*Why Sell Now or Nothing to Buy Objection

One of KJF Partners’ Core Values is:

“We are driven by our personal commitment to create value for our investors, tenants, teammates and brokers.”

To serve our broker partners, we send occasional emails that focus on lessons learned through my brokerage history or that I notice from my current role on the principal side of the business.

Brokerage is a very challenging business and, being efficient about handling objections is a huge part of being successful. Recently, I’ve had numerous brokers tell me that they are hearing very similar questions/objections from their potential Sellers. The question I’m referring to is some version of “there doesn’t seem to be anything on the market worth buying (right now) so why should I sell?” This can be a difficult objection but, I think there are a few conditions, unique to this particular market, that may help. While a full understanding of your prospect’s personal situation (motivation) must be obtained to serve them completely, the following are just few ideas that may help move the conversation beyond the prospect’s initial objection. Combine these ideas to create a cogent response.

1) The current market is providing sellers with the best pricing we’ve almost ever seen. Today’s market is unique and, we do not believe current pricing models are long term. An August 27, 2021 CoStar article, (“Competition Drives Property Prices to Record Highs”), stated that several market measuring indices hit their highest levels in July. In addition, cap rate compression for B and C properties has outpaced cap rate reductions for A properties so, today’s pricing may allow you to sell your B/C property and upgrade into a superior property without sacrificing much in cash flow.

2) The ability to trade via a 1031 may be eliminated by the current administration so, if this is not a property you see holding for the long term, the ability to exchange right now is still available. (Note: the recent tax proposal from the House of Representatives did not contain the elimination of the 1031 but, it is still possible the Senate will push that into their proposal).

3) In addition to the above, the current administration is also pushing hard to significantly increase capital gains rates. The tax treatment you’ll receive today will likely be the best that we’ll see in the foreseeable future. (Note: the current long-term capital gains rate is 20%. The administration’s initial objective was to increase that rate to the proposed individual income tax rate or their proposed 39.6% at the highest tax bracket. Again, recent proposal from the House shows a desired increase to 25% which is 25% higher than the existing rate. All proposals are subject to change as they work their way through the Senate).

4) As the current administration advances their tax objectives, most real estate money believes those changes will be a detriment to the industry as a whole. Prices are likely to erode if the 1031 exchange is eliminated and the taxes on sale go up. You will maximize your value by selling now.

5) Although some property prices may be elevated right now (if he’s an exchanger), there are properties available because people are rushing to get property sales complete before tax rates increase or the 1031 exchange goes away. If the prospect is considering a move, this is probably the best time, in the near future, to achieve their goals. I anticipate a quick reduction in activity and available properties if/when changes to tax policies, that affect our industry, become effective.

Remember, there is not one response to an objection, that guarantees success. What is most important is that you aren’t caught off guard with a prospect’s response. Prepare yourself to carry the conversation forward with well thought out responses for the objections that are common.

Finally, many of your prospects, just want to get off the phone as soon as they can. Their objections may or may not be real but, presenting professional, well thought out ideas will always increase your likelihood of continuing the conversation and finding real business opportunities that add value for your prospects.

Happy Hunting!

Joe

PS: If you have subjects that you’d like to see become future topics for This Principal’s Perspective, hit reply and let me know what your thoughts are.

Joe Faris
KJF Partners, Inc.
Cell Phone: 949-275-5038