The Buyer is Almighty

Have you noticed how much harder it has become to get deals into the end zone? Have you had conversations with your peers about how things are going for them? I keep hearing from people that 2025 has been a brutal year. I have one response to that: if you continue to take the same actions, you will get the same results.

As I have discussed in previous articles, pricing seems to be adjusting to current market conditions. That should be leading to more transaction velocity but that doesn’t appear to be the case. Why is that? I have some theories.

1. Brokers still think they can price all assets the same. One Taco Bell property is the same as any other, right? Wrong. In fact, there are usually too many differences to count. A Taco Bell on the market in Los Angeles at a 50,000 car intersection is not the same thing as a Taco Bell in Indiana in a town with 50,000 people. They are not worth the same thing even if the site in Indiana has a stronger signature on the lease. Facts. Buyers are getting wise. Sellers take note.

2. The mass volume brokerage model isn’t going to work in this market. Gone are the days where you could list 25 KFCs for a franchisee and wait for the phone to ring and receive a flood of offers. Brokers did not need to understand the minute differences between each asset. They simply didn't care. They didn’t need to care. They didn’t read each lease, study each location, and stack rank each asset from best to worst and then price each one accordingly. If they did, they would have lost the listing to a broker that didn’t care about differentiation. Further reinforcing this was the uniformed purchasing decisions of buyers. If the buyers were showing up and paying the asking prices with no regard for detailed differentiation analysis, why would a broker spend the time digging in? 

3. When the market is going up (CAP Rates going down), the sellers get smarter faster than the buyers. When the market is going down (CAP Rates going up), the buyers get smarter faster than the sellers. I’ve seen this happen in both directions several times in my career and it holds true every time. Even though we are seeing some price discovery occurring, there is still a large percentage of the sell side that isn’t living in reality, and many brokers along with them. An overpriced listing isn’t a potential opportunity, it’s a waste of time. Buyers aren’t buying the BS. Don’t take my word for it. Look at the amount of inventory on the market.

4. The volatility of the markets has sellers believing that once things calm down, the market will rebound and we will be back to prior valuations. Jaded by past experience and lingering euphoria, they are relying on a false sense of hope that the market will again meet their lofty expectations. That's not going to happen anytime soon. This is the new normal and hope is not a strategy.

When I started my career in brokerage in January 1997, we were just coming out of a recession and there was still a hangover from the savings and loan crisis. Real estate was out of favor. Recency of total economic destruction in the industry weighed heavily on the minds of investors. It was not easy to sell deals. Initially, I mostly sold retail strip centers. We would underwrite these assets with 20% vacancy factors (even if the property was 95% occupied), deduct reserves for maintenance, leasing costs, and recapture loss from the NOI. These properties would then be priced at 10% - 10.75% CAP Rates on these adjusted NOIs. We couldn't give these assets away. It would take 9 - 12 months to sell each deal. We would get offers 20%+ below asking price from every bottom-feeder in the market. Crazy, right? Every one of the people that bought one of those properties made at least 5x - 7x on their money and had growing cash flow along the way. Some have made much, much more. It certainly paid to be a contrarian and buy real estate when the rest of the world was scared.

In order to actually sell a deal and get into the end zone we had to understand every last detail and nuance of each asset we sold. There were no brokers selling 65 deals across the country and knowing next to nothing about each property. That brokerage model simply did not exist. The market would have punished that practice. We visited and spent significant time at every property. We drove the trade areas. We interviewed tenants (discretely) and even spoke to tenants in neighboring properties. It was a full on boots-on-the-ground approach to brokerage.

The only way to get a deal done was to know absolutely everything. We had to know about every other property on the market. Up front, we focused on every possible objection that could arise and created strategies to turn those objections into selling points (objection → how to overcome). I would put together investment write-ups and submit them to my mentor (Joe Faris of KJF Partners) and he would drop the document back on my desk 20 minutes later marked up with a sea of comments in red ink. To this day, I can hear his voice saying “don’t tell me, show me.” What he was teaching me was that the property is unique in some way and that I hadn’t proven that to him yet. I will be forever grateful for his tutelage. I have told him this more than a few times.

This was tedious work and it required deep strategic thinking. Selling something nobody wants at the best price possible isn’t easy (ask any Acura salesman). We earned every penny we made.

The buyer ruled the day and we knew it. If you didn’t get that, you didn’t close deals. Period. We treated buyers with kid gloves.

The buyer rules the day today. If you don’t get that, you won’t close deals.

So how do you get a buyer to focus on and choose your property when he/she has more investment alternatives that he/she has had in the last 25 years? The answer is outlined in the paragraphs above. Simply put: work smarter, know more, be strategic.

My training in the industry conditioned me to never abandon the core basics I learned through selling in the toughest environment. Things certainly got easier when the days arrived where anything you put on the market would sell. Those times created a lot of bad habits and a disregard for first principles for many. Even worse, a lot of brokers came up during a time where they never learned these first principles at all. Would you want to hire that guy to sell your property in today’s market? I think not.

Those that adapt and understand that it’s time to get back to the basics will flourish. Those that continue to operate like they did 5 years ago will perish. It’s really that simple.

For now, there will be no more pushing buyers around. There will be no more “you need to sign a fully non-contingent PSA.” The buyer wants 30 days for due diligence and a loan contingency on your McDonald’s ground lease? The answer is yes or the buyer walks. Open your eyes and survey the landscape. Understand the options buyers have. Buyers are the big dogs on the block now.

For the time being, the buyer is the asset, not the property. Get used to it.

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