There are two types of property we sell. Commodity properties are typically found on the MLS and are generally offered to Users. Developer properties are land deals that will ultimately be developed into a commodity property. While it is a tidy distinction, owners of each make mistakes because they don’t understand the differences from a deal-making perspective. Each property type has its own logical steps to marketing, representation, legal, and negotiation.
To sell commodity properties, such as a building in an industrial park, the goal is to offer the property to the widest audience of prospects. An aggressive campaign of mailing, cold-calling and online promotion will reach the most potential buyers and hopefully, the best priceIn contrast, selling development sites takes far more finesse and less mass marketing. Development sites are often unlisted because they can be difficult to comprehend, may require confidentiality, and need special expertise. In these cases, Sellers can often dictate the results by understanding the process better.
While environmental, legal, and occupancy issues are complicated, entitlements tend to be the major valuation difference in areas of urban density. Because there is little available land in Greater Los Angeles, local cities are micro-managing the zoning process to get greater economic benefit from the parcels they have. This condition works in the Seller’s favor if they have the skills to take full advantage of their property rights. However, lack of expertise often leads Sellers to offer their development site as a commodity without understanding the nuances of valuation and entitlements.
Commodity brokerage is the norm for most of the deals in the marketplace. It is commonplace to react to offers without considering development potential. No one should ever sell a property without talking with the city planning agency to see if any zoning changes are planned. One way for a Seller to get rewarded for a development site is to work with the Buyer by giving time for approvals either through a long escrow or a partnership. This gives the Seller a portion of the entitled value, but the Buyer is freed from interest carry and risk. Patience is a requirement, and there can be many false starts when working with cities on new development ideas. Unlike in commodity brokerage, trust and reputation are essential to longer term agreements like these.
Tireless energy and numerous contacts are essential for selling commodity properties. Clever planning and negotiation is needed for development sites. But the most valuable contribution is to figure out the deal using arcane rules of planning departments and the real estate industry.