Before Selling Your Commercial Property Directly to Your Tenant, Read This

Introduction
Selling your commercial property to your tenant may seem like an easy and logical option. They’re already familiar with the space, and the prospect of avoiding real estate broker commissions can be appealing. However, this seemingly straightforward path may not be in your best financial interest. In this blog, we’ll explore why working with a commercial real estate (CRE) broker can help you retain your hard-earned equity and net the highest possible selling price.

Why Tenants Often Undervalue Your Property

Tenants may have a vested interest in acquiring your property at a discounted price. Their perceived value of the property often falls below its fair market value. This approach allows them to secure a deal that benefits their financial goals—but leaves you with less equity than you deserve.

Commission Savings vs. Higher Net Profits

The desire to avoid broker commissions is a common motivation for selling directly to tenants. However, partnering with a skilled CRE broker often results in a significantly higher net profit. By accurately pricing your property, marketing it to a wider audience, and negotiating effectively, brokers can help you secure offers that far exceed your tenant’s initial bid.

Protecting Your Hard-Earned Equity

Selling below fair market value effectively transfers your equity to the tenant. Instead of giving away your financial gains, work with a broker who specializes in maximizing seller profits. A broker ensures your property is evaluated properly, marketed broadly, and sold for its true worth.

Why Marketing Your Property Matters

Even if you have a willing tenant, marketing your property is essential to establish its fair market value. A CRE broker can provide a detailed broker opinion of value, considering factors like:

Market supply and demand for your property type.
Desirability of the location.
Current property condition.
Anticipated major expenditures.

By marketing the property, you invite competitive offers from other buyers, prompting your tenant to submit a fair and competitive bid.

Flexibility to Accept the Best Offer

When you work with a broker, you maintain the option to accept offers from other buyers if your tenant refuses to meet fair market value. This ensures you don’t leave money on the table and allows you to explore all possibilities for maximizing your return.

Case Study: A Success Story with ProTech Commercial Realty

A property owner in a highly desirable area faced this exact dilemma. The turnkey property rarely had comparable sales in the area. The tenant, who held a Right of First Refusal (ROFR), submitted a lowball offer—$300,000 less than the broker’s opinion of value.

Michael Bruni, broker and owner of ProTech Commercial Realty, advised the owner to market the property. Within a week, Michael secured a fair market offer that matched the property’s assessed value. This prompted the tenant to match the competing offer, leading to a successful sale.

The Outcome:
The owner netted an additional $260,000—crucial funds for their retirement—by avoiding the tenant’s initial lowball offer. This financial difference significantly impacted the owner’s ability to enjoy a secure and fulfilling retirement.

Conclusion

While selling your commercial property to a tenant may seem convenient, it often fails to maximize your financial returns. By working with a qualified CRE broker, you ensure that your property is priced accurately, marketed effectively, and sold for its true value.

Don’t let your equity slip away—partner with an expert to secure the best possible outcome for your sale. Contact ProTech Commercial Realty today to explore how we can help you achieve your financial goals.