If you are considering selling your multi-unit property, how you start your relationship with your real estate agent has a tremendous impact on the final results. As a multifamily property owner in the East Bay, I receive postcards and letters in the mail touting the expertise of real estate agents.
As a real estate agent myself, specializing in multifamily properties, I also send out postcards with information to owners when I sell a property in their area.
In the past year, I have noticed a trend with regards to the information on the postcards and the letters that I receive. They are always addressed to me as the apartment building or multifamily property owner.
The postcard or letter will often describe the recent transactions the company or agent has worked on. I find this information very useful and it educates me on the investment real estate market in the East Bay. Similar to EBRHA classes, this type of valuable information is essential to being a successful property owner.
In many instances, the agents show properties in which they represented the owner, and also tout how they represented the buyer.
It’s the next part that is shocking to me as real estate agent. Often, in bold letters, the postcard will label a property as “Off-Market.” In other words, the real estate agent represents you, the owner, and earns a commission. Then, without spending a single dollar to market the property via the MLS listing service or LoopNet, they present you with a buyer. This has always been part of the investment real estate market, as there has always been a segment of agents that are truly only interested in making the most income without regards to why this is not best for the multifamily owner.
In the past, I’ve felt that the current owner would be best served if they had their agent representing them and the buyer had a different agent. It’s really in the best interest of each party to have someone working for each client exclusively.
I’ve witnessed first-hand these situations (many times in the past 18 months) in which the owner is convinced by their agent that the top offer will come from one of his or her clients, with persuasive arguments such as, “I have a number of highly qualified buyers” or “I will get you the top price without putting your property on any of the listing services.” They may also say, “I know all the buyers, I’ve worked with them, and we will get you that price” or “In this market, selling your property off-market is the best method.”
The agent’s argument can be very persuasive and much less of a hassle for you and your tenants. What could be better than the promise of a smooth sale of your property and at a price you’ve told the agent you want or hope to achieve?
There is one HUGE problem with this strategy: it almost certainly will cost you, the owner, a substantial amount of money in the end.
In the current investment property environment with rents skyrocketing and historically low interest rates, the demand from buyers far exceeds the number of properties for sale. We as owners can only estimate what our properties are worth. If you’ve owned your property for 10-15 years or more, as I have, we may not know the value of our properties.
As a real estate professional, I continually see properties sell for substantially more than I or anyone at the broker’s tour could have guessed.
If you agree to let a real estate agent sell your property to his or her client, or through an agent in his or her office, without letting every possible buyer have an opportunity to view and consider the property, as the seller, you could lose 10-20 % in the ensuing sale. This could translate to $75,000-$300,000 less.
The stark reality is that one person does truly benefit, and that is the agent who convinced you as the owner that this was the best path.
In this market, it is common to see properties selling for amounts that set new standards based on cost per unit or multiple of gross annual rent.
Attract More Buyers
Follow these steps to ensure your sale attracts the greatest number of buyers and it may help you receive the maximum return on your investment:
1.) Ask your agent to develop a marketing plan. What is their vision to sell your property?
2.) Insist that your agent or broker list your property on MLS/Loopnet. Do not sell your property Off-Market.
3.) Your broker should not limit the potential buyers to only their existing clients.
4.) Make sure your property is viewed by the widest possible group of buyers.
It’s simply not possible for any real estate agent to predict what buyers are willing to pay for your apartment building. They can, however, give you a very educated range, or minimum value.
When you’re considering selling your multifamily property and any agent suggests that he can sell your property in the above described methods, it’s important to understand that it is not in any way in the seller’s best financial interest.
– John Caronna
John Caronna has been an East Bay-based apartment investment-grade real estate specialist and apartment building owner since 1999. He can be contacted at (925) 253-4648 or .