TRUST SALE: SELLING INCOME PROPERTY
Jane (Doe) was appointed trustee of her mother’s estate. Lots of decisions needed to be made and her siblings were resentful. Her mother had owned income property for decades and most of the building was occupied by long term tenants. Rents had only been raised when the long term tenants vacated. Between the tenants and her siblings she was pulled in many directions.
The value of income property is typically determined by the gross rent multiplier. Although the rents were low, we knew the potential. We understood it should be valued and marketed differently. The municipality in which the units were located did not have rent control. We targeted our marketing to investors. One who was likely to give the tenants notice to vacate and then remodel the units, in order to maximize the rental income.
Income property is often sold “subject to inspection”. This means an offer is negotiated and then the buyer views the interior. The tenants are then only disturbed by “serious” buyers. Harb and Co. had a floorplan prepared for each unit and professional interior photos. Our aim was to disrupt the tenants as little as possible. As the Trustee was the property manager, our Real Estate Team was the buffer between the tenants and trustee.
With a clear marketing plan in place we quickly sold but after the physical inspection, this buyer attempted to negotiate tens of thousands of dollars off the selling price. Escrow was canceled, but we now had an inspection to share with any new potential buyers. After a price reduction, we sold to a cash buyer $10,000 under the new asking price. Sadly the tenants were given notice, the building renovated and the rents more than doubled.