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Is commercial real estate really back? A Q&A

PHIL HARDWICK

PHIL HARDWICK

The National Association of Realtors  recently reported that sales of commercial properties rose 9 percent on a year-over-year basis, with the average estimated transaction hitting the $2 million mark, and residential sales in July 2015 remained at the highest pace since February 2007. Home sales have now increased year-over-year for 10 consecutive months and are 10.3 percent above a year ago. With the residential real estate market appearing to be making a comeback now is a good time to check in with the latest real estate questions and answers.

 

Question: What is the standard commission for real estate agents in Mississippi?

Answer: There is no standard commission. All real estate brokerage commissions are negotiable.

Q: Our small company is considering moving to a larger location in a nearby strip shopping center. The real estate agent said that we could choose a triple net lease and get a lower monthly rent. What is a triple net lease?

A: Commercial leases are often referred to as net, double net and triple net. In general, such leases are of the type where you the tenant is expected to pay part or all of the expenses.  A net lease is one in which the tenant pays a base rate, plus utilities and janitorial costs. A double net lease refers to the type of lease where the tenant pays a base rate, plus utilities, janitorial, and the tenant’s share of property insurance.  A triple net lease (also referred to as NNN) is one in which the tenant pays a base rate and ALL of the property expenses, including real estate taxes, insurance and maintenance. These terms are not necessarily uniform around the country. The lease itself must be examined to determine who pays what. The advantages of a triple net lease for the owner is that it relieves him of worrying about expenses; the advantage for the tenant is that the base rate is lower and that he can have more control over expenses.

Q: I’m thinking of selling my house myself and am interested in making sure my advertising will attract attention. I know I should place a “for sale” sign in the front yard, but any other marketing advice would be helpful.

A. Don’t sell the property – sell the benefits. A benefit is an advantage; it is something useful. One way to sell the benefits is to use wording in your advertising that encourages the buyer to visualize himself or herself already owning and occupying the property. Here’s an example of an advertisement: “For sale, 3-bedroom, 2-bath home near elementary school.” Now try this one on for size: “Through the kitchen window you can see the kids walking home from school.” Also, think about your home’s greatest asset. Is it the cozy fireplace? The patio where you can smell burgers cooking on the grill? Finally, have a videographer make a professional video and put it on YouTube and the website that you provide showing the property.

Q: Which is the best month to sell a home?

A: The most recent statistics (July 2014 –July 2015) from the National Association of Realtors  reveal that more existing home sales occurred in the month of July, followed by June and May. Note that these numbers represent closed transactions. That means that spring is probably the best time to list a home for sale. What was the worst month for sales? It was January. That probably has something to do with the weather, after-Christmas expenses and kids still in school.

By the way, according to the Census Bureau, in 2014 the average sales price of new – not existing – single-family homes sold was $345,800, the average price per square foot for new single-family homes sold was $97.09 and the median size of a new single-family home sold was 2,506 square feet.

Q: What is the biggest mistake a home seller can make?

A: In my opinion, the biggest mistake a home seller can make is attempting to sell the property him/herself without have the knowledge and the skill to do so. Many homeowners seem to believe that all they need do is place a “for sale” sign in the yard and buy a copy of a real estate contract at the office supply store. They do not know how to research property values or how to negotiate. They do not understand liability for property condition issues, etc. They are also handicapped by lack of objectivity. It’s tough to negotiate the sale of your home when there are so many personal memories that go along with it.

Q: What is the difference between a fixture and personal property?

A: A fixture is an item that was once personal property that has become attached to the building or land so as to become real estate. If it’s a fixture, it belongs to the buyer because the buyer bought the real estate. Personal property, on the other hand, is an item that can be moved and is not attached.  A trade fixture is a piece of equipment on or attached to the real estate which is used in a trade or business. Trade fixtures differ from other fixtures in that they may be removed from the real estate (making it personal property even if attached) at the end of the tenancy of the business, while ordinary fixtures attached to the real estate become part of the real estate.

The above should not be considered legal advice. Consult an attorney before entering into any real estate contract.

» Phil Hardwick is a regular Mississippi Business Journal columnist and owner of Hardwick & Associates, LLC, which provides strategic planning facilitation and leadership training services. His email is phil@philhardwick. com and he’s on the web at www.philhardwick.com.

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About Ross Reily

Ross Reily is editor of the Mississippi Business Journal. He is a husband to an amazing wife, dad to 3 crazy kids and 2 dogs. He is also a fan of the Delta State Fighting Okra and the Boston Red Sox.