Hello -

In addition to being an aspiring agent, I am also a current home seller. My agent is awesome, and we've been talking about whether we need to take my house off the market before Xmas and relist it in the spring, or whether we should keep it listed continuously. I think this is a great learning experience for me, so here are a few specifics:

-We've been on the market about a month - we listed to take advantage of the fact that the comp next door went on a few weeks before us and we listed ours for $50K less. Otherwise we probably would have waited til spring.
-We have a commercial/residential zoning B1 - a large historic house in an area that is part residential and part professional offices - ie lawyers and accountants
-There are only two other similar properties on the market now (lots of res, but only 2 that are B1).
-Ours is sits in between the other two and is also smack in the middle of those two in price but objectively in better repair than either and approx the same size. Recent upgrades and repairs, bigger lot etc. So all 3 of the houses in a row are for sale at the same time. The 3rd just went up for sale 2 weeks ago.

I know the house is only worth what someone will pay for it, not what we have in it, so that's not what I'm asking about.

My question is really this: should we take it off so that it doesn't get stale, then relist in the spring? Or should we keep it listed so that traffic that might view the adjacent comps would also come see ours? For those of you that deal in commercial, is this a market that keeps going in the fall/winter or does it also drop off until spring?

If this was your listing - what would you do? Again - I have total confidence in my agent - she is doing a lot of research since she doesn't deal with a commercial market usually so we're both on a learning curve.

Thanks for your opinions!

Amanda

What have sold's gone for?? You might be 50k less than the other 2 but ALL of you may be overpriced.

I have seen whole areas overpriced and expiring and close by priced properties keep selling. People will always buy the cheapest deals in the best areas they can get into.

It sounds like since you mentioned commercial zoning you are trying to sell it for that since you feel you will get more money that way. For commercial purposes you would have to look at the future land use map and commercial growth to see how this area is slated to finish transitioning. If in city limits you get the map from there if not the county. They will have current land use and future land use maps.

The downside is with a historic home you will most likely have heavy conditional zoning restrictions which will limit interest in the property for commercial purposes as you can just use it for a limited function. Commercial office space vacancies are at an all time high (in the double digits and growing) because in a bad economy new business starts go down.

When valuing commercial property 3 approaches can be taken. Similar sold comps close-by,cost per square foot,the income approach.

Most of the time I use the income approach and then use sq ft if it is vacant. I look at the property and determine what it's highest and best use is. Example can it be torn down and re-developed; or rehabbed and zoning changed into a new use that doesn't already have high saturation rates for the area,or assembled with other parcels for a bigger project??

If the answer is no then I am stuck with it's current use.From there I would run a pro-forma to see what current and anticipated future returns would be. Just remember the NUMBER ONE cardinal mistake when trying to sell commercial property.

Sellers wants commercial prices of 2005 which will not happen again and sellers also try to sell and justify a price base on the POTENTIAL of that property. No buyer will purchase based on potential but will pay a value based on what the property is worth today. If the sellers wants a higher price based on potential then the seller will have to put in the hard work to get the property there before selling.

It's like a restaurant saying "this restaurant could do 10k a week so I want a price off of that instead of the 2k a week it is currently doing"

To which I would say as a purchaser you either sell to me on the 2k a week value or get your sales up to 10k a week for an extended period of time and I will purchase based on that and profit returns.

Good luck. Investors buy commercial properties all year long for the right price.

Isn't possible that someone may want to buy it now so they can close before the end of the year for tax purposes? Keep it on the market.

Sure but you still have to have it priced correctly to get people to look at it first.

Thanks so much to both of you for responding!

Mark - sometimes it takes an objective 3rd party to state the obvious. Duh. Average time on market around here is 80-100 days (for all properties, not just commercial) and we've been on about 30.

Super Realtor - I laughed when I read your response because I had JUST studied all of those valuation methods in my class about an hour before you posted. You've given me some GREAT info and I really appreciate your time in responding. Without going into a big song and dance, the property appears to be priced competitively compared to the rest of the market (second lowest in overall price for comp sf and about 15% less per sf for comp styles/uses), and - going on the low end of lease rates for comparable properties, would give an investor a cap rate of approx 10% at list price - based on a very simple net annual lease income vs asking price assuming tenant pays utilities and content insurance and owner pays property tax, special assessments and building insurance.

BUT - you notice - I'm not mentioning comps because there really aren't any. We live in a fairly small market, and our property is part of a relatively small sub market. The most recent comp is from 2006 - obviously not reflective of today's market. In short, this isn't a submarket that sells often - only about 10 on market now - and we have no legitimate benchmarks to go on. The most relevant comp has been on the market since beginning of Sept, so it's too early to really get a sense of what's going on in our comps.

Anyway, way more info than you wanted but again, thanks to both of you!

Amanda

"going on the low end of lease rates for comparable properties, would give an investor a cap rate of approx 10% at list price"

If it is not currently leased up with cash flow you can't go off of POTENTIAL cap rates. Remember this is the number one mistake time and time again. If you have a property that COULD rent out you only have a building based on square feet at that point. An investor will want to get it cheap as they will have to put the work in to rent it out and cash flow it.

Have you marketed the property to lawyers,doctors,dentists,accountants in the area and their trade organization chapters? You would need to check and make sure your zoning would allow for such uses. If the property is almost paid off you could offer a bug downpayment and you finance the rest at below market interest rate with a balloon note in 3 years.

Many are doing this as the financing has dried up on wall street without buyers putting down massive down payments. Even with say 30 percent down lenders do not want to loan out on properties that are not cash flowing already as they are to risky.

Then what you are left with is all cash buyers at a steep discount or doing some form of owner finance with some down from the buyer.

For solds your local mls will be mainly residential with limited commercial data. For that you need to go to www.loopnet.com and www.costar.com

Buildings can be broken down into age of a class A,B,C,D building. Once you have the age you can then derive a cap if it is cash flowing already if not you look at similar buildings even a little further away that were vacant and sold on a square foot basis. Look up who bought it and market to them as they generally focus or specialize in acquiring one type of asset class.

You might find that a class C building of 20 to 30 years old might sell at a cap rate of 13 compared to a class A building (brand new with nicer amenities,location,and features is selling with the same cash flow for a 10 cap.

hope it helps

Once again Super - thanks!!

You've raised some great points. The owner financing is an option I hadn't even thought of. Right now there's enough vacant and sitting on the market that we could probably negotiate a long-term lease-option on a house in the neighborhood we want to live in to try to nail down today's selling prices.

I've got a lot to learn!