Disclaimer: I am not an attorney and this article is not intended as a substitute for advice from the appropriate legal, zoning, financial, construction and/or tax professionals. This information is provided for educational purposes only and is made without warranties or representations
Selling commercial real estate is a complex process, no matter where you are. How long it takes can depend on a lot of different factors – and indeed, we’ve all seen properties stay vacant for years – but there has to be an average length of time it takes to sell such a property. So, what does the whole process entail, and how long does it take? Let’s dig in.
Note that, as California’s top commercial real estate broker, I’m very familiar with this process and can help you handle it with speed, efficiency, and the best possible deal you can get for your property. If you’re interested in selling commercial real estate you own in California, contact me, and I’ll help you out.
The first thing you should do is step back and evaluate whether or not you truly want to sell and, if so, what your goals are.
Specifically, answer this question: Are you looking to cash out, or are you trying to improve your investment?
In California, one thing you can do is perform what is known as a 1031 exchange. This process allows you to sell a property and immediately turn around and use the funds to buy a new property with equal or greater value. Formatting a sale as an exchange like this allows you to circumvent capital gains taxes, so it can be very beneficial if you don’t intend to cash out your investment immediately.
To read more about California’s rules surrounding 1031 (also known as “like-kind”) exchanges, read this post.
You can also decide to list and sell the property on your own without the aid of a broker. For obvious reasons, I don’t recommend it; it’ll take longer, have worse outcomes, and risks running into unexpected expenses and rules violations you wouldn’t even know about. A broker like myself makes things so much smoother.
The next thing to do is determine the value of your property.
This can be a surprisingly difficult process. Every commercial property is unique, and there are a lot of different factors to consider when determining the value of the property. Moreover, there are several different valuation methods you can use to calculate the value of the property.
Gathering the information and using these methods to estimate a fair market value of your property can take some time. A broker like me can access more comprehensive information more quickly than you can on your own, which is another good reason to reach out if you’re looking to sell.
Under normal circumstances, I can have an estimation of a fair market value in anywhere from a few days to a week or so. I can often give you a very general estimate, but an actually-researched market value will take a bit longer. The more unique, complex, or incomparable a property is, the harder it will be to estimate its value accurately.
It’s also important to know that an estimated fair market value is not guaranteed to be what the property sells for. Sometimes, the market doesn’t have enough interest to sell for that rate, so a lower price will be necessary. Other times, interest is hot, and a bid war can inflate the value of the property above and beyond your expectations. While this is, of course, fantastic news for you as a seller, it still makes the estimate invalid.
Commercial real estate is a turbulent market right now. Some kinds of properties are suffering under a social shift to work-from-home and remote work, leaving offices empty. Other types of properties are hot and sell near-instantly, even for inflated prices.
You need to spend a bit of time evaluating your goals with selling. Essentially, you need to choose between value and speed. The longer you spend fishing for buyers, the more likely you are to find someone willing to pay more than your asking price and start a bid war. On the other hand, if you need to cash out ASAP and roll that money into other things, you can set yourself a floor price and sell to the first person who offers above that price.
It’s difficult to say how long this can take. Delaying a sale can cause some buyers to withdraw their offers, but can get better offers later. On the other hand, selling quickly gets money in hand ASAP. It’s really up to you.
Paperwork is a necessary evil for society to function, and that’s never clearer than when dealing with real estate, especially expensive commercial real estate. There are brokerage agreements, letters of intent, sales agreements, due diligence reports, valuation reports, title and deed transfers, and a lot more to handle.
This is, again, where a talented broker like myself comes in. If you have to bury yourself in obtuse paperwork to get a sale finished, you’re going to take quite a bit of time at it or risk messing something up. On the other hand, I’m very experienced with handling any and all of the paperwork, I have forms and templates ready to go, and I can have it all set and done before you can blink.
