Wednesday, June 28, 2017

Where are the Listings?

Our commercial real estate sector in Connecticut is short of listings!  On the sites we monitor, and in the meetings we attend, new listings are thin on the ground these days, all over the state.  Some of it is time of year--people are thinking about vacations, not real estate.  However, there are companies and investors out there looking, and there's not much new to show them.  Many of our leads these days come in from online sources, and there it's the most recent that attracts the attention.  When nothing changes in the inventory, we get fewer leads. 

What's the takeaway here?  If you've got something you have been thinking about selling, now is your chance to get the greatest response.  If you are offering something new, you'll be in very select company, and those looking will respond.  So ignore the weather, and the season, and list now.

Tuesday, June 13, 2017

Activity at Lower Price Points

One of our jobs as commercial real estate professionals is to educate clients about the state of the market.  That's a particularly difficult task just now, because the national news often diverges with what's happening in our own state.  In fact, Connecticut recently has been all alone in seeing prices fall.  Although we don't like to admit it, we are experiencing that in many instances. 

Everyone knows by now about Connecticut's fiscal problems, and is aware that GE, and most likely Aetna, are moving their headquarters elsewhere.  What that means for the rest of us is that prices are much less apt to rise here than in other places, where the economies are healthier.  In fact, we not infrequently have to tell sellers and landlords that prices are going down, not up.

Tenants and buyers are finding lots of bargains around our area these days.  It does depend upon the type of real estate, with investment and multi-family trending as the strongest sectors.  However, our continuing depletion of industrial users has made those properties decline or stay steady in value over the past number of years (some for as many as 25 or 30 years).  Unless we can get owners to understand these cold facts, they are prone to thinking that what's true in Boston and NYC is true here, and that's just not the case.

What's the silver lining?  As I've been saying, we have plenty of bargains available. We also should be able to attract investors, and maybe even some users, from higher-cost regions.  As long as sellers don't get greedy, there are deals to be made, and we are looking to help make them.

Wednesday, May 31, 2017

Now is the Time to Invest in Connecticut

We have had so much bad economic news in Connecticut recently--and well-deserved, as we definitely made bad choices over many years--that we have forgotten one basic tenet of real estate:  It comes down to location, location, location.  Although businesses are up in arms all over the State, and many are leaving or considering doing so, they may be discounting the location we have here.

One of our agents believes that, in the future, Connecticut's commercial sector will all be about distribution.  I think that could well be true.  As New York and Boston soar to greater and greater heights, and lure young people from all over the country to settle in those two areas, here we sit--right between the two cities.  While we certainly have not invested in infrastructure in the way we should have, we still have a proximate location that will make our land and buildings valuable for distributing goods.  As one of the articles I read recently pointed out, whatever you can do with planes and ships, you need roads and trucks for at least the last few miles of any delivery. 

So, while factories and malls may be repurposed over time, there will always, in our lifetimes, be a need for space in Southern New England, and that's what we have.  Before others figure that out, and bid up the prices, those of us already here should take a second look at what is available.  It may be that location trumps all those bad decisions.  Let's hope so. 

Monday, May 22, 2017

Appraisals

We are starting to see properties "not appraising out" lately.  That's an early indicator that prices may be increasing, at least in submarkets or areas where supply is limited.  What we mean by that term is that the appraisal number is lower than the amount on the sales contract.  If the buyer needs a mortgage, it's an issue, because he/she may not be able to borrow the full amount that they expected.  In other cases, where the buyer is paying cash, it is not uncommon for the buyer to put in a clause that the sales price cannot exceed the appraised value. 

There are two ways to look at this issue, as with so many things.  One is that the buyer should be willing to pay what a property is worth to him/her, regardless of the appraisal.  The other side of the coin is that the practical value of a property--what it would resell for, and what you could borrow against it--is dependent upon the appraisals.

Appraisals tend to lag the market, because an appraiser can only use comps from within a narrow range of closing dates, and within a very small area around the subject property.  It can be very hard sometimes to find good comps, and adjustments must be made from properties that might not be exactly the same in quality or type.  Since the comps come from recent sales, those prices could be lower, in an increasing market, than the sales prices on contracts that haven't yet closed. 

What advice do I have after all of this discussion?  Appraisal is as much an art as it is a science, and both buyers and sellers should be reasonably skeptical about exactitude.  Given the restrictions on bank lending these days, it is harder for a bank to take the same attitude, so just be prepared to make an independent decision in any given instance.

Friday, April 14, 2017

Another Buyer Broker Story

The right of a consumer to be represented themselves by a real estate agent has been the law in Connecticut for at least a decade now, but it is still not understood by many people.  In the commercial arena, where many buyers are more sophisticated, and are used to buying and selling real estate under earlier regulations, it has been slow to take full effect. The way that the law is currently written, it requires a real estate agent to have a written representation agreement with a buyer, before s/he shows that person any listings other than his/her own company's listings, where the listing agreement with the seller would give the agent representation of at least one of the parties. A dual agency agreement must also be signed by all parties, when the agent represents both the buyer and the seller.

Why am I explaining this again?  Because so many people do not understand the law.  I got a call a couple of weeks ago from an attorney, skilled in real estate, and also licensed as a real estate agent.  He told me that he had recently bought a property, which he had previously called me about (to ask questions about the area, not to represent him on a specific property).  He said that he realized only after the deal was done that the listing broker had gotten paid to represent him, because he didn't have a buyer broker agreement.  He had thought, as many people do, that he would save money if he was not represented.  The way it works, though, is that the agent is (almost always) paid by the seller, as a result of a listing agreement, and that fee is named in that agreement, regardless of whether another agent is involved.  That means that, if there are two agents, the agreement between the two agencies (almost always) divides that commission.  If there is no selling agency, the listing agreement would still be in effect, so the listing agency would get that commission.  While that listing firm would owe certain duties to anyone, and would do the necessary work to put the transaction together, the fee wouldn't change just because the buyer chose to be unrepresented.  Brokers who do not represent a person, though, cannot give advice on value, except to state the listing price.  So that question--what's it worth?--can only be answered legally by an agent who represents you.

So why don't buyers want to sign buyer broker agreements?  Sometimes, they want the right to buy something without the agent, or with another agent.  Sometimes that's fair, although sometimes it isn't, depending upon the amount of ground work that has already been, or is being, done.  Sometimes they aren't authorized to sign, which is a problem that the CT Legislature plans to take up this year--it can be fixed by having a commercial buyer broker agreement signed later in the process.  In some cases, they are dealing with more than one agent in different areas, a problem that can be fixed with the proper documentation.  Many times, though, it's just a knee-jerk reaction against signing anything.  But when's the last time you saw a doctor?  If you declined to sign the HIPAA form, I bet that you didn't get in.  (And, actually, I'd put my money on a bet that you signed it, and never even read it.)  Why should real estate not have paperwork also?  It's good business, and good practice. And, it's the law.