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Concerns in an Abundant Market

Posted: 6/14/2016
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The current self storage real estate market is considered to be a frothy market, meaning that the market is abundantly full of transactions. And for the past six to 12 months, many commercial real estate sellers in this sector have averaged seven offers per site; the average is typically one to four. This is great news for owners in positions to pick and choose which offers to take – if any. But one primary concern that comes with market frothiness is selecting the offer to go with.

There is no shortage of unscrupulous brokers in the real estate industry, and the self storage market is no different. Some of these buyers will attempt a bait-and-switch tactic – in which they may offer a large amount upfront, hoping to get a seller excited and committed to the sale, then renegotiate over time – slowly decreasing the offer as the close date approaches. In many cases, the final price is even less than offers the owner had previously turned down. In this case, you need to make sure to know where you stand in the market climate.

This means being aware of the value of your property and doing your due diligence when it comes to those who are attempting to purchase off market or without representation. Either of these scenarios should raise a red flag.

If you’re selling right now or plan to sell in the near future, you will likely have a number of buyers to choose from. Be aware and beware: the highest offer is not always the best offer. An analysis should be utilized for potential buyers to determine the certainty of close, the likelihood that the buyer will come through on their offer.

This determination is often more important than the amount of the offer. To determine the viability and success of a deal, a good broker will look at a few specific factors: proof of funds, past closed transactions, broker’s own experience with the buyer, scheduled real estate owned and history of off-market purchases or lack of representation.

These items help determine if the offer is likely to continue through purchase at the number originally presented. They then weigh that likelihood with the price of the offer. Oftentimes, this ends with the seller choosing to go with a slightly lower offer, but a more secure, solid deal.

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