Investors are risk adverse…and “unknown” is synonomous with “high risk.” Being aware of this, The Client Centric Solution is to reduce the unknowns, reducing the risk…which delivers an increase in value to the client. (If there are too many unknowns, the potential buyer will make a very low offer…or not bid at all.)
The Problem…
A colleague had a client that was looking to invest in quads and smaller commercial multifamily properties. One opportunity that caught the investors’s eye was a fully occupied plex that had upgraded units and an assumable loan with stated payments and interest rate. The owner of the property was loathe to have multiple agents and investors traipse through the units on short notice and upset the tenants. He was so concerned about losing tenants, that he instructed his agent that potential buyers could only view the inside of a unit after the owner had accepted their offer. While this is somewhat common, without being able to view the property the investor could not verify the condition of the units, if they had a desirable layout, if they were upgraded, or if they were “repositionable” for increased income. The potential buyer didn’t know how much time was remaining on the loan. If it was a 30-year amortization loan with only 1-year left of the 10 year term he wasn’t interested.
The Solution…
I suggested to my friend that he contact the Listing Agent to find out how much time was left on the loan. He did, and found out that there was over 7-years left on the term and the bank was amenable to extending it on a qualifying assumption. That eliminated one form of risk for the buyer.
Second, I suggested giving the tenants a weeks notice that each unit would be filmed for insurance reduction reasons. About 1 minute is sufficient per unit. (I would also used that video to see if the insurance company would reduce premiums, so it is not a lie.) Being able to view the video permitted the potential client to make an informed offer with far fewer unknowns, and less risk. Should his offer not be sufficient, the owner had something to show future offerers.
I think my buddy owes me a lunch! What do you think?
The concept of eliminating unknowns to improve results applies to many aspects of business and life. I learned this years ago when I watched a co-worker answer the President’s question with: “I don’t know, and I don’t know when I will know.” That co-worker was permitted to seek opportunities elsewhere.
If you would prefer Client Centric Service, you can contact me at rick@rosecitycre.com