Read the Tea Leaves to Sell Your Apartment Building

How to tell what, if anything needs to be done to get your property sold once your property is placed on the market.

You’ve carefully scrutinized every active and sold listing. You’re up to speed on your competition – you’ve driven by each building with which you compete. You understand the tax impact of a sale. All that’s left is to produce that glossy brochure, place the listings info on multiple websites, call the neighbors, and publish in the multiple listing service. Now the fun begins! You must interpret the market signals – AKA “read the tea leaves” – to guide the process to a successful close. Here are a few of my favorites.

Lots of inquiries – no offers. Something is awry – and typically it’s not the asking price. Generally, this means the offering is solid with a building that generates a lot of income – at least on paper. The asking price seems fair based upon the market comps and current availabilities. But when prospects actually view the building – warning sirens blare. This could be signs of deferred maintenance, a bad location, an unusually messy tenant, or a tenant whose unit is one that everyone has designated as the place to hang out.

Offers well below asking. Buyers ignore the asking price and simply offer at their comfort level. I refer to this as “making the market the bad guy”. Please understand – I’m not suggesting you puff the price of a listing. However – what a ready, willing, and able buyer will pay is the best indicator of what your building is really worth.

Many offers at asking. Eureka! You’ve priced the listing correctly, property features are appealing, and interest has been generated from qualified buyers. Now it’s incumbent upon you to ensure the buyers can perform. Don’t simply assume that pre-qualification letter from the buyer’s lender is for real. Ask the tough questions. Cross qualify if necessary. Get a complete understanding of the buyer’s story – are they in an exchange? Do they own other rental properties? What is their source of funds? You need to select the right buyer the first time. False starts are painful.

Crickets. Oops. You missed the mark! Pricing is too high. Location blows. The property lacks numerous features which cause it to be undesirable. Rents are too low for the area. Property is master metered for utilities therefore expenses are too high.  Adjust course matey!