Note that certain kinds of real estate transactions have their own timelines you’ll need to consider. For example, with a 1031 exchange, you have time limits to make offers and close a deal. These are maximum times, not minimum, however. That means you can close quickly if you know what you want; you just can’t delay the process for more favorable conditions.
Closing a deal is, in some ways, only the beginning. Capital gains taxes on the sale are a significant issue to handle after closing, and depending on when you close, it can be anywhere from weeks to months before they come due.
There are also all manner of other details to handle, and you may be in communication with your buyer for a long time to come, answering questions as necessary.
Again, it’s very difficult to give a realistic estimate for how long it can take to sell a piece of commercial real estate.
In general, timelines often range in the 75-90-day range. If the people involved are dragging their feet, it can take even longer, though there are some limits to certain kinds of sales, like 1031 exchanges and their 45-day initial offer cap. Other times, everyone involved wants the deal to happen ASAP, and the process can be streamlined to be under 30 days.
If you want to speed up a sale, there are some things you can affect or do to shorten the time it takes. There are also pitfalls to avoid, which can add delays to the process.
Whether or not you hire a broker is a big one. Brokers like myself can dramatically speed up the process by leveraging our experience, utilizing connections and resources for advertising and marketing, and just having familiarity with the process and paperwork to speed it all up.
The type of property can be a big influence as well. Large parcels have a smaller pool of potential buyers and can take longer to sell. Certain kinds of real estate can be harder to sell at the best of times, and in cases like today – where office space has lower demand, for example – the type of property matters a lot.
Other property details can also impact the speed of a sale.
Another thing to consider is the legal details of a property. Everything I’ve mentioned above is an estimate based on a typical, unburdened property. If your property has any sort of legal attachments, it can take much longer to sort through them and straighten everything out for a potential buyer. These can include:
While a broker like myself can help sort through these, you may also need to hire the services of a commercial real estate lawyer to help comb through them. Of course, a property unburdened by these considerations can sell a lot faster than one with any of them to worry about.
I often tell people that faster isn’t better.
In some rare instances, there can be special circumstances that make a fast sale more desirable. The most common of these are:
Even that third one is often a tactic used by investors to lowball someone and pressure them into selling faster than they should. So, while there are the occasional valid reasons to sell quickly, it’s generally only personal reasons in the case of the property owner that make a fast sale more desirable.
In most other cases, selling too quickly means skipping due diligence or failing to wait for long enough to get more real offers to choose from. The longer your property is on the market, the more time you have to advertise it to investors who might not be local, might not have the awareness to see the listing right away, or just might not be able to make their offer immediately.
If you want to get the most out of selling your commercial property, taking a reasonable amount of time to do it is always the way to go. Even spending a few additional days or weeks on marketing the property can make a significant difference, and when we’re talking about parcels in the tens of millions of dollars range, that can be huge.
I always advise you to be skeptical of any pressure to sell quickly, especially if it’s a buyer trying to tell you that you aren’t going to get a better deal if you wait or that their deal is only on the table for a short time.
Luckily, the best way to sell a piece of commercial real estate in California, with excellent outcomes, the best possible deal, and end up satisfied with the process, is to talk to a skilled broker. Even better, you’re already right where you need to be. As California’s top commercial real estate broker, I’m uniquely positioned to help you sell for the best possible outcome, and all you need to do to get started is drop me a line.
And, as always, if you ever have any questions, either about commercial real estate, something I touched on in one of my articles, or similar, please feel free to let me know. I’d be more than happy to help however I can.
Erik Egelko is a veteran of the commercial real estate business with a specialized focus on Investment Property Sales. In 2021 and 2022, Erik was the #1 ranked Broker in California for one of the largest CRE Firms as well as ranked in the Top 1% of brokers nationwide. He has extensive experience in a variety of asset types including: Retail Shopping Centers, Medical Office Buildings, Industrial Properties, and Multifamily Apartment Complexes. Over the course of his career, Erik has closed over $100,000,000 of commercial property sales throughout Southern California.