Detailed Guide to Selling Your Warehouse in 2023
In this article, we will go through a detailed analysis of the best ways to sell a warehouse.
We will discuss several ways to approach the sale of your property, depending on your situation. Then I will guide you through the whole selling process step-by-step.
Let’s get you started on the path to a successful sale of your warehouse property.
Determine Your Goals
The first thing you should do is stop and consider your reasons for selling and what you want to accomplish. This will guide you to the best method of selling your warehouse. Here are a few examples of your possible objectives:
Immediate cash — are you compelled to sell because of personal or family issues? Has the property become a financial burden? Do you need the equity in this property to keep or improve other priority assets? This may call for a quick sales method at the lowest cost to you.
Reinvest in property — is it time to reallocate your real estate investment portfolio? Can you maximize your return on this property and purchase another one? This will likely involve the use of a 1031 Tax-Deferred Exchange. In that case, the selection of a replacement property within the time allowed for an exchange may require the help of a commercial broker.
Reinvest in other assets — perhaps you’re at the point in your estate planning where you need to liquidate assets. You may want to fund retirement accounts or prepare your estate for eventual distribution to your heirs. Having enough time to achieve the maximum price for your warehouse will open other selling options to you.
It’s important to involve your estate attorney, financial planner, and CPA as you make decisions on selling your warehouse. Make sure that you are aware of all the possible ramifications of creating income from the sale.
3 Ways to Sell Your Warehouse
#1. Using a Real Estate Broker
What Do Brokers Do for Sellers?
A real estate broker who can help with the sale of a warehouse would be a commercial broker. These are professionals, licensed by their state, who are specifically trained in the area of commercial real estate.
Commercial brokers assist their clients with all aspects of investing in commercial properties. This includes the purchase, sale, and leasing of all types of commercial real estate.
Advantages of Working with a Broker
It’s important to select a broker who is familiar with your particular market and is experienced in selling industrial properties like warehouses. They will know the market values of your property, market trends, and buyers who are active in warehouse property investment.
An experienced broker will:
- Guide you through the marketing and sale procedures.
- Know what buyers in your market are looking for.
- Tell you if repairs or improvements need to be made.
- Know how to price your property.
- Advise you in the negotiation of contract terms.
- Assist with buyer access for inspections.
- Refer you to other professionals you’ll need such as surveyors and attorneys.
If you or a tenant are operating a business in the warehouse, a good broker will market the property quietly without disturbing the ongoing business.
They will handle initial inquiries from buyers and other brokers. Once they qualify a buyer they will secure a Confidentiality Agreement (CA) or Non-Disclosure Agreement (NDA). This is especially important when a business is currently operating there.
Marketing a warehouse with a broker is not the quickest way to sell. A good broker can lessen the time on the market with a strong marketing package that is targeted to active buyers.
Disadvantages of Working with a Broker
Some brokers are taught to accept all listings regardless of their marketability. Buyers who call about those properties are then steered to other listings the broker has that are easier to sell.
Ask how many properties the broker currently has listed and their average time on market (TOM).
The biggest disadvantage of working with a broker is the cost. Good commercial brokers charge commissions that start at 4%. For smaller sales, they can want as much as 10% to make sure that they cover their marketing costs and still make their expected fees.
#2. Sell Your Warehouse by Owner
How Do You Sell a Warehouse by Owner?
When you conduct the whole process without a broker, it’s called a FSBO (For Sale by Owner) sale. There are online platforms for selling commercial real estate. For a fee, you can place your property for sale on the website and be contacted directly by interested buyers or their agents.
Selling a warehouse for yourself works best if you already know potential buyers that you can approach.
Advantages of an FSBO Sale
The primary advantage of a For Sale By Owner (FSBO) sale is the cost savings. The largest cost of selling property the traditional way is brokerage commissions. Keeping 4% to 10% of your purchase price is very tempting.
Disadvantages of an FSBO Sale
Every property owner thinks that they know what their property is worth. Unless you are very active in property sales in that market, your estimate may be way off one way or the other.
If you overestimate your listing price, you could wind up sitting on that property for a long time.
If your property sells quickly, you’ll forever ask yourself if you left money on the table. The answer is probably yes.
