“Some of the Smartest Minds in Real Estate” and Other Horror Stories
Almost every broker you speak with will tell you that they have the most extensive database of buyers for any given property on any given day, and that they will expose the deal to a universe full of prospective buyers.
They will boast about how wide their firm’s reach is and how important it is that you list with them in order to tap into their treasure chest of clandestine investors. Be it international, national, local or targeted, only they have access to the plethora of buyers every property must be seen by in order to garner a competitive atmosphere for bidding up the price on the market.
Almost every buyer you speak with will tell you that they prefer not to chase market deals, because the perception is that they have been picked over, shopped to death and cheapened by overexposure. Very few buyers will admit that they actually like to look at a property that everyone else is reviewing. Some will even whisper that they only want to view “virgin” deals.
Almost every seller you speak with will tell you that they just want the highest price.
So how do you reconcile all these factions into a successful sale?
A market deal is a property dressed up in a smoking hot gown and placed on the mass-market catwalk for all to see. Its flaws are airbrushed, and it is paraded as the “deal of the day.” It is the easiest and most common method of selling vanilla properties.
The philosophy to this approach is that it exposes the asset to a large audience in hopes that competitive bidding will ensue and heady bidders will be seduced in the moment, consequently bidding up the price.
So if the prevalent thinking among the majority of potential buyers is not to participate, is the seller really getting the highest price? Understanding these challenges is important in the matter of reaching the right audience. In order to maximize bids and achieve the highest price, a broker must understand the asset, as well as the market’s complexities.
One active investor complained to me that after spending thousands of dollars on attorneys, due diligence, engineers and architects in order to participate in a market deal, the seller accepted an offer to lease the property instead of selling it. It was clear that the broker handling this property didn’t properly understand the seller’s needs.
Other potential problems arise when a bidder offers a high price because he or she got caught up in the momentum of competition and then realize they overpaid.