What’s Your Best Offer
The retail investment market has really changed since I first started living the business. I consider myself relatively new to the commercial real estate arena, so every day I try to challenge myself to learn, understand, or question something that involves retail commercial RE. It seems over the last year, especially most recently, everyone and their mother is choosing to market their properties with “Best Offer” and no price. Most of the time the same thought always comes to my mind – the seller is not living in reality and wants more than it is worth. By using “Best Offer” the listing broker has a higher probability of investors actually looking at the offering instead of just hitting delete after seeing the CAP rate. Real offers can then be generated, potential bidding wars can be initiated, and the owner can accurately see where the market is speaking. The broker also benefits through the incoming market information of which investors have current exchange/acquisition requirements. That makes sense to me. What doesn’t make sense is when a property that has traveled from brokerage to brokerage priced and continually reduced, is then reintroduced into the market with “Best Offer”. Are they just trying to catch the idiot who wasn’t paying attention to it before? Are they trying to avoid the commonality of current investors who see a list price and offer 50-150 basis points higher? Or are these assets all bank owned, under distress, or soon to be foreclosed? In the beginning the “Best Offer” list price was almost always exclusive to “REO”, “Receivership Sale” or “Bank Owned”, but now there are high credit single tenant investments with the same marketing approach. I kind of get it, nobody wants to show a sub 5% CAP and/or leave money on the table. Since we have never used the “Best Offer” tactic, I’d be really interested to know what other benefits / success stories have came from marketing a property this way.
It also seems a lot of these brokers have moved to offer dates as well. They just want to create urgency since no one has any these days. 75% of deals used to be 1031 exchanges. If the Buyer making an offer was not in exchange you would advise your client to pass for the guy in exchange to lock him in your deal and force him to close or pay taxes. It also helps when you know the Seller wants top dollar to show them a spreadsheet of offers and say "Look at the averages, this is your market, we suggest you go with this guy, stop bitching about price". They are trying to rope investors in to playing their game and having power over them. They have to create this artificially since the market is not hot. They try to replicate the scenarios. I can see how it works, but as a Broker, could you imagine that listing agreement? Knowing the price you need to hit but not putting it out there? It's just patently silly. As a Seller's broker you should have control over them and the marketing, not try to control the Buyer pool. Anyway, I don't like it cause why bid when I have no clue how far off I am. But then, I'm happy to make an offer and walk away. I'll ask about it again in 60 days when I've received 8 more blast emails on it.
great point. A lot of brokers seem to have wasted their time and effort on overpriced listings thinking they can later convince their client to accept less, when in reality they were never a real seller to begin with. I still laugh when I see the "offers due" email blasts, especially like you said, when it comes out eight more times and now has "due date extended"
great point. A lot of brokers seem to have wasted their time and effort on overpriced listings thinking they can later convince their client to accept less, when in reality they were never a real seller to begin with. I still laugh when I see the “offers due” email blasts, especially like you said, when it comes out eight more times and now has “due date extended”
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