Selling commercial real estate takes a different approach than selling residential properties. While selling homes directly to homeowners requires you to be knowledgeable about things like local schools, distance to shopping centers, and community amenities, selling commercial properties takes a different perspective.
Commercial real estate agents need to know more about zoning, local traffic flows and patterns, and how to help their business clients find the right property for their needs.
Becoming a commercial real estate agent takes some extra finesse and expertise. But even within the commercial real estate niche, there are some further distinctions. Learn more about commercial real estate and all the different issues that may arise as you buy and sell these properties.
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Commercial real estate refers to any property designed and utilized for business activities rather than individual residential purposes. While the residential real estate market focuses on single-family homes, condominiums, and townhouses primarily for living purposes, the commercial sector has a broader scope.
Within commercial real estate, there are many different types of properties to buy and sell. The primary types of commercial real estate include multi-family complexes to be used as rentals, business office space, manufacturing/industrial, raw land, farming, and hospitality.
There may even be commercial properties that are considered mixed-use. Each type of real estate comes with a unique set of benefits and challenges:
Getting into commercial real estate requires the same licensing as those who sell residential properties. People who learn how to sell commercial real estate develop a slightly different skill set than those selling houses to families.
They learn how to make business deals, how to negotiate with businesses, and how to locate the best property for a particular need. In addition to getting a license, it’s important to find work at a brokerage that sells commercial real estate.
When you want to know how to start selling commercial real estate, it starts with working with the right people, such as experienced brokers. Some brokers find that they’d prefer to start real estate investment trusts and oversee large portfolios of properties as well.
When you want to sell commercial real estate, you need first to decide how you will do it. There is always the for sale by owner model. While there are benefits to this, there are also risks when you don’t know what you’re doing.
Another method is to sell by using a commercial real estate broker. This allows someone else to take the reins on marketing, photos, and meeting potential buyers, while you can wait for the right offer.
The third option is to sell your commercial property to an investor. Another option is to use seller financing for commercial real estate. This is often helpful for an interested party who doesn’t have the capital to buy outright.
For a better understanding of the commercial real estate sales process, here are 7 steps for success:
The first step is to create a listing. Some sellers keep the listing generic to get people to see the property in person, but this tactic can backfire.
Buyers want to know at least some basics like zoning, square footage, price, and a handful of photographs. Without these key pieces of information, some potential buyers won’t even bother to reach out unless your property is the only one in the area like it.
Why sell commercial real estate if you aren’t going to share the details in your listings?
There are many real estate marketing techniques that are necessary to sell a commercial property. Just listing it and hoping for the best isn’t going to guarantee a quick sale. It’s important to create a proactive marketing plan to ensure the right potential buyers see the property.
Creating a large sign, making promotional flyers, reaching out to your business networks, and listing the property online are all part of creating an effective plan to market your property.
One of the ways that commercial real estate brokerages add value is by saving you time and money. Busy investors and business owners don’t always have the time needed to manage their own listings. Between scheduling showings, negotiating contracts, and drawing up all the paperwork, this can get very time-consuming to do on your own.
Working with a professional broker gives you back your time to focus on more important things.
Additionally, they have a wealth of knowledge and expertise that can help you in getting top dollar for your property as well as great business connections that might just include a buyer for your commercial listing.
While there are plenty of benefits to working with a commercial real estate broker, there are also some cons. Real estate brokers are very busy and may not prioritize your property the way you would like.
Some brokers are so commission-focused that they don’t provide the best service. They may also try and pair a business with your property that is the wrong fit.
The most important part of any commercial real estate sale is to ensure you get a positive return on investment (ROI). While it’s possible to do this with FSBO listings, brokers are more likely to help you get top dollar for your sale.
While they will receive a commission for their work, it’ll be well worth it for the time they put into pricing, marketing, negotiating, and closing the sale.
If you don’t plan to put your property for sale publicly, it’s critical to use your connections to find buyers off-market.
