Did Buyers Have the Information Needed to Evaluate Your Commercial Property?
Attracting the right buyer is only the beginning. That buyer must also receive enough accurate information to evaluate the property and make a confident decision.
When important financial, lease, zoning or property information is missing, buyers may delay making an offer, reduce what they are willing to pay or move on to another opportunity.
If your commercial property did not sell, it may be helpful to review not only how the property was marketed, but also what information buyers received.
Financial Information
An investor needs to understand the income a property produces and the expenses required to operate it.
Depending on the property, buyers may request:
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Current and historical income
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Operating expenses
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Real estate taxes
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Insurance costs
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Utilities and maintenance expenses
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Capital improvements
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Net operating income
Simply providing a total income and expense figure may not be enough. Buyers often want to understand how those figures were calculated and whether they are likely to continue after the sale.
Clear and well-organized financial information can help buyers evaluate the property more quickly and with greater confidence.
Rent Rolls and Lease Information
For an income-producing property, the leases are an important part of its value.
A complete rent roll should identify the tenants, rental amounts, lease expiration dates, renewal options and any outstanding concessions or obligations. Buyers may also want copies of the leases and amendments so they can confirm the information.
Missing or inconsistent lease information can raise questions about future income and tenant stability. Those unanswered questions may cause a buyer to assume more risk than actually exists.
For an income-producing property, the leases are an important part of its value.
Property Condition and Improvements
Buyers want to understand the current condition of the property and what improvements may be needed after the purchase.
Useful information may include:
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Roof and air-conditioning ages
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Recent repairs or renovations
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Building-system maintenance
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Known deferred maintenance
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Existing warranties
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Property inspections or engineering reports
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Expected capital improvements
Owners do not need to suggest that a property is perfect. Providing accurate information allows buyers to evaluate the property realistically and reduces the possibility of surprises later in the transaction.
Could missing or unclear information have affected buyer interest?
A complimentary Commercial Property Sale Review can help identify what should be prepared before returning the property to the market.
Zoning and Permitted Uses
Zoning can influence who will purchase a property and what they may be willing to pay.
An owner-user may need to confirm that its business is permitted at the location. A developer may be interested in density, building height, parking requirements or redevelopment possibilities. An investor may want to understand whether the property could support different tenants or future uses.
Providing available zoning information, surveys, site plans and property records can help qualified buyers recognize opportunities they might otherwise overlook.
Environmental and Property Records
Depending on the type and history of the property, buyers may also ask for environmental reports, surveys, title information, permits, certificates of occupancy or code-compliance records.
If these documents are available, organizing them before marketing begins can save time. If they are not available, the owner and broker should be prepared to explain what is known and what may still need to be investigated.
Uncertainty does not always prevent a sale, but unexplained uncertainty can make buyers cautious.
Explain Anything Unusual
Every commercial property has its own history. There may be an unexpected expense, a temporary vacancy, an unusual lease arrangement or a repair that affected the property’s recent financial performance.
Leaving buyers to interpret these items on their own can create unnecessary concern. A straightforward explanation may help them distinguish between a temporary issue and a continuing problem.
The goal is not to overwhelm prospective buyers with documents. It is to provide the information that helps qualified buyers understand the property, recognize its value and decide whether to move forward.
Preparation Builds Buyer Confidence
A well-prepared property information package can make the marketing more effective and the transaction process more efficient.
The goal is not to overwhelm prospective buyers with documents. It is to provide the information that helps qualified buyers understand the property, recognize its value and decide whether to move forward.
The exact information required will depend on whether the likely buyer is an investor, owner-user, developer or neighboring property owner. Identifying the target buyers helps determine what information should be emphasized.
Good preparation also allows the broker to answer questions promptly, follow up after property tours and address concerns before buyer interest is lost.
Would a Fresh Review Be Helpful?
If your commercial property did not sell, incomplete or unclear information may have been one part of the problem.
If selling is still your goal, I would be pleased to provide a complimentary Commercial Property Sale Review. We will discuss what happened during the previous listing, what information buyers received and what should be prepared before returning the property to the market.
A brief conversation may be all it takes to identify what needs to change.
John C. McDonald
Commercial Real Estate Specialist