Residential Agents Listing Commercial Property – A Real Challenge

You can make commercial commisions
Commercial tips

Residential agents that have an opportunity to take a listing or represent a buyer / investor of a commercial property can find it very challenging. However, in a lot of smaller markets almost every agent will be asked to list a piece of commercial property. It may be a friend or a friend of a friend or it may be that you have a good reputation  in your market area.

While most agents are eager and anxious to list a piece of property, they can also be a little intimidated by the process. While commercial property is still just real estate there are some differences from a residential listing.

When listing a home you know what questions to ask and what information to gather in order to properly market the property. Normally you would not need to know if a home had a 480 amp electrical service and or  why that might be important. Zoning might also be an issue along with a lot of other issues. Financial aspects, except for a mortgage balance, of the property, are also an issue that you normally do not need to deal with when listing a residential property. When listing any investment type property gross and net income on the property will be very important in your marketing effort. The current NOI (net operating income) will also be important in helping the owner agree to a saleable listing price. You may have done 100 CMA’s for home sellers but doing a CMA or market analysis for commercial property requires different information and more of a challenge  for a residential agent that hasn’t been involved in that process.

It is often hard to find comps in smaller markets and it is sometimes necessary to look outside your market area. A lot of commercial agents do not belong to any kind of MLS which makes gathering information more difficult. In short, commercial listing might require more time and energy in the beginning but it can also be very rewarding both financially and professionally.

If you find yourself wanting to stick your toe in water and need some help, give me a call. It’s what I do.

Good luck.

Listing Commercial Property? Know The Numbers

 

Know your Cap Rate
Know Cap Rates

If you are a residential real estate agent  listing commercial property you need to know the numbers.  You need to make yourself and your client aware of certain items that will affect the seller’s bottom line. Knowing and understanding adjusted basis is one of those areas.

While adjusted basis is something that the client will need to eventually discuss with an accountant it is also an item that you should make the seller aware of.

In a nutshell, adjusted basis is taking the original basis of the property (purchase price plus any closing costs), plus any capital improvements made to the property during the period of ownership. From that you subtract the total accumulated cost recovery deduction and partial sale taken during the time the person has owned the property.

Why is this important? Any capital gain on the sale of the property will be computed using this formula and taxes will be paid on that amount. A lot of sellers do not take into consideration the amount of cost recovery that has been taken on the listed commercial property each tax year during their ownership.

Again, you are not an accountant and should not give any tax advice but be aware and make your client aware of this facet of the transaction before you list commercial property.

If this is new stuff for you, and you need some help, call me it’s what I do. I help Residential Real Estate Agents list commercial property like a pro.