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January 2012
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Market Length Matters
I recently came across a survey from the International Business Broker’s Association from 20 years ago. One of the questions asked for the average number of days from listing to sale. I compared the results of the 1992 survey to the most recent IBBA survey results from 2011.
Survey Year Avg. time Listing to Close
1992 4.8 months
2011 11 month
The big question is, obviously, “Why do deals now take more than twice as long from listing to closing?” One would think with all of the resources available today plus the use of email, search engines, computers, etc. that the time it takes to close a deal would be much less than it was almost 20 years ago. Paperwork can be emailed back and forth. Information for vendors, government offices, and the like are readily available with search engines. Don’t forget cell phones, E-fax, etc. One would think that with all of these tools available that deals would be much easier to close and the time from listing to close would be much quicker. So, why does it take twice as long today than it did 20 years ago (almost)? I suppose we can point a finger at increased governmental paperwork, red tape, etc. We can also assume that the attorneys of today work at about the same speed as they did 20 years ago. However, one would think that with all of the tools available today that their speed in drafting documents would be greatly increased and I suspect that the piles of paperwork sitting on their desks today is just about the same as 20 years ago. While it is interesting to think about the time frame differences,the real issue is that the longer a property sits on the market, the more likely it is that it never will sell.
So, how does Realty Sales cut down on the time between listing and closing? Here are a few of the steps we take to achieve results.
1) Competitive, market based pricing throughout the course of the listing. The market fluctuates; your list price and terms should fluctuate with it.
2) Sell the listing to all of the agents in the office. Everyone in the company needs a complete picture of the property.
3) Co-broke to create more buyer activity. We know we can’t please everyone so we have other Brokers on our prospect list.
4) Do all of the pre-closing work (financing approval, list of FF&E, title work, all of the seller information, etc.) prior to an offer.
5) Take shorter listings to put more pressure on ourselves to get a deal done.
6) Contact the seller every 10 days (max) to keep them involved in the selling process.
7) Change the write-up on the marketing we are using at least once a month.
8) Line up a those individuals and companies that are needed to close deals — who can get the job done quickly and efficiently. Then encourage our buyers and sellers to use them.
December 2011
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Proper Pricing
Ethics in Real Estate This month we follow up with last months newsletter on pricing and listing ethics in Commercial Real Estate. Last month marked my 12th year of selling resorts, campgrounds and small businesses in Minnesota and Realty Sales 62nd year of doing the same. During this time we have obviously stayed in business, made many friends and built strong relationships with several professionals invested in the MN Hospitality Industry. Fundamental to our longevity has been our commitment to truth and honesty in all our dealings with clients and customers and our belief in the “golden rule” – do unto others as you would have them do unto you. One aspect of this is providing an honest appraisal of market value to potential sellers. We may not tell our sellers what they always want to hear but we do tell them what they need to hear. We need to quote realistic, attainable and verifiable returns and sales scenarios to all of the parties involved (buyers, sellers, accountants, lenders, attorneys, etc.) However, while we will always do our best to give honest appraisals, we can sometimes take listings at a slightly higher price to “test the market.” We recognize that price is different from value and will depend upon negotiating skills, motivation of the parties and the actual deal structure. Keep in mind though, there is a fine line between top of range and out of range pricing. By pricing businesses honestly, ethically and realistically, the chances of a successful sale and maximized price are greatly improved. |
November 2011
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Ethics in Valuation
You Deserve Honesty The longer I am in the Commercial Real Estate Business the more convinced I become of the necessity of an honest Business Valuation. With so many intangibles, variables and fluctuating conditions, it is my belief that owners simply must have an honest assessment of their value before they move ahead with selling or other long-term business goals. A good Valuation is not a product but a process. It is a process that examines the value of the business as reflected in the company’s assets, products, people, and financials. It should not only reflect the value of the business that is impacted by external market conditions; but it should also recognize value that can be created or supported by the negotiating and sales process. Due to the real estate boom in the past decade, valuing businesses became a lost art and it is the desperate Brokerages that continue to neglect their responsibilities to their clients. Desperation breeds dishonesty, lack of direction and low standards of professionalism. They continue to live by the old mantra; “The more listings the better.” In almost every instance, this worn out business model only produces over priced listings. Overpricing creates one of two scenarios; both of which are destructive to the real estate process. 1) Over priced properties either see no offers or offers that are way below the listed price; both of which can make the seller angry, and often forces the broker to join forces with the buyer in arguing with the seller or, 2) Brokers must construct absurd scenarios for how the property makes fiscal sense for buyers and lenders. Brokers who present such preposterous, illogical deals are not respected by buyers and are the kinds of tactics that keep good people out of the Resort business. This system, so commonly practiced by other brokers, is also why they sell less than 20% of their total listings; a horrible statistic as reported by the annual survey of our industry. Conversely, those that do perform truthful valuations have sales rates upwards of 70%. |
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