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It is interesting that when real estate agents decide to sell their business or their rent roll they often choose not to use the services of a specialist agency and rent roll broker.
Selling a business and/or a rent roll is a process not just a transaction. It’s a longer and more complex transaction than the average real estate transaction.
As real estate agents will tell their clients, in order to deal with multiple potential buyers, negotiate price, terms and conditions to the mutual satisfaction of the seller and buyer, keep a transaction together and ultimately achieve the best possible outcome, it is wise to involve the services of a specialist agent.
Common horror stories abound about rent roll transactions going wrong when the transaction did not use a specialist agent. For example:
- Buyers and sellers agree on the multiplier without either side really understanding what it is that they are selling or buying, then the goal posts are moved once some further investigation has occurred.
- Sellers allowing buyers access to confidential information regarding their business prematurely only to find the transaction does go ahead and the confidential nature of the transaction is breached, or even worse, used by the potential buyer and/or other competitors to win business or canvass staff from the party endeavouring to sell their business, which results in lost business and/or key staff members.
- Arguments, or even worse, legal action has occurred after settlement around issues not adequately defined during the sale and negotiation process or not adequately addressed in the contract for sale.
Just like selling a property, a well listed, presented and marketed business and/or rent roll is three quarters of the way to being sold. None the less, this does not negate the complexities associated with such a transaction.
Appraising the value of your business and/or rent roll, qualifying buyers, protecting confidentiality, packaging up the presentation of the business to provide relevant information for potential buyers to prudently evaluate the opportunity, obtain finance and then being able to forward their expression of interest without the buyer having to come into the seller’s business and troll through confidential information prematurely are all critical processes a specialist broker can help to manage.
Many agents think appraising a rent roll is as simple as putting a multiplier on the annual management fees. However, there are many things which affect the multiplier and the potential buyer’s opinion of value, such as the rumours around recent sales, supply and demand, competition, state of the local market, the average management fee percentage, the average annual management income per management, the revenue generated by letting and other service fees and charges, the number and percentage of owners with multiple properties, the overall condition of the rent roll and how well it is actually managed, plus many other factors all affect the value. A professional specialist broker understands these factors and can address them accordingly.
Skilled specialist brokers are adept in negotiating price, multipliers, retention periods and percentages, conditions around due diligence, restraint conditions and periods, transferring staff, leases on premises together with liaising with solicitors, financiers, accountants and franchisor, as well as providing comprehensive procedures and advice from exchange of contracts through to the end of retention are also part of what a professional specialist broker can bring to the table to bring together and keep a transaction together.
With the time, money, stress and risk involved, the question begs: why do agents choose not to use agents when they are engaging in such an important and complex transaction?
Often it seems because either the seller or the buyer approach each other directly. Sometimes it seems because an agent runs a real estate business and sells real estate they feel they are qualified to sell their own business, albeit they may only do this once or twice in their lifetime.
The reality is, while a business owner is spending their time trying to deal with complexities of selling their business they are not as focused on retaining or building the business they have. New managements secured during the sales process result in more managements being able to be sold. Lost listings and sales result in lost revenue. Lost managements not only reduces revenue but also reduces the net sales result.
Speaking with a specialist broker is just like when a potential property client speaks with a real estate agent. Their advice is free, unless the potential client chooses to engage the agent and a settlement is achieved as a result. Therefore it only makes sense that before you sell or buy a business and/or rent roll you should speak with a specialist broker to evaluate the benefits of their service. Doesn’t it?
ABOUT THE AUTHOR
John Hanly
As a Specialist Rent Roll & Real Estate Agency Broker for Real Estate Dynamics, John’s key focus is to ensure exceptional service and outstanding results are achieved for our Clients.
John has over two decades of real estate experience spanning across high level industry facets of Agency and Rent Roll Business Management, Franchise Management, marketing, training, coaching and consulting which have resulted in John possessing exceptional business acumen as well as superior communication and negotiation skills.
Renowned for operating with integrity, respecting confidentiality, consistently delivering excellent service and having a genuine passion and interest in assisting others in achieving their objectives, John has forged long lasting business relationships within the real estate industry.
With Real Estate Dynamics being the leading provider of Rent Roll and Agency Brokerage services, John and the team provide our Clients with access to vast industry expertise, an extensive network of agency and Rent Roll Buyers and Sellers and also specialist Financiers, Valuers and Lawyers.
In his role as one of our specialist Consultant Brokers, John effectively leverages off his extensive knowledge, experience and skills with our innovative, comprehensive systems and documentation that Real Estate Dynamics provide exclusively to our Clients. The combination of expertise is a proven success strategy for our clients in the sale and acquisition of Real Estate Agency Businesses and Rent Rolls.