If you look at the long list of a broker’s responsibilities, you’ll realize that selling a commercial property will take a lot of your time. Passive investors typically don’t have that much time to devote to the sale of their warehouse.
Most buyers use a broker to help them. You should be prepared to at least pay a buyer’s agent commission. They will be represented by a professional, and you will not. And you will only save half of the cost you had hoped to keep.
#3. Sell Your Warehouse with WarehouseCashin
What Is WarehouseCashin?
WarehouseCashin is an online marketplace for warehouse sellers and cash buyers. We make it easy for you to show your warehouse property to active commercial property investors who are looking for warehouse properties.
At WarehouseCashin, you can receive no-obligation all-cash offers for your property.
Advantages of WarehouseCashin
WarehouseCashin looks carefully at investors before including them in their network of buyers. They’re researched for their investment track record and selected for their reliability, experience, and ability to close.
When you ask for your offer at WarehouseCashin, interested investors will arrange to visit your property. Once they’ve seen your warehouse, they will make you an offer within 72 hours. Sometimes they are prepared to make you an offer on the spot.
All offers are for a cash purchase. This eliminates the uncertainty of waiting to see if the buyer and your property are approved by a lender. It also removes the large amount of time that it takes for a lender to go through their appraisals and underwriting.
Professional buyers are able to assess the value and condition of your property for themselves. You’ll save time not having to wait for endless third-party inspections.
All of this makes for a quick, all-cash closing for you.
Our investors can make any needed repairs or upgrades for themselves. That means that they will buy your warehouse as-is. You won’t have to put any more money into your property. We also don’t charge any commissions, which is a huge saving for you.
Their offer will take into account your closing costs so that you won’t have to come to closing with any cash.
With WarehouseCashin, you’ll have less paperwork, less costs, and a lot less time to close. And, you are under no obligation to accept any offers you receive through WarehouseCashin.
Disadvantages of WarehouseCashin
The price that you receive from WarehouseCashin investors will reflect repairs (if any), closing costs, and their anticipated investment return. Depending on your market, your price could be lower than the market value.
To accurately consider your WarehouseCashin offer, you should consider the costs you are saving from repairs, marketing, and commissions.
If you want to have an investor show you all possible options they have for you to make your sale fast and convenient, fill out our no-obligation cash offer request form.
Alert Your Team of Advisors
Let your attorney, your CPA, and your financial planner know about your intention to sell your warehouse. They each have different responsibilities so they all need to be consulted.
Your attorney is concerned with your legal liability, your CPA is concerned with your tax liability, and your financial advisor is concerned with your future financial position.
Your attorney will also be an essential asset in the negotiation of the purchase contract. Warehouse purchase and sale contracts are usually written by attorneys for that particular transaction. The specific contract language can either protect you or expose you to unnecessary liability.
Review Ownership Documents
It’s likely that you own your investment property through another entity, like an LLC. This may be true even if you are the sole owner. Make sure that you follow all the steps that are required in the organizational documents to sell the property.
If you have partners, it is crucial that they are aware of your decision to sell. Even if you own a majority of the partnership, you may need the agreement of others for a major decision like this. For example, you may own 51% of an LLC, but a major decision such as a sale of the asset may require 65% of the members’ interests.
Ensure That You Have Clear Title to the Warehouse
Your attorney can help with this in advance of marketing the property. The ownership of your property may have been affected by actions taken by you or others.
If you built additions to the improvements or extended pavement, you may have encroached into the setbacks around your property. Today, there are even cases of people filing deeds on other people’s property without their knowledge.
You will be required to convey (or transfer) a clear title to the property when you sell. It pays to know in advance that this will not be a problem.
Review the Condition of the Warehouse
When you sell a property in a traditional transaction, the buyer will negotiate an inspection, or diligence period. During this time they will have your warehouse thoroughly inspected by professionals.
To help them do this you will have to provide them with diligence documents such as surveys, environmental reports, Geotech reports (if you developed the property), and insurance policies including title insurance.
You need to inspect the physical condition of your property for yourself, including the roof, plumbing (if any), and all mechanical systems.
A lot of investors leverage their purchases with borrowed funds. A lender will want to see all the diligence documents, inspections, and an appraisal of the property. They will want any significant defects, and some minor ones repaired before closing.
