We know what you’re thinking. Have we lost our minds? Why is the kicker for the New England Patriots selling real estate? Was he just fired by Belichick and picked up by the local Remax affiliate on the waiver wire? Not even close. Stephen Gostkowski is still alive and kicking, getting ready for another 87.1% season.
One challenge with sellers is they want to believe the broker who forecasts the highest price, rather than the broker who tells them the most realistic outcome. It’s all too easy to start a bidding war with other brokers, and before you know it, you have just landed a listing for 20% above your original valuation.
A field goal analogy works well when speaking with sellers about their properties. Let’s place the price that even the most conservative investor would pay at the one-yard line – about the equivalent of an extra point – and the highest price imaginable at the 45-yard line (meaning a 62-yard field goal, which has an approximate success rate of say 10%). In this metaphor, the higher the price, the lower the success probability… but it’s helpful if you’re the best kicker (broker) in town.
In fact, commercial real estate has different values depending upon who’s buying it. Take a suburban office property for example. To an investor, it will have a value based upon a cap rate range. An owner/occupier may be willing to pay slightly more if they view it as their office and have different economics, emotional attachments, and maybe even different financing. A developer may value the property even higher if there are potential zoning changes and increased time to get said rezoning.
Selling to an investor at a market – or slightly above market – cap rate is like an extra point. Most brokers should be able to kick that. Only a bad snap or hold will stop you making a sale.
Selling at a premium cap rate or to an owner-user is a little tougher and requires a wider reach. Most competent brokers can get the equivalent of a 25 yard field goal utilizing their broker and investor network, but you need to have a more targeted approach if you want to hit from further out. The success rate dramatically drops off unless you have Gostkowski accuracy.
Getting maximum pricing relies not only on accuracy but range. Only the top brokers have this.
A top broker maintains deep relationships in the market, knows how to approach investors, owner-users, and developers to structure a deal that makes sense, and then strikes at the right moment. They will use the best tools to help them reach the right buyer and then run a tight process to get the deal closed. Many of them have made CREXi part of their team for its ability to enhance their range and accuracy.
Are you the Gostkowski in your market? How do you drive pricing and help get that extra point or three?