Article by Leon Fear – First Published in “Property News” Magazine October 2012
The below article written by Leon Fear was first published in “Property News” Magazine in October 2012:
When selling property, whether it is a private house or a commercial property, the main issue at the moment is people are worried about job security and cannot raise finance from banks or other sources as easily as before the market crashed in 2008.
When job security is stable, most people tend to borrow money readily, even at higher interest rates if they feel their jobs are secure. So long as people are worried about their jobs, the market is unlikely to move significantly as people hesitate to make, what is often, the biggest purchase of their lives in buying a property.
Since the government announced a major relaxing of planning rules (5th September 2012), giving more flexibility to extend and build on their current homes, people are more readily committing to staying put than they are moving, making it a lot harder for anybody wishing to sell.
Whilst I believe that the market has some way to drop, consider how out of synch house prices are with national average earnings, anybody looking to sell their property in the current financial climate needs to do so as quickly as possible, however as property is illiquid generally speaking, this is not always easy to do.
Often in the current climate, it may be easier and more palatable to let your property, even for a short period of time until the market improves.
Considering that the “first time buyer” is rapidly becoming a thing of the past, at least for the time being, as the UK moves towards a more European model whereby renting the family home long term is commonplace, you can see that even at the entry level of the market, things are still slow to sell, which has a direct knock-on effect all the way up the market chain.
Based on my market experience, I have compiled my top tips to consider when looking to sell you property:
One of the most effective marketing incentives to let commercial property in the current market is to offer rent-free periods to tenants. For example, if you have a vacant shop that you are trying to let, offer the first three or even six months rent free to attract a potential tenant. However, make sure you do your research on any prospective tenants’ credentials, as rent-free periods may attract tenants who historically have struggled to pay the rent once the holiday period is over.
The better the covenant, the larger the rent-free period you may have to offer. For example, a well-known supermarket may want 12 months rent free, but want to sign a 10 or 15 year tenancy agreement which could increase the value of your property over a period of time. A lesser quality tenant may accepting three months rent-free but may only sign a 3 year lease thereafter. Protecting your income is just as important as achieving the highest price because the cost of re-marketing to re-let, plus rates, council tax bills, insurance and security in the meantime can potentially take a significant percentage out of a profit margin.
With commercial property, It is worth considering the current operators either side of your property. For example there might be a convenience store operator to one side who wishes to expand and may take your retail unit, or a restaurant owner needing more to expand to accommodate more covers.
also think about what the area is missing in terms of facilities, and targeting operators of similar businesses directly who may not be aware of the availability of your property.
Choosing an Agent:
When choosing an agent, you must be prepared to ask the difficult questions such as; where will my property be advertised and how often? Who do you know in the market to sell my property and at what level, i.e. key decision makers? Will you be personally attending every viewing? Are you prepared to attend viewings evenings and weekends when often people have the time to view properties, rather than just in the daytime when most people are at work? If it is a house sale for example, the agent needs to arrive well BEFORE the potential buyer put on lights, gas fires and even a pot of coffee to make the place welcoming. Having the property heated and well lit is essential to the way people feel when they walk in. First impressions count.
All too often you arrive to view a property, the agent is late, and when you finally get inside it’s cold, dark and uninviting. You need to make sure the buyer can visualise living there or running their business from there, whichever is appropriate.
Most agents tend to “blanket” market property to a mailing list which often is not kept up to date with buyers’ real-time requirements, so sometimes going directly, or asking your agent to target a specific audience on your behalf can be very effective. Often properties that could be sold, sit on agents books for months or even years simply because they are not targeting the right buyers or reaching the true decision makers.
Generally speaking, most agents will put in the effort to earn their commission, but it is important to make sure they are directed properly as the ultimate goal is a sale for you. If you leave it may be on the market for a very long time.
This sometimes is the most simple answer but is often overlooked. It is always worth asking your current tenants whether they wish to purchase your property, especially if they are long term tenants.
If you’re in a financial position to do so, you may consider lending to them in the form of a private mortgage. Any such agreement must be checked with a lawyer who will be able to advise on the various legal aspects of such an arrangement.
Often if you’re trying to let or sell a retail unit, offering a contribution to fitting out the shop can be very attractive to the buyer. If you are selling, then this is merely discounting the price to take account of this and with letting it is in effect the same but cash flow wise can be of benefit to you because you might offer it instead of a rent-free period, so you still achieve the rent and may have credit with materials suppliers aiding much needed cash flow.