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6 Tips for When Your Property Won’t Sell or Lease
Each situation is different, but with average marketing times of several months to sell or lease most properties, patience is the operative virtue in this real estate market.
There are times when we can pinpoint why a specific property isn’t selling or leasing. Price, condition, owner motivation or lack of it, and location are all traditional factors in the process. Ultimately, DEMAND for the existing inventory of buildings and empty space is what drives this process of absorbing the supply.
When there is no tangible demand, it doesn’t seem to matter how low your asking price is; the property just sits.
Sometimes we have a condition of what is called “negative absorption.” This means there is more space coming on the market than there is space coming off the market. This condition, when supply outstrips demand by a significant amount is probably the primary culprit for explaining why most properties languish on the market. Fortunately we are seeing signs that demand for certain property types is picking up.
If you are not under any pressure or duress, you may just want to “wait this one out” and not put the property on the market. Most people in business don’t have that luxury.
Often there is a mortgage payment or huge real estate tax obligation that is screaming for attention. Lake a big alligator, it just keeps eating and you are responsible for digging in your pocket and feeding it. In that case, you need the property to be on the market for sale or lease.
So what do people do to “stir things up” in this market? Here’s 6 tips that often pay off:
- Owner Financing: when banks refuse to make loans or offer unacceptably high interest rates, owners are sometimes offering to finance credit-worthy buyers with low down payments and competitive interest rates.
- Lease with option to buy: You might not want to lease your building, but this approach might be a stepping stone to your desired end result of ultimately selling.
- Various Lease Incentives: Periods of free rent, periods of reduced rent and tenant improvement allowances are all lease incentives that are being offered in the market to attract tenants. In the past, we have seen some landlords accepting zero rent for up to a year and only asking the tenant to pay CAM, taxes and utilities. To some landlords, this is better than the proverbial “sharp stick in the eye.”
- Change Brokers: Our clients would never do this, but if your broker isn’t at least communicating with you once a month, it’s fair to say he’s probably lost interest in the property. You might want to consider a change, not just for the sake of change, but to try a fresh approach with a broker who at least returns your phone calls. How’s your signage? Are you in the right data bases? Does your broker have a marketing plan?
- Reduce the Price: This one may hurt to talk about, but if the market has rejected your current asking price, listen to the market and make an adjustment. Nobody looking at your property is often the market talking to you and saying the price is too high. Your broker needs to make you aware of what your competitors are doing as pricing doesn’t occur in a vacuum.
- Offer a bonus commission: You wouldn’t believe how many people think they are shrewd trying to negotiate away the broker’s incentive by trying to reduce our commission. We’re trying to entice the other brokers to show your property and a lower “co-op” commission isn’t going to get the job done. Smart landlords are offering 1.5 or 2 times the commission (on leases) to stimulate showings. Some are offering cash to the broker for taking a legitimate prospect through the building. This might sound self serving, but some of us brokers are motivated by money. That’s how we feed our families.
There is no magic elixir that will work every time, but if your property is just not moving and no one is looking at it, talk with your broker about proactive things you can do to stimulate activity.
By Bruce Kaplan, Senior Broker at Premier Commercial Realty, brucek@premiercommercialrealty.com
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