You may be asking yourself, “the market is hot, why isn’t my property selling?” Or “is it normal for a property to sit on the market this long?” The reality is, there is no excuse for a property to sit on the market in the current, fast-moving environment. As the market leader in small apartment sales in Long Beach, CA, our team at Sage Real Estate has come up with the top six reasons why an apartment building is not selling. While some of these reasons may be obvious, others are often overlooked by inexperienced agents or brokers who are desperate to secure the listing on a property.
#1: The Property is Overpriced
This is plain and simple. The number one reason why a property sits on the market is because it is overpriced. Even with poor marketing tactics and poor execution, if a property is priced right and the numbers make sense, an investor will still consider purchasing the property. At Sage Real Estate, we have created a humorous but valid saying that generally sums up investors’ mentalities: “Buyers always believe that a property is priced too high, and Sellers always believe that their property is worth more.” Because of this inevitable mentality, many agents and brokers will overvalue properties to entice Sellers to list their property with them. However, when an agent over-promises on the price that they can deliver, it has a negative effect by causing your property to sit on the market for much longer than it should, which in turn does one of two things: gets you LESS money when selling the property OR wastes your time in the form of an expired listing.
#2: Listing with a Residential Agent
There are many agents out there that are very good at selling homes. However, this does not mean that the same agent is well-equipped to sell an apartment or income-producing property. The reality is that there is a whole different process when it comes to selling an apartment. To ensure a successful sale, it is important to list your apartment building with someone who specializes in multifamily income properties. Not only are multifamily agents well-versed in dealing with tenants during a transaction, they will know how to use the income of the property to arrive at value. The most common, basic value indicators used in multifamily real estate are Capitalization Rate (“Cap. Rate”) and Gross Rent Multiplier (GRM); while these value indicators might seem basic to apartment brokers, a single-family agent simply will not know what these metrics are or how to use them to dictate value.
#3: Bad Marketing
Not enough photos
Many agents that try to save money by cutting costs believe that they can simply shoot a couple quick photos on their phone and use those photos when attempting to sell the property. In a world where digital marketing is at the forefront, images and the quality of those images makes all the difference when attracting buyers. It makes no sense to use cheap, low-quality cellphone photos to sell an asset as large as an apartment building.
The next best thing to visiting the property and viewing it in person is to watch a video highlighting the location, amenities, and floor plans. By creating a high-quality video highlighting the property, the Seller is able to get many more eyes looking at the property. Again, agents that avoid doing video are usually trying to cut costs and do the bare minimum to get the property sold. Sellers deserve to have their property marketed as best as possible, and video is the perfect way to explain the property to prospective Buyers while creating excitement and “buzz” about the property.
No Property highlights or compelling facts
Another common mistake when it comes to marketing is leaving out the property highlights and compelling facts. An apartment broker that is based in the city that the property is located in will understand the local rental market, including rental rates, local attractions, lifestyle opportunities, and so much more that will appeal to prospective Buyers. If an agent is not from the area, they will likely not know what makes each neighborhood unique and what will appeal to the tenant base. By including these highlights and compelling facts, Buyers gain a better understanding of the property and why it makes a good investment.
#4: No Financial or Income Information
When it comes to multifamily real estate, investors purchase properties for one primary reason: to make money through cash flow or appreciation. If this is the number one concern of Buyers, they should know the income the property produces, along with the expenses that the owner incurs. For an investment to make sense, each investor will have their own criteria and they cannot determine whether the investment makes sense unless they have the income and expenses for the property. Inexperienced agents or single-family agents are not well-versed when it comes to reading and producing the numbers that investors need. By failing to provide these numbers, an agent is failing to provide the most important information that an investor needs before purchasing.
#5: Not Understanding the Ideal Buyer or Financing Options
Another clear indicator that an agent is qualified to sell your property is their understanding of financing options, as well as the ideal Buyer for your property. The various financing options will determine who can legitimately qualify to purchase the property. Moreover, there are different ideal Buyers for different property types. For example, the ideal Buyer for a duplex is traditionally an owner-user who is looking to live in one unit and rent out the other. For a fourplex, the Buyer is more likely to be a traditional investor who will not live at the property but is purchasing the property based on the income it produces. By understanding the financing option and ideal Buyer, a good agent will take this information to develop the marketing plan to ensure that the probable Buyer is aware of the investment opportunity.
#6: Listing the Property Only on the MLS
While the MLS is a great platform for letting agents know the property is for sale, these agents must be licensed to have access. What that means is there is whole portion of direct Buyers and investors that are not seeing the property unless they have an agent. To make sure that these people know the property is for sale, the listing must be live on all other platforms such as CoStar, LoopNet, and Crexi. At Sage Real Estate, we average over 100,000 views on these sites alone, so it makes the most sense to ensure the listing is visible on these sites.
As the only firm focusing on small apartment buildings in Long Beach, we monitor the market and track listings daily. When we come across a property that is sitting on the market, it is usually pretty evident that the property is not selling for one, or all, of the reasons above. Not only do we live in Long Beach and understand the local market better than our competitors, our hyper focus on small apartment owners like you allows us to be “boots on the ground.” Our custom 5-2-1 formula guarantees accurate pricing. All of these factors combined with our property-specific marketing plans have enabled us to consistently get Sellers 10% more for their properties while selling 10x faster.