Over-Asking Secrets of Commercial Property Sellers


This is part of a multi article series aimed at getting the highest asking price for commercial real estate and selling it to qualified buyers the fastest.

With commercial realtors collecting between 1.5% to 5% of the selling price plus expenses, its no wonder owners of commercial real estate properties are looking to cut these unnecessary transaction costs.

These articles intend to show sellers how to:

  • Cut out the realtor
  • Save millions
  • Make managers look good in front of their investors
  • Create a plan to sell their commercial real estate faster
  • Make you a smarter, better businessperson

Great real estate takes less than 20 days to close. Of that great real estate none will ever end up on a realtor’s website. The majority of that listed real estate, like businesses on business broker websites will never close and will never sell.

The secret to selling is to sell something that buyers would like to buy. The other secret is most sellers in real estate are lazy and not great property managers. The effort put forth by owners to sell their property are generally less than what a seller of a five thousand dollar, 15-year-old Toyota Corolla puts in. We have seen sellers try to pitch us $60m asking price portfolios from a excel spreadsheet with 3 lines- no revenue and these were not vanity assets that need no introduction. The seller wondered out loud from his broken up, echoy skype call why we were not ecstatic. The call ended quickly.


-George Chayka

That seller laziness, keeps realtors in business, collecting between 1.5% to 5% of the selling price for a fancy brochure and a couple of phone calls.

This article goes beyond the standard realtor property brochure. That fancy brochure is the bare minimum, these are the other minimums.

The minimum needed to sell directly

  • Get in the mindset that the buyer is from out of town/state/country. Show them everything a low/mid level employee needs to present a case to his boss or investment team to make a decision.
  • Get a great local lawyer with relevant experience in the asset class. Don’t cheap out on this, get recommendations or referrals. Even if you have representation, keep looking around.
  • Professional photos- by pro photographer, interior shots, drone shots, video, grounds shots, close-ups, etc.
  • Astounding 1 pager giving all the stats relevant to buyers
  • Data room- this is a place online where a link can be given to buyers to go and get all the info.
    Beats getting or sending out 20 pdfs and if anything, needs an update or additional data- it’s all in one place. All buyers are on the same page.
    Comparison data room page: http://datarooms.org
  • Rent rolls, include a short bio and links to your tenant’s websites (do the buyers homework) if rated include that credit rating.
  • Leases with abstractions
  • Include any geographical/state/provincial “weirdness” in property laws, rights, or tenant procedures. Include the link to the tenancy act and all other city links relevant.
    IF landlord favorable area, then include these favorable clauses/rights- it’s a selling feature. If laws favor tenants include common errors that landlords do. Hold the buyers hand, give them your knowledge. This is rare and invaluable for out of town buyers. Think that this builds trust and goodwill- even if they don’t bid you can pitch them again for your next property- it’s a warm lead now. Real Estate is a long game, think and act long term.
  • If historic building- layout exactly how maintenance or renos are done specifically for your building and include how and what you needed for your last reno. MAKE IT EASY TO BUY.
  • Include your insurance costs and coverage papers. Try to get the tenants whose leases are up for renewal to renew. This makes it easier for buyers to get better financing terms.
  • Get an audit from a local mid level accounting firm. By doing this you verify the revenue and expenses of this property, its also easier to get revenue Canada to sign off on the transaction. The auditing firm will have to go back 3-4 years, you should be already using an outside accounting firm, if not make sure your books are clean and easy to assess. Cost should be $15-35k per year audited. Much bigger numbers if you use a top tier accounting firm, but on a sub $60 million dollar property portfolio this is fine.
  • Balance/cash flow statement- We don’t like having to subtract the management fees from cash flow to determine revenue. Just leave it off or put it to the side.
  • Tons of annotations to the cash flow, timing of renos, maintenance done.
  • Proforma- this goes beyond- and time it what buyers realistically need to do. IF the property needs a new roof- don’t be coy and not tell them- get 3 quotes from contractors you used before and include this. (close the deal faster- the buyers always have to do this anyway)
  • All building logs from the properties
  • Relevant phone numbers to your building manger or maintenance person.
  • Commercial property tax information, historical plus the latest, make a chart showing the change over time- even if triple net.
  • Video- optional do a quick walk around and talk about the building.
  • Survey- to it just prior to “listing”
  • Valuation- most are not worth anything because they are buyer led- have your board or investor do it on your behalf. Get 3.
  • Environmental assessment- it’s astounding that more sellers don’t do this. Its mandatory for the bank and sellers still dilly dally and leave this for the buyer to initiate, co-ordinate with you or the property manager/ on site personal. This is such a big headache. It’s also a common tactic used by buyers to drag out the signing of the purchase & sale agreement. Sellers should get the property environmental assessment done before pitching the buyer. Get 3 phase 1’s if you need remediation, get the 3 quotes to provide to buyers. Cost is cheap, budget $3500 to $5500 for each assessment and get it done in one day. Better yet, get your commercial property in top selling shape and get the work done prior- if you want over asking.


