My Vacant Commercial Property Has Not Sold. What now?

There are two main types of commercial property buyers:  USERS rather own than pay rent, for the freedom, security, fixed payment and equity buildup from ownership.  What price will a user pay? Unless the property holds specialized attraction, most users want to purchase so the monthly payment is equal or less than rent for a comparable property.

The other is INVESTORS; people who want a return on their investment from rents.  Returns are often higher than residential property.  The downside is commercial properties tend to be specialized, requiring users with special needs. Result: potentially longer waits to find a tenant.

Retailers need traffic, easy access and parking; Industrial users need access to transport and energy; Office and professional users generally want to be near other, like office and professionals and educational facilities.  What return does an investor want?  Years ago, it was possible to get a 10% cash on cash return on invested dollars; while today, with lower interest rates and lower expectations many smaller properties return 4% to 8%; NNN (Net after taxes, insurance, maintenance); still better than CD’s, offering future increases in rents, and increases in equity as property appreciates in value and the mortgage gets paid down by the tenant.

AS A REAL ESTATE BUYER, YOU ARE IN THE DRIVER’S SEAT!

 

 

These are difficult times in the real estate market.  Many homeowners in Oregon and around the country are in default on their loans and have to sell, and the banks and mortgage companies are holding properties they don’t want.  (They make their money making loans, not owning real estate).  With interest rates lower than any time in 45 years, and prices around 30% below their peak, homes are a relative bargain.

 

Even though buyers now drive the market, the road can be very bumpy; even dangerous.  Here are a few tips for buying distressed properties:  Short sales often go for around 80% of the mortgage balance.  If your offer is much below that, even if the seller accepts your bid, the lender is in control and may sit on your offer with no response in hopes they get a better bid from another buyer. 

 

Be prepared with a fast acting lender to close quickly (two weeks or so) after the lender gives approval.  This means to have a loan commitment and have any inspections completed so you know what you are getting in to.

I HAVE TO SELL MY HOME IN OREGON, BUT I DON’T HAVE ENOUGH EQUITY TO PAY A COMMISSION

 

 

This is a tough spot to be in.  If you are or about to be behind in your payments and your house is worth less than your mortgage plus selling costs, you probably need to do a SHORT SALE.  Contact your lender, explain your situation in full.  Put your property on the market with an office experienced in handling short sales. They can negotiate not only the dealings with your buyer, but just as important, the delicate negotiations with the lender in order to help protect your credit record to the extent possible.

 

If the lender approves the deal and your sale proceeds are short, the closing costs and realtor fees are paid by the lender.  This benefits them as well, since they usually realize more from a short sale than from a foreclosure.

I WANT TO SELL MY SOUTHERN OREGON HOME, BUT WITH ALL THE REO’S AND SHORT SALES IS THERE ANYTHING I CAN DO TO HELP HOLD MY PRICE?

Bank owned (REO), short sale and other distressed properties are sold “as is” and often take much, much longer to close escrow as lenders often withhold permission for a sale till the last few days before the foreclosure sale in hopes of getting a better offer.  Some REO properties have been neglected, and even stripped and vandalized.

 

That’s where you have an advantage!  You can perform needed inspections even before an offer comes in; that way you can reassure buyers about the condition of the house.  Another thing to give you a competitive edge is to pay all or part of your buyer’s closing costs, anywhere up to 6 % of the agreed price.  This can be a great advantage, since it relieves some of the cash requirements for cash strapped buyers; meaning more people can qualify to buy your home.

 

Remember this; in this real estate climate, the buyer is in charge with lots of choices and the constant temptation to wait for prices to drop even more.  If you don’t have an offer in the first month, the market is speaking and you may have to make a price adjustment.

THE OREGON REAL ESTATE MARKET IS TERRIBLE, I NEED TO SELL, HOW TO SET MY PRICE?

There is no easy answer.  What buyers will pay depends on location (desirable and undesireable situations nearby), condition, special features, comparable sales of similar homes and costs of interest, repairs taxes. Your price will also depend on how many similar homes are on the market (your competition) and any truly unique desireable features.

 

If you have the data and the skill to analyze the above, you can set a price that will sell your home.  If not, contact a realtor and be sure there is backup data to support the price recommendation.  Beware of the agent who agrees that you can get more than the data shows; that could be a costly mistake in this falling market.

 

Three years ago, if you overprice your home, it meant you had to wait a few more months to get your price.  Now the picture is completely different.  An example: Your home “comps” out at $250,000, and the market is falling at about 10% per year. You price it at $265,000 hoping to get a little more and have some ‘bargaining room’.  Six month later you drop the price to the original $250,000. . . but the property is now only worth $237,500, a 5% drop.  If you need to sell, the least loss situation in a bad market is to list the house at $245,000 and sell it.  You might even get multiple offers if it is truly a good buy.  Ask yourself this question: Can I afford to be wrong if the property doesn’t sell?

If you don’t NEED to sell in Grants Pass or Klamath Falls, don’t put it on the market!

If you are still hoping to ‘get your price’ or testing the market, this is the wrong time to try to sell your home.  The market in Southern Oregon is like most of the rest of the country; homes are being offered at firesale prices.  The downward spiral is caused by foreclosures and short sales (properties sold for less than the mortgage).  Buyers naturally want to get the best buy. . . the best home for the least cost; and they are mostly waiting on the sidelines, expecting prices to continue down.

Know this: if you need to sell, price your property below the competition to generate showings.  It’s a bitter pill to swallow, but if you need to sell, you need a buyer willing to pay your price.  Take your medicine; price it to sell.   If you go two weeks without a showing, or a month without an offer, your property is priced too high for current market conditions.  Pricing with a negotiating cushion is a big mistake.  It means your property will be part of the pack unless it has a truly unique benefit buyers are willing to pay extra for.

San Antonio vs Southern Oregon

The beautiful Rogue River

San Anton’  is a beautiful old city with a great river walk (more like a canal with restaurants on the banks.  It has a history hundreds of years old. Had a great meal in market square; cabrito!  If I lived here, I would want to brush up on my Spanish (one year in college in my distant past and an Italian language background is just not enough).  I wish I had a Spanish speaking agent in my Grants Pass and Klamath Falls offices. 

By comparison, Southern Oregon is much newer and much much smaller.  The people are the same, though.  Both have courteous drivers (oneSan Antonio driver drove around a rain puddle so I wouldn’t get splashed), quiet friendly smiles from strangers.  I like our mountains and hills, the rivers (especially the Rogue) and that amazing Klamath Lake, one of the last wild places.

Is the Bottom here for Southern Oregon Real Estate?

Lots of short sales and foreclosures out there.  Buyers of these have to be patient (as much as 4 months), but can get a good buy.  Warning:  do your homework; these properties are sold as is.  Banks are allowing short sales rather than foreclose, but are beginning to counter back on low offers, where last fall they often took first offers.  That may be a sign we are near the bottom and things will level off.  Sales of homes will pick up this summer with the $8000 tax credit and low interest rates.

Hello world; another Real Estate broker joins the blogosphere!

Century 21 J C Jones American Dream John C. Jones, Managing Broker

Well, here I am getting ready to enter the blogosphere.  I will share ideas about real estate here  in the southern part of Oregon.  Hopefully folks will get some value.  Your comments are most welcome.

John