Selling in a Buoyant Market

Selling in a Buoyant Market

Selling in a Buoyant Market

People often focus on the negative or pessimistic side of things and in this case that would be selling in a quiet market.  However, let’s take a brief look at the more positive and optimistic side of things, selling in a buoyant or busy market.

Markets fluctuate up and down most of the time.  The reasons for this are many and varied but at the end of the day no matter what industry, field, product or market being considered, human sentiment is the driver.  Supply and demand!  Those who want it and those who have it.

When the market is quiet the demand for that product is low therefore there is downward pressure on the price achievable and it takes longer to sell.  Conversely, when the market is busy and there is high demand, the price achievable goes up and the time taken to sell that product is much less.  There will often be many buyers for that product and many unsatisfied buyers once a contract is entered into, especially when there are limited numbers available of that type of product, such a particular motel business.  The shelves are not stocked with them!

The fluctuation of markets is different for each.  The stock market is an example of one of the most fluid markets and can change in seconds on the back of one company announcement.  A positive announcement may see the value of shares in that company skyrocket within minutes.  Human sentiment has changed and as a result demand has soared.  The residential property market is not as fluid and takes a bit more time to react.  There may or may not be a buyer immediately in the market as soon as the property lists for sale.  It may take days, weeks or months to sell depending on many variables.  The commercial property market and the business markets are a little less fluid again, with the market taking a little longer to react therefore the selling times can be more protracted.  Everything is relative though, and the length of time a motel business is on the market will reduce substantially in a busy market compared to that of a quiet one.

One must understand the market they are in when considering offering their motel or accommodation business for sale.  Price expectations rely on how a seller and their advisers around them understand where the market is currently tracking and therefore informed decisions can be made accordingly.  Everyone wants to sell in a strong market, however this is not always able to be achieved.  One can only prepare and do all they can given the circumstances at the point in the cycle where the market is, when they come to sell.  As with anything, being armed with as much relevant information as possible is paramount.

No matter what the state of the market, there are a few matters that need to be in order before going to the market.  Some items will be forgiven in a strong market over a soft one, however there are some matters that will not be compromised no matter what the state of the market.  Let’s consider just four:-

Financial Statements - Too often a quality motel business and property will not sell due to the financial statements not being prepared correctly.  Perhaps not inaccurate, but poorly presented.  Often a Seller may try to avoid paying their Accountant to complete an “Abridged Profit and Loss Statement for Sale Purposes”.  One may be happy that their management accounts are accurate, and they will satisfy a due diligence, but how can a prudent buyer know or accept this upfront.  Presentation plays an important role, no matter what the state of the market.  It really is about giving the buyer confidence to make a quick decision, especially in a fast moving situation.

Property - Physical presentation should always be at its best, but of course we all know that this is not reality and the longer one is in a house, motel or business, things can tend to slip without proper diligence.  Minor items may be allowed to go through to the keeper in a strong market, but more major and costly matters will still come under scrutiny.  Attempts to “pass on any bigger issues” to the next party, will be red flagged and need to be dealt with, most likely under contract conditions which could create additional pressure to the process.

Legal – Having all contracts, agreements and statutory requirements tidied up so there are no outstanding issues that will cause an issue whilst under contract or just prior to settlement is important.  Often prior to selling, when a council related or other similar issue arises, it can be seen as easier to just sweep these types of matters under the rug and “deal with them later”.  That seems like a good idea at the time but becomes a headache later on.

Marketing - the consideration of marketing does not change whether it be a strong or quiet market.  Direct targeted marketing does not change.  Where, what type, who are we aiming at and how much is required may change but the fundamentals stay the same.  Marketing funds can be frivolously wasted very easily when not placed correctly and directed at the target market in any market situation.

Professionals – The same principles apply in legal, accounting, finance and brokerage, no matter what the market.  Utilise the experience and knowledge of those who know their business.  Those who dabble, or do not specialise, will be disadvantageous to a Seller’s position, even in a strong market.

Being fully prepared before jumping into the pressure cooker of a fast moving sale process in a busy market, will reduce the pressure and stress for all concerned and achieve a better result.

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