Selling vs Financing

October 9, 2013

Selling vs financing is one of the most oft-asked questions an investor faces in the commercial real estate realm. Each circumstance is unique, but there are steps almost every owner should take before making a decision of this scale. Researching a possible sale should include two concurrent course of action.

First, have an experienced mortgage banker run the numbers. Which lenders might be a good fit? What are the best available terms you can obtain? This will give you a benchmark to compare the respective scenarios, to see if you are better off taking out tax free loan dollars on a refinance or if the prospect of selling or trading should be explored further. Likewise, this will ensure closing goes as smooth as possible should you choose to go that route.

Next, identify a competent commercial sales broker. An experienced agent will perform all the necessary due diligence on your behalf, and make a presentation providing you with pricing information and market analysis specific to your property. Resist temptation—don’t fall victim to attractive pricing projections by signing an exclusive sales agreement on the spot. There are other factors to consider. What are the candidates for a replacement property? And their tax implications? Are there any hidden surprises with the building’s condition? Is there a suitable return to replace the current cash flow?

Decisions such as selling vs financing have significant implications which can be daunting. The good news is once you find the right proxy, much of the heavy lifting can be done for you. Make your mortgage bankers and brokers earn their keep. The more an owner educates themselves on their options, the less chance there is in making a mistake. The question may be complicated, but the answer is straightforward: don’t rush through the process, assemble a qualified team, and gather all of the relevant information before moving forward.

Please contact us with any questions about commercial mortgage financing.