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March 2017 Commercial Newsletter

March 2017 Commercial Newsletter

Download Complete Newsletter | Volume 5, Issue 3

Why Overpricing Your Property Can Be Fatal

Oftentimes owners can believe that overpricing their property when they first put it on the market can be a good idea. They can sometimes begin thinking, “Why not just ask for a lot more money than I can expect to get?”, but this can then create problems…

When a property first comes on the market, it gets a lot of attention from the people who have been looking for this exact same kind of property. They know what’s currently on the market, they’ve seen the properties that are the most suitable ones for them, but they haven’t found the right property at the right price yet. So as a result, they’re looking for the next property that comes onto the market that has the exact same features that they’re interested in.

So when a property comes onto the market that has these features, normally there will be interest from a number of different parties as long as the property is fairly priced…meaning that the property is priced at fair market value, or either slightly below or above fair market value. But why would you ever want to price your property slightly below fair market value? Well, if the market is hot, and properties like yours are in short supply, this can then create a bidding war between the interested parties. They can swoop in like sharks who are taking the bait, and then they’ll compete to outbid their competitors, getting wrapped-up in a frenzy that can deliver you a much better price, similar to what happens once people begin bidding against each other at auctions.

Conversely, pricing your property just a little above market value can still be OK, because most everyone understands that there’s going to be some negotiation involved before the final price is agreed upon. However, pricing your property way above market can end up turning people’s stomachs, and have them think that you’re outlandishly selfish, or maybe even crazy, and then this can have them not even want to begin negotiations with you. Then your property can get a stigma around it, sit on the market for quite some time, and you will have completely blown your opportunity to generate all of the initial excitement around it.

But then even if over time you begin to get more reasonable on your price, you will have lost all of your original ideal prospects, because they’ve now purchased the properties that they were looking for, and your broker will be out there trying to convince people that, despite the fact that your property has been overpriced for months now, you really are a reasonable person, and you’re now willing to negotiate a deal at fair market value. So by not pricing your property fairly in the very beginning, you’re now in the position of having to convince people that they really should be interested in negotiating with you.

This isn’t the position that you want to be in, so whenever you’re putting your property on the market, make sure that you price it in a manner that will get people excited about buying it!

Struggling shopping malls let high schools, doctors move in where Penney’s used to be

MarketWatch Tonya Garcia

Beneath some positive stats, shopping malls are facing serious problems that threaten their health, including a shift to non-retail tenants and forecasted rent declines, according to Wells Fargo analysts.

Wells Fargo stresses a need to look deeper at high mall occupancy rates. Occupancy for the fourth quarter of 2016 was 93.6%, near the 93.3% for all of 2015, according to data from the National Council of Real Estate Investment Fiduciaries, cited by the International Council of Shopping Centers. However, the type of tenants many malls have is shifting to a lower-quality occupant for the overall health of the retail-focused mall, the analysts said.

“[F]or example, there are far more ‘mom-and-pop’ stores, and some malls have repurposed space for non-retail uses such as doctor’s offices, town libraries and even a high school,” Wells Fargo said in the report published Sunday. “Mom-and-pop” retail in a mall setting may generally be seen as a more-vulnerable long-term tenant and less of a traffic pusher without big-name brand backing.

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