You don’t want surprises to come up at the last minute. Usually, buyers can terminate the contract during the inspection period for any or no reason. If they think that you are hiding something, they may just walk away from the deal.
Look Over Service Contracts and Warranties
If any equipment, roofing installation, or construction warranties are still in place, see if they will pass on to new owners. This can be a great selling point in your marketing.
Third-party service providers such as HVAC contractors may honor any remaining time on their contract with a new owner. That could lock in your pricing which may be a benefit to your buyer.
If your service contracts won’t pass on to new owners, you want to make sure that you cancel them so that you don’t owe additional payments after you close.
Review Your Leases
If you have a tenant in your property, have your attorney go over your lease. Having a paying tenant in place can increase the value of your property. This is especially true if the tenant is strong financially or nationally known (a credit tenant).
Make sure that you give any required notices on time, and that their lease will convey to the new owner.
Assess the Value of Your Warehouse
In order to know the market value of your warehouse an objective evaluation has to be made of your property and the local market.
The 3 Methods of Appraising Property Value
When you look at a real estate appraisal, you’ll often see that the appraiser used three methods of property appraisal. Sometimes, depending on the location, age, and condition of the property they will have to give some consideration to each method.
Most of the time, commercial rental property appraisals will depend on the Income Capitalization method.
Here are the three appraisal methods and how they are used to value commercial property.
This method takes the actual price of similar warehouses to calculate your property’s value. This method uses the price of sold warehouses that are a lot like yours, are located as close as possible to your property, and that closed recently.
Acceptable comparable properties will have closed within the past year. You also need to use at least 3 properties for the comparison.
The sales price of the comparable properties is increased or decreased to account for any differences with your property. The value of your property is the average of the revised prices.
If your warehouse is vacant, the Direct Comparison will probably be used to calculate its value.
This method is only useful in assessing properties that generate income. It’s based on the concept that the value of an income-generating property is based on the return that it will bring an investor. The value is calculated using the Capitalization Rate, or Cap Rate.
The Cap Rate formula can be used to estimate a property’s Net Operating Income (NOI), to calculate its annual return, or in this case to determine its value.
The current NOI of the property (not including debt service) is divided by the average Cap Rate for the market. The answer is the property’s Fair Market Value.
The Cost Approach is just what it sounds like — the cost to replace that property today. If a commercial property has been built recently and doesn’t have an income history yet, the Cost Approach might be called for.
The value of the land plus the cost of building the exact same improvements minus depreciation is the property’s value.
Hiring an Appraiser
Professional appraisers are trained to be objective evaluators of property values. They are licensed by their state and held to professional and ethical standards in their work.
The property information that we’ve discussed is readily available to appraisers including:
- closed property sales,
- construction costs, and
- average Cap Rates.
The cost of an appraisal depends on the size and complexity of the property and its financial records. An appraisal of a typical one-building warehouse property can cost between $2,000 and $5,000.
Some appraisers will perform an appraisal for a property owner on an abbreviated form that costs less.
Marketing Your Warehouse For Sale
The Marketing Package
Marketing packages for industrial properties are data-driven. Potential buyers want to know the details about the property that will indicate its usefulness for their use or for potential tenants.
Your package should include:
- the property’s location
- accessibility and distance to main highways
- survey or plat showing the location of improvements on the property
- the age and construction method of the improvements
- square footage
- mechanical systems
- electrical system capacity
- building features such as hoists or cranes, loading docks, ceiling heights, office space.
If the property has the potential to add value, such as having room for expansion, make sure that you highlight that.
Your presentation should look professional, but getting the right information in front of the right audience is critical. For income-generating properties, do not disclose any financial information until you have received a Confidentiality Agreement (CA) or Non-Disclosure Agreement (NDA). Financial information will be contained in a separate Confidential Memorandum.
Where to Advertise
Online real estate listing sites have taken over the real estate marketing world. The National Association of Realtors (NAR) recently published a survey showing that 100% of homebuyers have used the internet at some point in their property search. All forms of print advertising combined only reached 47% of buyers.
This is true for commercial real estate as well. The reasons are simple: online marketing is cheaper and can be targeted to your desired audience.
