Theory vs. Facts

While I was at a building inspection yesterday, I took a call from an appraiser (always help the appraisers) who was asking about a sale we closed a few weeks ago in North Seattle at a 5.95 CAP. He was trying to figure out why the CAP rate was “so low”. I asked him where he is seeing higher real CAP rates and he actually couldn’t give me any decent examples. In other words, rather than basing an opinion on facts he was, like so many people are today, basing his opinion on theory. The problem is that he is an appraiser.

We just brought to market for a seller a portfolio of five buildings in the Fremont and Maple Leaf neighborhoods. Within a week, three of the buildings are firmly under contract with buyers paying at or very, very near the asking prices and we are working through offers on the other two now.

These properties are selling because they are in good areas, in good condition, and being offered at reasonable prices. By reasonable I don’t mean the high CAP rates that many people think is necessary to sell today but rather a reasonable price relative to the specific properties. Not one of these is near and certainly not above a 6 CAP and all are in the neighborhood of an 11 GRM. Good properties are rarely for sale today which is why we have such strong interest. There is not a shortage of buyers but a shortage of good inventory priced reasonably.

When these five properties close escrow, I expect more calls from more incredulous appraisers wondering what the story behind these “unusual” sales is. Nothing but normal business will be my answer.

Good buildings get good buyers who get good loans, all through good brokers today.