When you go too high, you may think you’re setting yourself up to make a hearty profit but what you’re really doing is leaving money on the table. Commercial real estate is part art, part science, and part madness –– navigating the nuance can be tricky.
I’ve seen mispricing go sourly before, and I try to advise my clients so they don’t have to experience the same pain.
Here’s how to not shoot yourself in the foot when settling on a price to sell:
The Market is Speaking – You Better Listen
Are you listening to what the market is telling you, or are you only listening to your emotions? The CRE market has its own vernacular. That language is price and action. You have to be a polyglot: fluent in the languages of price and action but also neutrality. That’s the hard part: applying what the market is telling you in an objective, unemotional manner.
Don’t make the market your adversary instead of tuning in and going with what will work.
For example, let’s say a CRE investor named Tanya purchased a six-unit building with a nonconforming penthouse in 2014 for $1M. She decides it’s time to sell and wants to market the building as seven units when it’s really just six with a nonconforming unit. Her preferred listing price? $2.75M.
So, I’m honest with her.
I say, “realistically, the most we can get from this is $2.1M because banks don’t look at the nonconforming penthouse, so buyers will have to come up with a higher down payment.” Tanya still wants to upsell.
We put it up for $2.75M, and everyone says, “Yeah, no, that’s too expensive.” I ask her how she feels about lowering it, and she gives a bullish “no,” ignoring the market’s obvious message.
Pay Professionals to Do Their Job
I don’t have a crystal ball, but I do have enough information to ascertain what’s probably going to happen.
If you don’t have the headspace or time to listen to the market, let me do it for you. I make my living by keeping a stethoscope to the market’s vitals. When clients don’t know their competitive moat, I act as their moor.
Or, at least, I try to.
Back to our hypothetical anecdote: Tanya agrees to let me lower the listing to $2.3M, and we get an offer. Guess what it is? $2.1M. She doesn’t bite.
Instead, she kicks around every counter, trying so hard to win that she lets the perfect buyer pass her by, demanding a bonkers $350k per unit with a nonconforming penthouse, so her building continues to sit on the market with no interest.
Don’t be like Tanya; trust in a professional’s ability.
The Most Obvious Direction is Usually The Right Direction
Unfortunately, it’s often difficult to obey the obvious. I’ve seen clients come to me clouded by emotion, not seeing the reality of what will help them sell.
When you’ve been in the game as long as me, you’ll acquire an infallible intuition through osmosis. Basically, when you see enough: you know how to play the game. If you let me do what I do best, I’ll get four people figuratively fist-fighting for your building, bringing the price up.
The Bottom Line
Don’t misprice, listen to what the market is telling you, and don’t get in your own way. Since that’s easier said than done, just give me a call. My stethoscope and I are in your corner to ensure you price right and profit.
