Irrelevant what others think it’s worth

6a00d8341c58f653ef00e54f0ccf4b8833-800wiIn my earlier article: “The Psychology of the Negotiation.” we looked at four different strategies to achieve a targeted price. But how do you discern what that targeted price is?

It’s not hard to obtain opinions from experts within the commercial real estate industry. But are those opinions relevant?

­Accredited Appraisal

Many buyers and financial Institutions will rely on a value reported by an up to date property appraisal. An independent accredited appraiser typically approaches the market valuation in three different ways: market approach, income approach and cost replacement/depreciation approach.

The information used to arrive at the estimate of value typically will come from past and existing data that has been gathered from various sources. They can also be engaged to calculate a future value based on specific proposed improvements however specific details regarding the nature of the work to be done must be provided.

Commercial Real Estate Broker

Even though we aren’t representing you, it can be easy to solicit an opinion from one of us who has experience within the real estate sector in question.

Unless formally engaged, we will follow a less detailed process somewhat similar to the accredited appraiser. It is however possible that our opinion can be negatively influenced by work previously done in the subject property’s geographic area or past experience with the Seller.

Experienced Developer

A local developer typically loves to share his advice and wisdom which has been accumulated through the many projects he has tackled. Most have lots of very interesting and entertaining anecdotal success and horror stories.

The question is, do they take the time to ask you lots of questions about your experience, goals and vision for the property in question. Without that information, I believe it is difficult to provide objective direction and feedback.

Self-Assessment

Information gathered from any or all of these sources can be beneficial in your discernment process. It is critical that you keep in mind the potential biases that each source carries.

Engage a creative, experienced commercial real estate broker to represent you. He or she can provide valuable input on how to turn that “sow’s ear into a silk purse.”

Any vision or plan needs to be substantiated with a researched, viable proforma and business plan. I have seen many examples where the majority of the experts in the field do not see the potential in a property and miss a great opportunity.

It requires guts to go against the majority and follow your own path… but that’s often where the greatest rewards can be found! Feel like sharing a time when you were rewarded for following your own unique vision?

Posted by Barry Stuart

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