For owners deciding how to sell
Should you sell to a broker or a direct buyer?
A broker markets your facility to many buyers and takes four to six percent of the price. A direct buyer makes you one offer and takes nothing. Which is right depends almost entirely on how many buyers would realistically compete for your facility.
We are a direct buyer, so read the rest knowing that. We have still tried to write the honest version, including the cases where you should ignore us and call a broker.
The difference, side by side
| Broker | Direct buyer | |
|---|---|---|
| What it costs | 4 to 6 percent of the sale price | Nothing |
| On a $1.4M sale | $56,000 to $84,000 | $0 |
| Time to close | Six to twelve months is normal | 30 to 60 days |
| Who you deal with | An agent, then a buyer you meet late | The buyer, from the first call |
| Privacy | A public listing your tenants and competitors can see | One private conversation |
| Condition expected | Cleaned up and presentable before it shows | As it sits |
| Financing risk | Most buyers need a bank, and banks kill deals late | No loan contingency if the buyer pays cash or carries |
| Price achieved | Higher when several buyers compete | One number, negotiated directly |
| How you get paid | One cheque, taxed largely in one year | Lump sum, or payments over years, your choice |
When a broker is genuinely the better answer
We would rather tell you this than have you find out afterwards. List with a broker if most of these are true of your facility:
- It is large, stabilised, and professionally managed already, so institutional buyers will compete for it
- It sits in a growing metro where a dozen buyers are actively shopping
- You have three years of clean, audited-quality financials
- You are selling a portfolio rather than one property
- You have a year to spare and no reason to hurry
In that situation a competitive process will very likely beat any single offer by more than the commission costs you. That is what brokers are for, and it is a real service.
When a direct buyer is the better answer
The calculation flips when the pool of realistic buyers is small. A direct sale usually wins if:
- The facility is in a small town where national buyers do not look
- Occupancy is soft, rents are behind, or there is deferred maintenance
- Your records are handwritten, incomplete, or simply nobody's idea of a data room
- You do not want tenants, staff or competitors knowing it is for sale
- Timing matters, because of health, an estate, or a loan coming due
- Spreading the tax over several years would leave you better off than one cheque
On a $1.4 million facility, a six percent commission is $84,000. If a listing would realistically attract two interested parties rather than twelve, that competition is unlikely to recover the fee, and you will have waited most of a year to find out.
The move most owners miss
You can do both, in the right order.
Get a written valuation from a direct buyer first. It costs nothing, it is not a listing agreement, and it takes a couple of days.
Now you are holding a real number from somebody who would actually pay it. Take that to a broker and their opinion of value stops being an abstraction you cannot check. You will know immediately whether their number is a considered estimate or a figure chosen to win your listing.
If you then list, you list better informed. If you do not, you already have an offer. There is no version of this where knowing your number first makes you worse off.
Questions worth asking either one
Ask a broker: what comparable sales is your number based on, and what year did they close? What expense ratio did you assume? What is your commission, and is there a minimum? How long is the listing agreement, and what happens if I want out? Who pays if it does not sell?
Ask a direct buyer: where does the money come from? Have you closed before? Will the entity that signs be the entity that closes, or could this be assigned to somebody else? What happens to my price if diligence turns something up? Will you put your valuation in writing before I commit to anything?
A serious party on either side will answer all of those without hesitating. Anybody who will not has told you something useful.
Start with the number.
A free written valuation and a market report for your county, in two business days. No listing agreement, no obligation, and you are free to take it straight to a broker.