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Tag: Real Estate

Rethinking the Real Estate Sales Process: Getting More May Mean Asking Less

In the world of real estate investment sales, it is rare for the broker to suggest ownership ask less than the market value. But maybe more of us should. In an industry of low probabilities at every turn, it would take brass to suggest such an approach. So few do it even if it maximizes price and yields better outcomes. A few reasons to reconsider:  

1. Asking Whatever is Foolish: Many believe asking for the moon will land at sky-high pricing. It won’t; instead it keeps otherwise interested groups at bay.  Asking $7 million for a $5 million property won’t get you $6 million…only a stale listing.

2. NYC is a Sophisticated Market: Investors may and often do overpay for the “right” asset but not by nearly as much owners often think. And a good broker matches the owner’s property with the “right” investors—that’s the skill. Groups willing to overpay will quickly move on from a supremely overpriced listing and overpay elsewhere.

3. Price Maximization Requires Competition: It’s true that broad exposure invites competition but it isn’t sufficient. You can spread the gospel far and wide but if the message reeks, few will follow. Pricing matters…a lot. If too high, groups will move along and focus on better opportunities. Why make your property easy to dismiss?

4. Get ‘Em Half Pregnant: Asking less than market invites an abundance of interest. A well-priced asset has legs and spreads faster than a salacious high school rumor. It also invites investors to dig into the due diligence and inspect the property. An active investor with time and resources allocated to a property is one step closer to consummation.

5. Sending the Right Signal to the Market: Overpriced listings or marketing materials riddled with phrases like “ownership seeking proposals” is a sure pass for any serious and well capitalized group. The message (realized or not) is clear: pay me a stupid premium and I’ll sell. If you are a seller, be a seller!

To be clear, the ask price should not be foolishly low—consider a 5% discount to market (but be sure your broker knows the market). A pool of rowdy and eager buyers chomping on the bit to buy beats the alternative. I have several anecdotal stories where we employed the above with phenomenal success achieving, in each instance, above the ask price.

Owners: let your brokers disrupt the old model. It works, is more fun and gets you to your goal of selling sooner for more.

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