Introduction
Selling commercial real estate requires careful planning and skillful execution. A well-designed plan is essential for achieving excellent results, keeping clients satisfied, and minimizing stress throughout the sales process. While the steps outlined below are based on my experience in Southern California, it’s important to note that different regions and countries may have varying laws and processes.
11 Steps to Achieve Better Results in Commercial Real Estate Sales
Step 1 – Conduct a Thorough Property Evaluation
Before listing a commercial property, it’s crucial to conduct a comprehensive evaluation. This involves a site inspection led by a commercial agent who assesses the property’s general condition, including the roof, systems, and other important features. Gathering material facts and identifying any potential issues that may impact the sale or desirability of the property is also part of this step. Additionally, the agent may collect information for disclosures from the owner or their representatives.
Step 2 – Prepare a Market Analysis
A market analysis is a vital component of selling commercial real estate. It provides an overview of the market, including lease rates, new construction, absorption rates, trends, competing inventory, capitalization rates, and comparative valuations. A professional commercial real estate agent, equipped with the right tools, will be able to produce an accurate market analysis.
Step 3 – Determine the “Go to Market” Value
After completing the property evaluation and market analysis, the broker utilizes this information to determine the property’s valuation for the market. Commercial appraisers typically use three approaches when valuing a property: comparative sales, capitalized income, and replacement cost. The weighting of each valuation method depends on factors such as the property’s age, type, use, occupancy, and intended buyer. However, it’s important to remember that an appraised value is only an estimate, and the market may assign a different valuation based on various factors.
Step 4 – Prepare the Property for Sale
Based on the property evaluation, it is advisable to provide the seller with a detailed list of recommendations for necessary repairs or improvements. The seller can then select the repairs or upgrades that will have the most significant impact on the property’s price or time on the market. While there are no guarantees, enhancing the property’s appearance and ensuring it is in a move-in-ready condition can attract more attention and expedite the sales process.
Step 5 – Develop a Marketing & Sales Plan
Creating an effective marketing and sales plan is crucial for selling commercial real estate. This plan should include strategies for targeting potential buyers, both locally and globally. Depending on the scope of the assignment, it may be beneficial to focus on specific user groups and their brokers. A comprehensive marketing approach, encompassing various channels and platforms, can maximize exposure for the property.
Step 6 – Prepare a Comprehensive Marketing Package and Video
A detailed marketing package is essential to provide potential buyers with the necessary information to make informed decisions. It should include items such as site plans, floor plans, photos, rent rolls, annual property operating data, and zoning information. Additionally, marketing videos offer a great resource for virtual tours and visually showcasing the property. By including these materials, the buyer can gain a comprehensive understanding of the property’s features and benefits.
Step 7 – Implement a Multi-Channel Marketing Approach
Commercial real estate professionals have access to professional tools and platforms that allow for maximum exposure of properties. While it may not always be advisable to list a property on the open market, depending on the circumstances, utilizing a multi-channel marketing approach can help target the right potential buyers. The specific channels and platforms utilized may vary based on the property and its target audience.
Step 8 – Monitor and Report Results
Continuously tracking the exposure of a property ensures that marketing efforts are effective, and the pricing remains aligned with market conditions. It’s essential to be aware that the commercial real estate sales process often involves a longer decision-making timeline compared to residential sales. Buyers, especially those seeking properties for business operations, require time for planning, securing financing, and making capital expenditure decisions. An experienced agent will monitor marketing activities and provide insightful reports to keep the seller informed.
Step 9 – Negotiate the Offer and Review Legal Documents
Negotiation skills are crucial for a successful commercial real estate agent. Understanding the seller’s goals and priorities is key to reaching favorable outcomes. While price negotiations are typically the focus, other factors such as timing can also come into play. Thorough property evaluation and market analysis should minimize negotiation challenges, as the facts of the market will guide the negotiation process. When it comes to contractual issues, legal professionals should be consulted to review and approve all documents before final approval and signatures.
Step 10 – Mitigate Risks and Ensure Proper Disclosures
Compliance with disclosure requirements is essential to avoid potential conflicts and lawsuits in real estate transactions. Disclosures can be statutory (required by law) or contractual (added to the purchase agreement). Sellers should provide all necessary disclosures to buyers and advise them to conduct property inspections and engage qualified legal professionals for document review. Zoning and permitted use are critical factors to consider, and buyers should verify this information directly with the governing authority before completing the purchase.
Step 11 – Manage the Escrow Process
Escrow is the final phase of the sales process, and it involves multiple parties working together to facilitate the real estate transaction. The role of the escrow company is to act as an objective intermediary, ensuring the proper handling of funds, document signing, and coordination with the title company for property recording. The commercial real estate agent acts as the quarterback, overseeing the process and keeping the seller informed about progress. A range of professionals, including attorneys, appraisers, inspectors, lenders, and contractors, may be involved in the escrow process.
Conclusion
Selling commercial real estate requires careful planning, market analysis, and effective execution. By following these steps and working with experienced professionals, sellers can navigate the complexities of the commercial real estate market successfully. Remember, each region may have its unique rules and regulations, so it’s essential to stay informed and comply with local regulations. For a hassle-free selling experience, consider partnering with Garrity Traina, a trusted name in commercial real estate. Visit Garrity Traina for more information.
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