Do buyers stand a chance in this heated real estate market? – Orange County Register
Last week I read with great interest Leslie Eskildsen’s column on a relatively new residential class known as Registered Status.
If – like me – you’re unfamiliar, this is where the clif notes are found. A seller hires a realtor to sell their home by entering into an agreement. Twelve options are – among them – active, available soon or registered. If “registered” is selected, the broker can pass the information on to agents working under the broker’s license – but not to the multiple listing service.
Read: Collaboration Is Eliminated And The Pool Of Potential Buyers Is Reduced To Those Represented By The Agent. In today’s rugged sellers arena, there are more buyers than homes for sale. The transaction is easy, with multiple tours and countless suggestions. Do sellers leave shekels on the counter? May be. But that is the seller’s prerogative. Impressive!
OK. You may be wondering what all of this has to do with commercial real estate as this is my strong point. Pamper me if I tell you a few similarities.
The residential real estate market usually goes nine to 18 months ahead of the commercial market. If you are curious about the future commercial real estate landscape, just watch what happens in the residential area.
In 2007, residential property sales plummeted due to the collapse of subprime mortgages. CRE didn’t feel the crisis until the end of 2008. Social media marketing caught on with agents in residential areas long before any of us used Facebook, Instagram, YouTube or Twitter to broadcast our offers. Will the “registered status” become an item in our inventory? My prediction is yes!
Some kind of registered status already exists. Some brokers already use some form of registered status marketing. Here’s an example: If a salesperson asked me to sell a 10,000 square foot freestanding manufacturing facility in Anaheim, I could make 10 quotes with 10 phone calls.
Before we recently sold a property, there was a selected “invitation to offer”. The competition was fierce and the resulting competition set the new high price. If you have a buyer for an industrial rented building in the Inland Empire and the listing is listed, there is likely no buy-side fee.
Buyers are extremely disadvantaged. Similar to a season of The Bachelor, sellers have a choice of qualified buyers and can present the rose to anyone they choose. It’s quite common for successes to hit the market without a price. We receive a “guide” on what the seller’s expectations are. Also, there is more water to buy than buildings in the Mojave.
All of these factors have increased prices by 32% since October 2020! When something hits the market, you have to take the Gretzky approach. Skate where you think the puck will be.
The traditional deal structure is also disappearing. Before – before this insane activity – a buyer could expect to be given a decent amount of time to secure funding, clear the property, and check the roof for leaks – all without being required to close if anything Unpleasant was discovered. Now? Forget it. You are lucky enough to have time to carry out due diligence at any time – with no money at risk.
Buyer representatives MUST be innovative. If your business represents buyers or tenants, you need to meet your customers’ expectations. In a recent roundtable discussion, we offered a 13% higher number than the last market sale, non-refundable money on day one and no funding option.
We didn’t get a counter! Why? Although our business didn’t depend on getting a loan, we still needed funding. Confusing? Yes. But we were ready to risk it – and with a large sum of money as an assurance to the seller. In fact, we were told: “Show us the money”! Prove that the money in a liquid account equals the purchase price or the non-deal.
In the darkest days of 2009-2011, the sellers were at a disadvantage. No more!
Allen C. Buchanan, SIOR, is a Principal at Lee & Associates Commercial Real Estate Services, Orange. He can be reached at [email protected] or 714.564.7104.