Commercial real estate can be a wise investment for a myriad of reasons. However, when the market is unpredictable and you’re having trouble making a profit, you might be wondering if it’s time to sell your commercial asset. This guide can help you decide whether you should sell your commercial property or hold it until a better time.
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How to Determine When to Sell a Commercial Property
As you think about when to sell commercial real estate, keep the following factors in mind:
- Consider opportunity cost and future returns: When you put your property on the market, the goal is to maximize the return on your original investment, avoid future asset depreciation or pursue other forms of risk mitigation. Before listing, consider the current market conditions and how buyers might react. Work with a specialized real estate professional to determine how much your property is worth now to figure out how much money you’d make if you sold it in today’s market.
- Watch the CRE market: The CRE market cycle consists of ups and downs that affect property value. Each of the four phases in this cycle — recovery, expansion, hyper-supply, and recession — indicate the opportunities and risks for buying and selling commercial property at different times. Determine where the market stands to predict the price and timeline for your property — whether you should sell or wait.
- Compare similar properties: Research market trends to determine how your property compares to recently sold commercial spaces and create an accurate listing price. There are many factors that come into play when evaluating commercial real estate comps, including physical characteristics, market conditions, and geographic location. Search online listing platforms for recently sold properties similar in size and age to yours, as well as those in a similar area and industry.
- Decide whether you’re selling the business with the building: When selling a commercial building, you may want to consider whether you’re also selling your company if you own both. If you’d like to retire from your business or you’re considering another career, you could end up with more liquid assets by selling the company along with the building. This decision allows you the flexibility to pay off personal debts and pursue other investment opportunities.
How Long Does It Take to Sell a Commercial Property?
The current market and the method you use to sell your property will determine how long it takes to sell. When you work with a professional real estate agent, the timeline can take anywhere from weeks to several years. Consider these factors to get an idea of how long your sale cycle could take:
- Improving your property’s curb appeal: Cleaning up the exterior by pressure-washing the siding, freshening up your landscaping, repaving pathways, and installing light fixtures may take some time, but these improvements increase your potential to attract more buyers. As a result, your property may spend less time on the market because these cosmetic updates may attract more potential buyers, leading to more competition.
- Closing and getting mortgage approval: The closing process can take anywhere from a few days to several months. You might not see the proceeds from the sale for an extended period of time to the complexity and nature of a traditional CRE transaction. However, if you auction your commercial property, you’ll likely close more quickly because of the non-contingent contract and efficient timetable that immediately follows an auction.
Steps to Selling a Commercial Property
The following information details the typical process of selling commercial real estate:
- Find a real estate broker: Consult with a broker in the commercial real estate industry to help you sell your property. An expert who has researched market trends can recommend a fair listing price and save you time. They’ll also correspond and negotiate with potential buyers when your property goes on the market.
- List your property online: Your real estate broker may list your property on multiple listing platforms — such as Loopnet, CREXi, or RealNex — to reach a wider audience. These sites allow potential buyers and agents to find information about your property so they can contact your broker if they’re interested. Some platforms provide offerings that allow you to email your listing to a proprietary list of potential buyers or share it through their social media channels. Work with your real estate broker to produce attractive pictures of your listing, and discuss the benefits of having your building in that specific location.
- Work with a professional to determine your target market: A real estate broker can help you identify the type of business or investor who’d most likely want to buy your commercial property, given its purpose, location, and price range. They’ll research local real estate comps online and discover what recent buyers paid for similar properties to find potential buyers for your asset. They also advertise your commercial property to recent buyers who might be interested in further expanding their portfolio.
Tips for Selling Commercial Property
If you’ve decided to put your commercial property on the market, follow these tips for getting the most money and saving time in the process:
- Check the roof: Replacing the roof may be an expensive upfront cost, but a brand-new roof could attract more buyers. If this component of your property is in relatively good condition, you can repair or replace parts of the roof instead of investing in a new one.
- Update the parking lot: Even though you should mostly focus on updating the building itself, the parking lot is also important for displaying how many customers and employees can fit in the commercial space at once. You may want to fill in potholes, reseal the asphalt and repaint the lines to provide a spacious, clean parking lot for your property.
- Clean and de-clutter the interior: Create as much of a clean, spacious place as possible to help potential buyers imagine how they can design it to meet their needs. You may also want to clean the windows and throw on a fresh coat of paint to brighten up the room.
How to Sell Commercial Property Without a Realtor
If you’re curious about selling your own commercial real estate, you may want to auction your property. Compared to listing your commercial building with a traditional commercial real estate agent, the auction process is a timely, practical alternative. Cates Auction & Realty Company is a licensed brokerage and auction company in Kansas and Missouri, helping you effectively reach your target audience and sell your property. For more information about how we can assist you in your commercial property’s sale, get in touch with us online.
