Buying and selling self-storage properties is one of the wisest real estate investments you can make. But transactions can be complex, and even the most sophisticated investor can come across thorny situations. As a consequence, most investors and owners are usually represented by a full-time, professional real estate brokerwho must be able to answer the ultimate question: What is this facility worth?
A competent and experienced broker will be able to accurately respond with the correct answer. Most important, a firstrate brokers negotiating skills and knowledge of property values can add 5 to 10 percent to your facilitys sale price.
Throughout the selling process, brokers offer an array of services. They customarily control and coordinate the marketing and selling process, supervise property due diligence, help with finalizing the closing documentation, and can coordinate your attorney, CPA and escrow officer.
Qualities
You'll find the best brokers share certain characteristics. They educate and inform you of the marketing, selling and closing process. They know the buying procedure and will carefully explain each step so you understand exactly whats happening at all times.
As a rule, they should be patient, not overly ambitious and never use misinformation or inexperience to manipulate your business decisions. The experienced broker will always clarify your options, enabling you to make prudent business decisions regarding your best course of action. Hell also recommend when you should augment your group of consultants to include inspectors, attorneys and environmental specialists.
Knowledgeable brokers know that trying to be all things to all people results in average service. You need to choose one specializing in the storage industry, not temporarily entering it due to a slowdown in another field. A broker who is already working with several other sellers (and buyers) probably doesnt have enough spare time to serve you appropriately. If you find your needs being neglected because your brokers time is over committed and hes difficult to contact, consider retaining somebody else.
Retaining
Selecting your representative starts with getting referrals from people employed in the self-storage industry. After locating the broker specialists, youll need to personally interview two or three individuals.
During the interview process, get familiar with the candidates' background, sales experience and track record of sales. Gauge how easy you feel with their professional style. Dont forget to ask for a list of industry references. Its important you feel comfortable with whomever you choose since youll likely be spending a good deal of time together discussing your property.
Interview Questions
When interviewing prospects, put these important questions at the top of your list:
1. What sales price would you recommend for my facility?
Experienced brokers should be able to provide you with a Financial Market Analysis of your facility. The report they prepare and draft should contain their estimation of value. This document is not considered an appraisal, simply a value of your facility based on current market conditions. In reality, the analysis may be more accurate than an appraisal since its determination is based on pending offers, confidential market information and non-published sales on self-storage properties.
2. How would you plan to market the facility to prospective buyers?
Sellers want the most exposure possible in order to attain the highest value. The best exposure is through existing industry contacts, direct e-mail contacts, direct-mail advertising to investors in the industry, and ads in local and regional newspapers. Access to web-based ads on the Internet is an absolute necessity in the real estate industry.
3. What is your brokerage fee?
Some brokers may accept a reduced brokerage fee to procure your business. Though a reduction in fees is always tempting, its not always the wisest business decision. Good brokers pay for themselves though their ability to market and sell your property in a reasonable amount of time. Remember, brokers only receive compensation when they deliver a qualified buyer that closes the deal.
4. What type of listing contract will you be using?
Youll be asked to sign a listing contract with your broker. It includes the agreedupon terms of sale, detailed services to be performed, brokerage-fee arrangements and expiration date of the contract.
All listing contracts must specify a beginning and ending date. Make sure services and terms important to you are written into the contract. In an exclusive agency contract, you agree to pay your broker a commission if that broker (or any) finds a qualified buyer. You also may want to reserve the right to cancel the contract upon reasonable notice. These options allow you to hire a new broker if youre dissatisfied with his services.
5. What other necessary information will be included in the listing contract?
The asking price for your facility will be included in any listing contract you enter into. Carefully set this figure. If you initially go too high, you may turn away potential buyers. During the term of your contract, you may lower your asking price. If, however, you raise it without your brokers consent and receive an offer at the original contracted number, youd be obligated to pay a commissionwhether or not you accept the offer. In theory, your broker fulfilled his contractual obligation to procure a buyer able to pay and close on the price specified in your contract.
6. How long have you been a self-storage broker?
Industry experience is a valuable commodity. Knowing the marketplace, the industry investor/owners areas of growth and contraction, and capitalization rates are just a few of the necessary pieces of information an experienced broker brings to the table.
Valuation
Pricing your facility appropriate to market conditions is a crucial factor in attracting buyers. You can ask any price you want for your facility, but the property won't sell until you find a buyer willing to accept your figure. Astute sellers know that although only one person sets a price, two peopleseller and buyer make the sale.
Adverse factors outside your control, such as a glut of properties on the market or high mortgage interest rates, may negatively affect your sale price. The secret to success is to establish a realistic asking price for your facility when you first place it on the market. An experienced self-storage broker will provide you with an up-to-date financial market analysis to establish the best figure.
The ideal broker for your needs is someone who listens to you, understands the marketplace in which you are selling, and is able to communicate effectively. Settle for nothing less.
Stephen Grossman is a senior vice president with Lee & Associates-Newport Beach Inc., specializing in the sale of self-storage properties. He has been responsible for the sale of 3 million square feet of existing facilities and 700,000 square feet of entitled land for self-storage development, totaling $140 million. For more information, call 949.724.4709; e-mail [email protected].