Over the last two years, we’ve seen real estate transactions become increasingly complex and difficult to complete due to the cautious nature of buyers and, more important, the exceptionally cautious nature of lending institutions. In that light, I thought it would be helpful to explain what a real estate broker does to help clients buy and sell self-storage facilities.
Typically, you hire an expert to increase the probability that a deal gets done—and done right. It falls into the same category as why you hire an accountant to prepare your tax return. But there’s more to a broker’s role than just completing paperwork. We’ll explore how these responsibilities can have a significant impact on the results of your transaction.
Creating and Extracting Value
In March, I presented a seminar at the Inside Self Storage World Expo in Las Vegas titled “Ready to Sell Your Storage Property? The Prep Behind the Sale.” My primary goal was to help owners understand that the selling process doesn’t create value, but rather the value of the property is created by the net operating income (NOI) and the current investment climate for income-producing real estate. In today’s market, 90 percent or more of the value is created by the NOI because real estate, including self-storage, is competing for investor dollars with stocks, bonds, CDs and other income-producing investments.
A broker’s job is to extract the value of the property by finding a buyer who recognizes the value and is able to purchase the property under current market conditions. A broker should also assist in the navigation of the complex marketing, pricing and negotiation processes. The buyers who are active in today’s market are sophisticated, as are their lenders, and more cautious than ever before. It’s unlikely you’ll find a buyer who’s unsophisticated and willing to pay a premium to the current market value; and it’s unproductive and potentially detrimental to the property if the transaction process is not executed properly.
It stands to reason that the more potential buyers who see information on a listed property, the more likely an owner will receive the highest possible offer. The only way to guarantee you’re receiving the highest offers on your property is to maximize the number of qualified prospects exposed to the listing.
Does a broker make a difference in this process? Absolutely! Only an experienced professional with a specialization in self-storage will have access to the necessary tools and relationships to ensure your property has maximum exposure within the self-storage and commercial real estate industries.
A good broker will employ marketing practices that expose a listed property to as many prospects as possible, not just ones a broker develops from his own list of contacts. A seller deserves to receive offers from all potential buyers. Some brokers feel mass marketing is just an additional cost and creates a hassle; but even though it creates more work and costs more, it’s an opportunity to get a better price for the client.
In short, a broad marketing approach helps a broker find the best buyer for the property, not just any buyer. Be sure to ask your broker about his marketing strategy when you discuss your listing. If he doesn’t have a marketing strategy for your property, it should be a red flag.
Your Broker Works for You
The real estate community has an industry standard that one broker represents the seller and, most of the time, another broker represents the buyer. These brokers then typically split the commission or cooperate in some manner so both participate in the commission paid by the seller.
Over the last few years, it has become common to see listing brokers who are unwilling to “cooperate” with other brokers. This is because they don’t want to share their commission or do the necessary work to qualify potential offers generated by a commission split. Not only does cooperating with outside brokers increase the potential market of buyers, it protects the seller by exposing all potential offers on the property. There’s no benefit to the seller if the listing broker doesn’t cooperate with outside brokers.
It’s important to understand the role of the broker before you hire one. If a self-storage facility is priced properly and a good marketing plan is executed, the property will sell in a reasonable amount of time and the client’s objectives will be met. Be sure to consider all these factors when you look to sell or buy your next self-storage facility, and you’ll put yourself in position for a smooth and successful transaction.
Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail [email protected].