One of the most effective online listing sites for warehouse properties is WarehouseCashin. Our site is specifically targeted at active warehouse investors who are looking for properties just like yours.
Once you request a cash offer from WarehouseCashin, your property is immediately submitted to our network of qualified warehouse buyers. Buyers who are looking for warehouse properties via search engines such as Google will be able to see your listing as well.
You should also search your area for local and regional commercial listing sites. Advertising your property on many sites will require paying a fee.
You may already be active on social media platforms that provide advertising services. Twitter, Instagram, Snapchat, Facebook, LinkedIn, and Pinterest all have advertising venues you can use. Business media such as LinkedIn will target your message to subscribers who are real estate professionals.
Real Estate ads on Google have grown over 250% during the past few years. If you’re not tech-savvy, Google has a marketing staff that will help you through the process.
If your warehouse isn’t being leased, you can place a For Sale sign on the property. However, sellers report that most of the calls they received from signs were from brokers trying to list it for them.
Listing Your Warehouse
In your listing, highlight any features that differentiate your property from others.
Is your warehouse climate controlled? This can be a big plus to certain owners and tenants.
If your warehouse includes office space, it qualifies as Flex Space and you should describe it that way.
Loading docks are a must for some companies. This can be a significant selling point in your marketing.
Roll-up doors may seem standard these days, but you should include them in your description of the property.
Overhead hoists and cranes are another huge plus for a warehouse property. If you have them, highlight them along with their weight capacity. If you don’t have overhead hoists, check to see if the structural beams will support them. Have an engineer inspect your building. If Hoists/Cranes are an option for a new owner, mention that prominently.
An active warehouse needs to be easily accessible by trucks coming from main highways/interstates. Warehouse properties that are close to large highways are very desirable in today’s market.
The same is true for the distance to the nearest airport. Cargo that arrives by air needs to be stored as it awaits distribution. When a warehouse is close to an airport, that needs to be a major marketing point.
Excess acreage should be described as potential expansion space.
There is a wide range of uses for warehouse space. You want your property to appeal to as many buyers as possible.
If your warehouse is leased, make sure you stress that viewings are by appointment only.
Qualify Your Buyers
Experienced sellers will make sure that the buyer can perform before incurring the legal costs associated with a purchase contract.
If you and the buyer use a Letter of Intent (LOI) to establish the terms of the contract, make sure that it requires the buyer to give you proof of funds by the end of the inspection period.
If they are getting a loan, try to get a comfort level with their ability to obtain financing. Ask who their lender is, if they are pre-approved and if they have a previous relationship borrowing from that lender.
It will help if the buyer has experience buying similar properties and has successfully closed on purchases before.
Confidentiality and Non-Disclosure Agreements
When your warehouse is leased and not just owner-occupied, you will be expected to share financial information about its operation as an income-generating property.
Before receiving any private financial information, a buyer should be willing to sign a Non-Disclosure Agreement (NDA), sometimes called a Confidentiality Agreement (CA).
This is important because if they share this information with others and the sale doesn’t go through it could put you in a difficult position. You could lose tenants, and you could suffer financially.
An NDA establishes your rights if the confidentiality is breached, and your remedies. The buyer should be responsible for their employees or agents honoring the agreement. They can’t be allowed to share confidential information with anyone without your express written permission.
If there is information about your property that is public knowledge, such as tax records, that will not be covered by an NDA.
Always have an attorney prepare this document.
Commercial real estate sales usually involve a specially prepared contract, not a pre-printed form. These are written by attorneys and revised by them through the negotiation process.
Letters of Intent (LOI) are commonly used in the commercial real estate world to make an offer before going to the expense of a contract.
An LOI makes sure that the buyer and seller are in agreement on the basic terms of the purchase.
It will include the buyer and seller’s legal names as they will appear on the contract. Properties like this are often owned by a legal entity that hasn’t been created yet. If that’s the case, the buyer will be allowed to assign the contract.
The LOI will show:
- the purchase price
- the amount of earnest money
- the length of the inspection period
- how long after the inspection period the closing will be held
- required diligence documents and how long the parties have to provide them
- responsibility for closing costs
- any contingencies such as re-zoning or financing.
