In our first article in this series, we discussed the importance of the appearance and condition of the property and of determining appropriate pricing. Next comes the marketing process and negotiating the terms of an agreement.
The pre-marketing phase includes gathering the plans, details and information a prospective buyer or tenant will need to make an informed decision. This may include:
• Building plans
• Details about the building’s HVAC, electrical and plumbing systems
• Present zoning, flood fringe or floodway info
• Any easements, covenants or mixed use agreements that may affect the use
• Building or site amenities
• Environmental reports
• Preliminary title reports
Once the information is gathered, we prepare a detailed marketing package. We always try to prepare a detailed package for buyers or tenants to give them the information they need to determine if the property meets their requirements. This eliminates problems and headaches later in the process. It may sound like a minor issue, but when buyers or tenants get incomplete or inaccurate information it complicates the process and makes it more difficult for them to make a decision.
At the same time we are assembling our marketing packages we assemble a list of prospects we have tracked in the market that we think may be interested in the property. Depending on the property type, we may look at who has a lease coming up soon, who needs another location in this geographic area, who may be outgrowing their current location, what business type fits the property or existing improvements to the premises, and who might be new to town and seeking space.
Once the packages are complete and we have assembled our prospect list, we begin the marketing process. The marketing packages are posted on our website and other sites, specifically Loopnet and Crexi, which market to the public, and CoStar, which provides the information to real estate professionals across the country. There are other targeted internet services or postings we may utilize depending on the type of property. Signs are placed on the property to get the attention of drive-by traffic, broker blasts via e-mail are sent to area commercial brokers and, in some cases, contact is made and tours are set up with key brokers who specialize in the specific property type. We send information and/or make calls to neighbors and other identified prospects. We also include property information in our quarterly newsletter which is distributed to over 3,700 people in and around the commercial real estate industry, most of them local.
Hopefully this will generate interest from likely prospects and lead to showings. Our brokers try to personally attend each showing to make sure the property is shown and described in its best light. Once a serious prospect is ready to negotiate a commitment, a letter of intent (LOI) or purchase agreement is negotiated. Sometimes this process may be very short — days or weeks — and other times it may take six to 12 months.
Ideally, we will have more than one party interested. This helps to ensure we get the best price, and frequently eliminates some of the back and forth in the negotiation process. This is where our knowledge of construction costs, timing , ADA laws and other laws and zoning regulations are valuable to the client because we can point to potential problems and unintended consequences.
Often, the deal starts with an LOI, particularly on a lease. Sales can go directly to a written purchase agreement. When drafting an LOI or purchase agreement, we try to incorporate as many of the business points as possible so that both parties clearly understand the basics of the deal. This is the stage where the parties are generally negotiating the price or lease rate, term or closing date, any tenant improvements or other seller requirements. When the parties have agreed on these terms a lease or purchase agreement is drafted and reviewed by the parties and their legal counsel.
This article appeared in our company newsletter in September of 2019. Please click here to download the entire newsletter.