Start planting seeds through your networks to let them know you are planning to sell. Look for people wanting to be real estate investors or who might want to add another property to their investment portfolio.
Use search tools to discover transactional information about recent sales. These documents will have information about not only the seller but the buyer as well.
This information can help you find sellers who may be interested in a new investment opportunity and buyers who may want more than one new property to add to their portfolio.
It’s important to have as much information as possible about the location you’re selling to ensure you can negotiate effectively with potential buyers.
Use case studies, comps, and other charts and graphs to justify the asking price. This is more likely to appeal to a business or investment buyer.
Commercial real estate comps are going to fall under two different categories. The first is commercial leasing and the other are sales of commercial properties. You’ll need to sift out leasing comps if you are selling commercial real estate.
Additionally, make sure you have the right access to the systems at your company to view these listings effectively. Role-based access control explains why many agents couldn’t get this information on their own and needed their broker to do it instead.
Selling a property means you need all the right documents drawn up to ensure the sale is legal and final.
This means clearing any title issues, paying off your lender, and fully transferring over ownership to the new commercial property holder. You also need a place to send the funds from the sale once it’s complete.
There are several success tips for selling commercial real estate fast. But many of them have more to do with getting documentation and financial history in place as opposed to simply
The process of selling commercial real estate includes making a ton of mistakes. But some of these mistakes can cost you a lot of money.
The first mistake is that sellers don’t have an accurate idea of the property value. They either undervalue it or overvalue it. But not selling it in the right price range, can mean it stays on the market too long or it won’t sell for the right price.
Many property owners want to know how to sell commercial real estate fast, but they don’t understand how important the paperwork can be. If done wrong, these documents can cost big money or leave them in legal hot waters.
The last mistake to avoid in selling commercial real estate is in going rogue. You don’t want to sell a property without finding someone experienced in selling commercial real estate. Use the best professionals to give you the best ROI.
Selling commercial real estate is a great career opportunity. It connects a real estate broker or agent to businesses and investors. These connections create more future opportunities than a one-time sale of a residential home.
Additionally, many commercial property sales yield a much higher commission, so brokers and agents get a greater ROI on their time.
Residential real estate agents looking to transition to selling commercial properties are qualified to do so. The answer to, “can you sell commercial real estate with a residential license,” is yes.
Savvy investors may want to break into selling commercial real estate on their own, but unless you own the property already, the answer to, “do you need a license to sell commercial real estate,” is yes. You need proper licensing to sell commercial properties.
Selling commercial real estate isn’t any harder than residential real estate necessarily. With both options, you still need to network, maintain a contact list, and treat your clients well.
But with commercial real estate, it’s even more important to get mentoring in commercial real estate and to work in agencies that already specialize in commercial properties.
You can also leverage several resources to find the owners of commercial properties to see if they are interested in selling.
The most common way to value a commercial piece of real estate starts with sales comps. You’ll need to find other properties that have sold and compare the subject commercial property to it.
Other ways to value these properties are to look at cap rates, and gross rent multiplier, and also to evaluate the replacement costs.
Don’t forget to factor in commercial real estate closing costs for seller fees and account for them in your ROI calculations.
Start by asking business associates or searching through recently sold listings on websites like Loopnet to find a real estate broker.
Additionally, a simple Google search can help you find a qualified commercial real estate broker.
Selling commercial real estate is lucrative both for commercial real estate brokers and sellers. When you’re learning how to buy and sell commercial real estate you’ll make a ton of mistakes in the beginning.
While marketing is critical, it’s equally important to build a big list of investors and clients who may be interested in future properties. Working with a skilled, licensed commercial real estate agent will almost always benefit you.
Getting into the real estate business has another option. Many people are learning about wholesaling real estate and are surprised at how it too can help you earn a living.
For real estate investors and regular people looking to diversify, here’s how you can learn more about wholesaling properties.
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