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Motel market: Time to sell?

Andrew Morgan says the variables that go into determining the answer are many...

When it’s time to sell, what is a reasonable timeframe to expect a motel to sell within?

The variables that go into determining the answer are many, however, price and market sentiment are two of the major contributors to how long the process may take. However, the old saying, “right buyer at the right time” can change any expectation of timing very quickly.

 Article originally published in Resort News – subscribe HERE

In general terms, if a motel is priced correctly a standard selling timeframe will likely be around four months.

This is a very general statement though and the number of variables that go along with this are many. One thing, though, is for sure — if the business or property is overpriced at that time, then it will most likely sit on the market for much longer.

In general terms, a marketing commencement date to the settlement of a Contract of Sale within a four-to-six-month period is acceptable when a motel is priced and marketed correctly in a standard market environment.

The strength of the market will dictate market prices achieved and marketing campaign timeframes, however, the above-mentioned is a good guide in most markets. Even when markets are running hot the logistics of buying a business do take some time to formalise and complete.

Adobe Stock By iQoncept

The time taken to source a buyer may be shorter, however, external factors will always extend timeframes to settlement. Delays in gaining finance approvals are a perennial issue for many different reasons. There are many people involved in the sale process, not just a buyer and seller and a lack of respect for contractual obligations from anyone involved within the process causes delays with a knock-on and compounding effect.

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We find in the field of accommodation business and property sales, often the seller does not wish the business to be displayed publicly for sale. Hence an off-market sale campaign can be conducted. This is becoming more common as sellers do not wish certain individuals (who do not have a genuine interest in buying the business) to receive their business data.

This has become more relevant as accessing information online has become easier as technology improves. It allows those who either cannot finance the transaction or do not have a genuine buying interest in the business to find out private information about the business or owner.

Enquirers often ask why we do not include the locations of all the businesses that are for sale on our website. The answer is that quite often we do, however, more and more of our clients have realised the value of confidentiality and do not want their business compromised in any way by those who are not genuine potential buyers.

Off-market campaigns will often see a motel offered to genuine buyers that the broker is aware of and are actively seeking such a business.

These campaigns will allow a sale to occur, generally in a reasonable marketing timeframe, and the first any non-genuine buyers know about it is when it shows up as a completed sale. The old line of “you can’t sell a secret” still has some merit, however, those genuine buyers who maintain a relationship with their broker will know what is for sale before anyone else, therefore, there is no secret!

It is also relevant to add that off-market campaigns suit certain property types and business types more than others. There is no one-size-fits-all all.

Achieving the highest price possible is any seller’s goal, however, stepping over the line and pricing too high is an issue that is not always considered. A seller must do their research and come to their own conclusion of value based on all the collated information.

AdobeStock By seanlockephotography

Some pitfalls may include sales evidence that was not an “arm’s length” transaction, or incorrect information (or lack of information) that may have been provided. The way to protect oneself from this is to arm yourself with information on genuine recent sales of a similar nature, what is currently available for sale, how does the motel compare, and general market information on what may affect potential buyer’s assessment of value, such as interest rates rising or falling, access to finance, and economic issues.

A successful sale at the highest possible price will not be achieved by sitting on the market over time, quite the opposite. All that will happen is the price will come down and down over time until eventually it meets the market or sells below it. Meeting the market within a reasonable time is the best way to avoid a protracted selling timeframe and ultimately underselling a product.

Interested in buying a motel? Go to AccomProperties HERE

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