With these 5 ingredients it is possible to sell real estate for more than its appraised value.
As stated in a previous post on the MacRo Report Blog (Selling Land and Commercial Real Estate at Prices that Exceed Appraised Value – August 5, 2011), even in a sluggish and sometimes declining real estate market there are any number of examples where sales prices have exceeded appraised values.
Be it a recent estate appraisal, a valuation ordered by a commercial lender on a property used as collateral for a business line of credit, or market update, sometimes the appraiser may miss the mark.
How can that be you ask?
While appraisers are trained to analyze past comparable properties, activity, market trends and formula based income evaluations, in a volatile land and commercial real estate market as we have been experiencing for the last five years, the market is established by consumers. It is the consumer’s individual determination of the uniqueness of a particular piece of real estate that sets the price.
The Wall Street Journal recently featured an article on how
Here are 5 parts of a formula that can assist a property owner in maximizing the possibilities of beating devaluation odds in today’s environment:
- Versatility — How adaptable is the property to a wide variety of uses? The greater the versatility, the wider the spectrum of possible users.
- Buyer demand – Within that spectrum, it is important to have a grasp of the depth of the market for the various uses … and more importantly identify the business hot spots – geographically, business types and individual companies with a niche that is causing them to soar.
- Condition of the property – Does the property shine? Is it well managed? How many different buyers could walk right in, put hand in glove and run the show without blinking an eye? These are critical points. It is one thing to put a new coat of paint on the walls of a poorly maintained property, but it’s a completely different thing when a property has an exemplary operational and maintenance history.
- Broker knowledge – Has the property owner engaged a broker who understands the ins and outs of the local real estate market, property values, the political climate, the zoning and other land use regulations, as well as the technical aspects of the property itself? This is no time to let a rookie real estate agent or a relative to cut his or her teeth with such an asset.
- Marketing strategy and broker’s ability to implement – As they say this is where the rubber meets the road. A broker can have all the knowledge in the world, but if he or she doesn’t have a proven track record in identifying the right target markets, developing specific strategies to capture them and successful implementation … well, a lot of time and value can be lost.
The key to all this is that once a new real property listing hits the street, it should immediately have leverage over other comparable offerings in the market.
This leverage means a higher possibility that more than one offer will show up at the same time. Then it’s all about who wants it more … than what others may say it is worth!
Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes for TheTentacle.com.