Don’t Go ‘DIY’ When Selling Your Net Lease Asset
- Aug 05, 2020
Do-it-yourself projects are all the rage, it seems. Maybe it is the result of the extended home quarantine or possibly it is a simple antidote to the amount of time we spend on our digital devices. Whatever the cause, we are turning ever more to DIY. In fact, according to Statista, the do-it-yourself market exploded from $30.2 billion in 2012 to $43.7 billion in 2018–and that was well before COVID-19 forced us to do it all alone.
But just because you have not lost a finger at your mail-order table saw or singed your eyebrows fixing the perfect bananas Foster does not mean you are a master of any of those trades. And probably the worst place to apply your do-it-yourself skills is in the commercial real estate sales process. Investors invest. Let the broker or brokerage team take on the heavy lifting and do what they do best.
Just think about it. There are so many skills that you encounter through life that you would not dare take on yourself. Commercial aviation and heart surgery pop into mind immediately. Even solid DIYers know when it is time to call in a plumber or electrician. In all of those cases, as silly as they sound, smart clients are looking for a degree of experience and training they simply do not have.
The mistaken allure of DIY is especially true for net lease investors who have been active in the business for a number of years and are ready for “the next big challenge.” Armed with their years of exposure to the market, contracting with a broker might seem excessive, especially given ever-looming broker commissions. Instead, why not tackle the problem yourself and avoid that outlay?
But enlisting the help of a broker is essential for a number of reasons. This is especially true now, given the economic picture, when the outlay of that commission can prevent the seller from leaving serious capital on the table.
Falling In Love With the Deal
First, the sell and the buy sides of the negotiation table provide two very different perspectives, and demand two totally different skill sets. A broker can bring detailed insight, research and market knowledge to the table that may or may not be top-of-mind for the first-time seller.
It is also very easy to confuse sentimentality with passion. A broker can be passionate about the deal he or she is making for their client and, in fact, they should be. But ownership brings the pitfall of sentimentality, especially if the property on the table is a long-held asset or a first-time investment, which could cloud clear-headed negotiation.
As Terry H. Monroe states in his excellent book, Cashing in on the Secret Wealth of Your Business, “Never fall in love with a business or a property, because it can’t love you back.”
Monroe points to other sand traps DIY sellers run into, such as talking too much. It is easy in the heightened atmosphere of a sales pitch to give away too much information, especially in those cases of a personal attachment to the property in question. A professional broker can navigate with much more skill the highly nuanced environment of a sales negotiation, giving away and holding back just the right amount of intel as the talks dictate.
To that extent, the sales negotiation process can be likened to landing a marlin in deep waters. Expert fishermen play the line out and reel it in as the give-and-take between fisher and fish wears on. Much the same can be said when you are sitting opposite a potential net lease buyer, and the last thing you want is for them to snap that line.
Monroe also warns against going up against a buyer who is more seasoned in acquisitions than you are in dispositions. “You are going to be outgunned for sure,” he warns.
As the old saying goes, the doctor who treats himself has a fool for a patient. A relatively small investment in the right net lease broker or brokerage team can navigate the negotiation process to maximize the seller’s return and minimize frustration.
Jonathan Hipp is a firm principal & head of the U.S. Net Lease Group of Avison Young.