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How To ... Set your asking price

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by Ann Bucy

If you have parcels of vacant land available, or you own an existing building and have office or retail space that's ready for move-in, how do you determine your asking price?

The goal is profit, but the price needs to be competitive with other properties. Local real estate professionals have a few suggestions on how to set a price.

"With vacant land, you want to establish the highest and best use," said Chuck Floyd, a broker/salesperson with Coldwell Banker. "You also want to determine what sort of land preparation is necessary: check on the costs of off-site improvements like sewer, water, whether or not there's a street that leads right up to the property." Onsite improvements include grading and drainage.

"Once you have an estimate of those costs, check the sales of similar land in the area," Floyd said.

If someone wants to move into an existing building, Floyd suggested looking at the deferred maintenance costs. For example, if the parking lot is in bad shape, what will it cost to fix it, or if the roof is leaking, what will it cost to repair it? He calls it the replacement cost approach.

"It's also important to look at the economic age of the land and the building," he said. "Some older buildings are very well taken care of and could pass for being much younger. Likewise, some newer buildings haven't been taken care of at all. This will depreciate the value of the building."

Floyd has listed and sold shopping centers, industrial properties, vacant land for site development and office-warehouse facilities, he said.

Mark Harrell is the president of Plaza Realty & Management Services. He deals with both existing structures and new projects under development.

"The majority of what we deal with is leasing, managing existing properties and selling land to those who develop it for their own use or to speculative users," he said.

The asking price depends on the type and quality of the property and its location, he said. "In retail, the location is more important than it is in office property per se."

"From beginning to end, there'll be a total project cost which is a result of land acquisition, architectural, engineering, building costs, interest carried during the lease up, carry costs and financing fees, just to name a few," Harrell said. He said the same thing goes when renovating a building, because it's non-revenue producing.

Harrell said he believes that when you're building, it's reasonable to expect a return on your investment above and beyond what it cost you to build.

For existing buildings, "decisions are typically made regarding adjustments on rental rates based on: supply and demand, overall market conditions and sometimes sub-market conditions."

Harrell said that at Plaza Realty, he continues to see a lot of interest in available lease space and land.

"Land is typically supply and demand, location and zoning," he said. "The majority of properties' sale price is based upon comparative market sales of similar properties for undeveloped property. Important considerations include utilities, traffic counts and accessibility."

What to look for:

When setting a price for vacant land, consider:

?Existing or needed improvements and infrastructure.

?Zoning.

?Supply and demand.

?Prices for comparable properties in the marketplace.

When setting a price for sale or lease of an existing building, consider:

?The age and condition of the building.

?The location of the building and its zoning.

?Maintenance costs.

?Supply and demand.

?Prices for comparable properties in the marketplace.

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