Skip local marketing firms. They tend to be super slow and very expensive. We were recently quoted for a 4-page brochure with 5 facts at $60,000 the cheapest was the cost of ford fiesta. Quality wise they looked like first year analyst powerpoints to marginal template brochures. Go to https://upwork.com and for ten to thirty bucks an hour you can hire a graphic artist/video editor/designer/copy writer/editor/SEO marketer/voiceover person with thousands of hours of experience, and produce great real estate marketing material. For the tech stuff/setup you can hire a contractor from upwork as well. Subtitles for the walk around video in Mandarin, French and Kiswahili? You can get that done in a day. Let’s see your realtor do that.

Sellers need a plan

To get a property sold, sold quickly, sellers need a plan. They also need some time and need to put in effort.
This will entail spending money, taking time out of your day, putting together a buyers list, and picking up the phone and calling them.

Sale Assumptions:

  • $60 million portfolio sale price
  • LTV 70% senior mortgage
  • $18m in owners’ equity
  • 3.0% realtor commission rate
  • $1.8m potential commission/agent cost plus their expenses.

To the sellers initial equity what’s this worth?


  • Total ownership of 5 years
  • 3% YOY appreciation in value- same as rental escalations.
  • $51,524,000 going in price
  • 7% CAPRATE
  • Mortgage: 70% LTV, 3% interest rate, 25 yr amortization, 5 year term. 35 basis point loan origination rolled in.
  • 3% vacancy through out ownership period.
  • Initial equity: $15,593,789 (30%)
  • Owners closing cost $300,000 (0.5%)

This would mean the seller is able to save 10% on his initial equity ($1.8m -$300k= $1.5m). Over 5 yrs that’s a 2% built in hedge against an investment hurdle.

Commercial Property Auctions, another way to sell

Property Auctions are popular for sellers; what sellers assume is that the auctions are going to make buyers over bid or overlook hidden issues with properties or allow sellers to mix in some dogs into the portfolio.

What sellers also assume is that the property will sell. Most properties don’t because they set reserves or minimum selling prices. The other hidden is that the market will work efficiently taking off the buyer’s premium off the bid. Generally, an auction premium is 5%.

Property Auctions, a buyer’s perspective

With commercial caprates continually declining, that 5% fee means that on a 6% cap rate property the buyer is not making any money in year one OR that a 5-year fund now has a 17% straight-line drag or a 3.5% drag per year on a investment fund with a 6% hurdle.

Auctions for buyers are generally a waste of time, unless the buyer has feet on the ground expertise and knows the property because of the low chance of winning or the large and real chance of overbidding. With institutional level properties this changes a bit because the buyers have reach or a pre-existing plan to enter that local market.

We still think it’s better to sell directly to the buyer if possible.