides to buy a property, whether they intend a short- or long-term hold, they have likely been burning with desire for the property to skyrocket in value. You cannot underestimate the power of intention. Unfortunately, whether the property's value goes up or not has more to do with your ability to raise rents over time than pure intention.

The second reason is the innate drive of the investor to raise rents. However, the ability to raise rents is dependent on what the market can bear. Raising rents raises NOI, which raises appraised value.

Third, commercial real estate brokers add fuel to this fire. They know that if they want to get a listing that they have to drive the price up as high as possible. The best of them know they'll have to temper an attractive price with sales comparables in the market ...