REASONS I GAVE A REAL ESTATE OWNER TO SELL OFF MARKET INSTEAD OF A PUBLIC LISTING.

Why should I sell off market Kenneth as opposed to going to the on market route and listing my properties with an exclusive broker?

This is a question I got recently directly from a CRE ownership firm.??

It is a very good question that required a good response.?This question is really a test of how well do you know your niche and also an opportunity to sell your position to an owner.

Here are some of the reasons I gave below.?(AS A SIDE NOTE, the member of the ownership firm, was satisfied with my responses below and they are discussing internally do they want to go the off market route.?He said I gave good explanations for the off market route).

(1.).?Reduction or elimination of seller side broker/finder/wholesale fee commission.?In the off market industry, as a property isn't listed for maximum exposure, it is common that the seller will pay a reduction in the % of points paid out at closing.?For an on market listing, an exclusive broker can charge up to 3% on the listing.?In fact, if an offer gets accepted above a certain threshold, it can even go higher up to 4% in some cases.??

In the off market world, the fee can be as low as sometimes 1% (100 bps) or lower such as .50 bps.?In some cases, the seller will pay ABSOLUTELY NO POINTS to the broker/finder/wholesaler.?Seasoned buyers in the off market realm, know that if if an asset has a sufficient haircut/basis, it is customary for the buyer to pay the fees to the intermediary.??

In some cases, it could be a joint effort with both buyer and seller paying the intermediary a co broker fee?at reduce rate.

(2.).?Fed Interest Rate Hike Environment threatens sellers pricing expectations and equity proceeds at disposition.

This point is so relevant and vital.?Fed has already raised its fund rate .25 bps.?For the May and June meeting, it is rumored that the Fed will raise their fund rates each respectively at .50 bps on the next 2 rounds.?That means for various lenders, their prime (par) rates will be higher.?That translates into the cost of borrowing going higher and higher that will affect the offers buyers are willing to purchase assets at.?That can translate into lower lower bids which means for the seller a pricing haircut, which is a loss of equity preservation.

(3.).?Achieving a specific strike price that a seller will be satisfied with at minimum regardless if it is sold public listed or off the radar .

I mentioned that if them as the seller can receive a specific offer that meets the strike price to satisfy themselves and their investors via off market, a public listing isn't necessarily needed for world wide exposure.??

(4.). The listed market process is more lengthy and tedious as opposed to selling privately.

It is common in order to get a listing ready, it can take 2-3 weeks or sometimes a month depending on the intricacies of the deal structure and also presently how busy the exclusive broker is with other deal flow for sourcing, financing, acquisitions, and dispositions.

Getting an offering memorandum (OM) setup takes time.?It requires site visits to the property, professional photography, market research of sub market.?The sub market research includes recent sales comps, current rental comps, daily traffic volume (DTV), population counts, major employers/ institutions that drive economic growth to the area.?Also, negotiations for the exclusive can go back and forth especially with legal review and be a time consuming price until something gets inked.

In the off market world, seasoned buyers DON'T RELY OR NEED AN OM SETUP.?They have subscription to database/research firms like Costar, Rconomy that helps them do that external research.?Off market buyers will ask for the substantial substantive materials such as T12, RR, tax returns, lease agreements, receipts of payments, bank statements, etc.?Therefore, the off market process can be much quicker if a seller wants to divest asap as opposed to vetting multiple brokerage firms to get a listing ready.