“Depending on how a buyer is made aware of your property, price is often the first thing he or she sees. As a result many investments may not be shown because they are discarded by prospective buyers for not being in the appropriate price/income range.”
Your asking price is often your gateway to an investors first impression, and if you want to realize the most money you can from your properties sale, it is imperative that you make a good first impression.
Because this is not as easy as it sounds, your pricing strategy should not be taken lightly. Pricing too high can be as costly to a seller as pricing too low. Taking a look at what investments and CAP rates are in the market is only a small part of the process, and this on its own is not nearly enough to help you make the best decision. You must be competitive with what investors are looking for and can find in todays market.
This report will help you understand some important factors about pricing strategy to help you not only sell your property, but sell it for the price you want.
Pricing Strategy Starts with Good Information
Before you can begin to know what your property is worth, you should do some research, to find a qualified commercial realtor who has knowledge of the current market and can help you with the process.
The prospective buyers who will be viewing your property, will conduct their searches in a similar manner. Most investors use their owner commercial agents to help them select the best investment.
How Sellers Set Their Asking Price
For you to understand how much to offer for a property you’re interested in, it’s important for you to know how sellers price their properties. Here are 4 common strategies you’ll start to recognize when you begin to view investments:
1. Clearly Overpriced:
Every seller wants to realize the most amount of money they can for their property, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to over-inflate the value of your property. This is done far too often, with many properties that are priced 10- 20% over their true market value.
This is not in your best interest, because in most cases the market won’t be fooled. As a result, your property could languish on the market for months, leaving you with a couple of important drawbacks:
- Your property is likely to be labeled as a “troubled” property by other agents, leading to a lower than fair market price when an offer is finally made
- You have been greatly inconvenienced with having to constantly have your property in “showing” condition . . . for nothing. These properties often expire off the market, forcing you to go through the listing process all over again.
2. Somewhat Overpriced:
About 3/4 of the investments on the market are 5-10% overpriced. These will also sit on the market longer than they should. There is usually one of two factors at play here: either you believe in your heart that your property is really worth this much despite what the market has indicated (after all, there’s a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you both in terms of time on the market and ultimate price received.
3. Priced Correctly at Market Value
Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their properties based on a thorough analysis of other investments available in the market. These competitively priced properties usually sell within a reasonable time-frame and very close to the asking price.
4. Priced Below the Fair Market Value
Some sellers are motivated by a quick sale. These properties attract multiple offers and sell fast – usually in a few days – at, or above, the asking price. Be cautious that the agent suggesting this method is doing so with your best interest in mind and can jsutifiy the pricing based on market conditions.