On most on-line offerings, the time on the market is featured somewhere in the listing. This is one of the most valuable pieces of information available – yet many buyers overlook its importance. In this Self-Storage University podcast we’re going to explore how knowing how long a facility has been up for sale can prove to be a useful tool in getting it under contract.
Episode 94: The Importance of “Time On The Market” Transcript
So you're looking at self-storage listings online. Perhaps you've gone to LoopNet. And yes, it shows you the location, it shows you the price, it shows you the size, all kinds of items. But do you ever notice at the very bottom, there's a little tiny bit of data there, and it tells you the date that it was placed on that listing service? This is Frank Rolfe for the Self Storage University podcast. We're gonna talk about how important that time on the market feature is in online listings, all the potential that it holds, all the things it suggests about the property. Now, everything in life pretty much is timed. If you go to take your SAT exam in high school, it's got very rigid time. It starts at a certain minute and it ends at a certain minute. There's very few things in life that have infinite time availability.
Let's say for example, you wanted to become a certified public accountant, you have to pass a part of the exam, and then you have to pass another part of the exam. In many states, within so many months or days, or years from passing the first part or the first part, scores thrown out. So all of us tend to realize that in life there's a clock that's ticking and it's ticking on everything. It's ticking on our lifespan. It's ticking on when you graduate from high school and how long you have to be in college to get a professional degree. It doesn't matter what, there's this clock. And the same is also true when people put something online to sell. In the world of self storage, there's a clock and the clock starts ticking the minute it goes on. And a healthy property doesn't really present a problem because the clock keeps ticking.
But ultimately, there's a buyer and it goes under contract and they do their diligence and they get a loan and they close on it. But some properties just seem to sit. If you look at how long they've been on that website, you'll see some of them are not really measured in weeks or months. Some are actually even measured in years since they've been put on there. So what does that information do for us as a potential buyer? Why would it matter if a self-storage facility has been on the market for three months or for three years? What's the difference? Well, the first thing is the longer something has been on the market, it tends to mean the more desperate the seller because most people who put something up for sale, the whole point of it was to sell it in a reasonable period of time and it's not selling.
So as a result, they start to get very concerned, am I ever gonna be able to sell? Does anyone even want my asset? And they may have other time constraints like trying to settle a divorce or settle in a state. So the longer things sit, the more that seller gets anxious, anxious to get that thing out the door. And when you have an anxious seller, some good things can occur. Number one, they have the potential to drop the price substantially. Often when they make the decision finally to sell, the very first person that calls is gonna get a real bargain because they're gonna drop that price maybe too much just as they held it high for too long. They typically flip-flop like a pendulum, and then they too aggressively cut the price. The next thing they may do is they may give you the potential for seller financing because it may be what's holding that property back is there's some issue with it as far as getting financing or maybe just to expedite the system, the seller is now willing to carry the paper just to cut out the bank.
And the potential depressing moment that even after due diligence, the financing provision may require the buyer to drop it. So things have been on the market a long time, typically can come with more attractive price and terms, but there's another indicative item of that time clock on that property. And that may be that the property just isn't one you should be buying. A lot of properties when they've been on the market for a long, long time, they actually have been under contract perhaps more than once, but every successive buyer has dropped it. They've dropped it 'cause there may be something lurking under the surface that you don't know about. Might be environmental contamination, maybe a problem with the permit. Maybe the market just has no demand and way too much oversupply, whatever the case may be. When things sit on the market, it means one of two things.
Number one, the property isn't worth buying, has some terrible problem with it. Or number two, the seller has overpriced and is now becoming extremely desperate. The bottom line in both is it leads to a fairly creative deal-making. So when a thing, something has sat a long time, that typically opens the door for the buyer to often get a really, really good deal because the seller at this point is desperate. And even if the property has some horrible problem, which has scared away, other buyers, it may be something that you could fix. I've seen deals where they've languished on the market simply because they've got some kind of terrible issue with the survey. It doesn't mean it could not be fixed. Perhaps it could. Maybe you could tell the seller, Hey, seller, here's the deal. Give me an even longer period of due diligence and I'll try and get the survey problem done.
We once bought a property where the survey was so screwed up, it took over a year to get the survey fixed because successive generations, as people died, they didn't wanna spend the money for a real survey. So they had broken up the old family farm using just common landmarks that only they knew, like Sally's Oak Tree and Uncle Bob's fence. But sometimes those things that have scared away the pack can be resolved. Not always, but sometimes. So the bottom line is when you see things that have sat and sat on LoopNet or any other website selling self-storage facilities, you need to prey on those. Those are an excellent target for you. You have something going on that may make it possible to do a very, very creative type of deal to get a much lower price or a seller financing. Of all the deals I see online, the ones we've had the best success with over the years have been situations where it has sat and sat and sat.
And the fact that you can find that information out by simply looking at the website and the information on the property is an enormous asset to you as the buyer. I find it kind of amazing. They actually put that on the listings. It kind of gives the buyer an unfair advantage in seeing how much dust has settled on the property. But as long as they do never forget that, that is a very important tool to making a good self-storage purchase. This is Frank Rolfe, the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.