To make sure that the buyer doesn’t use your deal in negotiations with other property sellers, you should:
- Include an expiration date of 7 — 10 days
- Make the terms of the LOI confidential.
An LOI will state that it is the intent of the signers to create a contract that is based on the terms of the LOI. The LOI is non-binding, but professional investors should honor the deal once they have signed it.
The negotiating process involves offers and counteroffers from the two parties. One reason to use an LOI is that having these counteroffers in writing helps with clarity and prevents misunderstandings.
When making a counteroffer, send a marked-up version with your changes along with a signed clean version that incorporates the changes. If the buyer agrees to the changes, they can sign your counter and you’re on your way to a contract.
If a contract is used for these negotiations, once an offer is countered, the original offer is rejected and you’re starting over. The buyer can walk away. There is no advantage to using a contract, and an LOI is easier and less expensive.
Although an LOI is non-binding, reputable investors don’t start that process unless they expect to complete it if the terms are satisfactory.
The LOI expiration date that we mentioned will help to keep the negotiations going forward. This will help keep you from wasting time with a deal that isn’t going to pan out.
Inspections and Due Diligence
Any prudent investor will need enough time to look over the property and verify their assumptions before being committed to close on the purchase.
The LOI and contract will specify the length of time for an Inspection Period, sometimes called the Diligence Period.
Smaller properties shouldn’t require more than about 90 days for inspections. Larger properties and more detailed transactions may need up to 120 days, possibly more.
The effective date of the contract, the day it has been signed by both buyer and seller, is the beginning of the Inspection Period.
Remember, most contracts will allow the buyer to terminate the contract for any or no reason during the Inspection Period. You don’t want to allow a period that is longer than necessary.
During this time the buyer will schedule visits to the property by inspectors and appraisers. They will also go over all the diligence documents you provided, including financials, studies, and reports.
Contingencies should have to be satisfied by the end of the Inspection Period. You’ll either be notified in writing that the contingencies are waived or that they can’t be satisfied and the contract is terminated. If you haven’t received notification by the end of the Inspection Period, they should be considered waived and the buyer obligated to close.
A knowledgeable buyer will insert language that allows for extensions of the Inspection Period just in case. You should try to require that they pay additional earnest money for each 30-day extension. Sometimes you can make those funds non-refundable but credited to the purchase price.
Signing the Contract
A commercial Purchase and Sale Agreement, the contract, is a complicated legal document. It goes into great detail about the obligations and rights of the buyer and seller.
It specifies what is being conveyed to the buyer, the type of deed to be used, and if any other items are included. This could be equipment, vehicles, contracts, or leases.
The contract will include exhibits such as the legal description of the property, surveys, and location maps.
All commercial purchase and sale agreements should be prepared by an attorney. The attorneys for each party will make changes to the document as various items are negotiated by them. If your attorney wants to start the process with their lease form, make sure you require that in the LOI.
When everyone is satisfied, the buyer and seller sign the agreement. That becomes the effective date.
Diligence documents will have to be delivered to the buyer within a few days after the effective date. You’ll want to prepare them in advance to be ready.
The earnest money will also have to be delivered to your attorney within a few days. And, the inspection period will start on that date.
If you have any loans on the property, your lender will need to provide the loan payoff amount. This is the total amount that is owed on the loan on the day of closing.
That includes the principal balance, interest owed as of the closing date, and any remaining bank charges.
Your attorney will get the loan payoff for you. Once the lender receives payment in full, they will release their lien on the property and you can convey clear title to the new owner.
It’s normal for commercial property buyers to leverage their funds with a loan. This is especially true when interest rates are low. If that is the case, there will almost certainly be a financing contingency in the contract.
Loan approval will depend on an appraisal of the property and underwriting of the financial strength of the borrower. If the warehouse is an income-generating property that is leased to others, the financials provided by you will also be reviewed.
You can help make that process go more smoothly by having complete financial records ready for the buyer.
When a real estate contract is signed, the buyer is expected to place some funds with the seller’s attorney or escrow agent as a sign of their serious intent to buy the property. This is called the Earnest Money.
In most markets, the minimum amount of Earnest Money that’s expected is 1% of the purchase price, but the seller can negotiate more.
If the buyer terminates the contract during the Inspection Period, most contracts allow for the Earnest Money to be refunded. If the Inspection Period expires without the contract being terminated, as long as the seller performs as agreed the Earnest Money is not refundable.
The Closing of the Sale
The closing of the sale of real estate is referred to as an escrow process. This means that a third party, not the buyer or seller, takes possession of the funds required and releases them when certain conditions are met.
Each state sets the rules for escrow agents, sometimes called title agents. They may be attorneys, title companies, or even properly licensed notaries. In some states, an escrow agreement must be completed between the parties.
Before the funds can be released, all aspects of the transaction have to be completed. In some states that includes recording the new deed.
A title search must be performed to make sure that a clear title can be passed on to the buyer. This includes searching for any liens placed on the property. Every property owner should want title insurance on all property they buy. If there is a lender, they will require a lender’s title policy.
Buyers who borrow money for their purchase will have to sign loan documents prepared by their lender. The seller will sign documents such as a deed that convey or pass on the property to the buyer.
When the seller or the buyer is a legal entity, a corporate borrowing resolution or board resolution is needed. These resolutions state who is allowed to sign legal documents on behalf of that entity.
If there are loans on the property being sold, those lenders will have to be paid in full and their liens released before funds are distributed to anyone else. Once all documentation has been properly signed and liens satisfied, the funds can be dispersed.
Fees, commissions, and invoices for people who were involved in the transaction like surveyors or brokers are paid by the escrow agent. The remaining funds are paid to the seller.
The financial details of the closing are contained in a settlement statement. This is like a ledger sheet showing credits and debits that occurred during the transaction. ALTA Settlement Statements are used for commercial real estate sales.
Closing costs can be anything that is required in the purchase and sale of real estate that are paid at the closing.
Closing costs can include:
- Brokerage commissions.
- Legal Fees — deed preparation, title search, performing as escrow agent.
- Insurance — title insurance, general insurance (if premiums are paid at closing).
- Studies — environmental Phase I reports.
- Reports — Geotech or engineering reports.
- Negotiated repairs (if they are paid at closing they may be considered closing costs).
- Loan fees — origination fees, appraisal fees, discount points, interim interest, tax, and insurance escrows.
The buyer and seller will each pay property tax for the time they owned the property during the year (pro-rata portion).
When the tax bill has already gone out, the buyer and seller each pay their pro-rata portion and the escrow agent pays the taxes. If the bill hasn’t gone out yet, the seller’s pro-rata portion is taken out of their proceeds and credited to the buyer.
The majority of a seller’s closing costs come from commissions. If a listing broker was used, the seller’s costs can be anywhere from 7% to 10% or more. Other closing costs may be as little as 1% of the purchase price.
If a warehouse owner is having trouble with their property, it may be difficult for them to come up with the funds to close. If that’s your situation, you should think about selling your property through WarehouseCashin. Your costs will be calculated in your cash offer and you won’t have out-of-pocket closing costs.
How to Sell Your Warehouse Fast
You have to be prepared to devote a lot of your time to the sale of a commercial property. If you are leasing your warehouse to a tenant, selling can be even more complicated.
If your buyer is using a loan to buy the property, as most of them do, it will add more time to an already slow procedure.
When you need to avoid the time and stress of selling your warehouse property, WarehouseCashin can help.
When you request a cash offer from us, your property will be reviewed by our qualified network of experienced partner warehouse investors. We buy warehouses ourselves as well.
WarehouseCashin is a unique online marketplace that brings motivated sellers together with active warehouse property buyers. The result is a fast all-cash sale of your real estate.
The list of commercial real estate investors at WarehouseCashin has been thoroughly vetted to provide you with reliable buyers who can close quickly. Our professional staff knows what to ask and where to look for buyers that you probably would have missed.
Submit the no-obligation Cash Offer Request Form here on the site to sell your warehouse for cash. Our buyers are looking for properties just like yours. Small flex space, big distribution centers, and everything in between.
Old fashioned marketing techniques won’t bring you real all-cash offers right away like WarehouseCashin. Find the solution for the fast, all-cash sale that you need at WarehouseCashin.