Salvatore Salesperson was fairly new to the real estate profession. He may not have had a lot of experience, but he knew he was going to be successful – he was smart, he was personable, he had a wide circle of friends and acquaintances and he had ambition.
Salvatore had one client who was particularly busy buying and selling real estate. The client, Albert, liked to buy a property, fix it up quickly and then resell it – it was Albert’s hobby and a nice source of additional income. Once Albert found out Salvatore, who was the friend of a friend, was now in the real estate profession, he relied on Salvatore to not only find him suitable properties, but to sell them as well. It was a win/win for them both.
As Salvatore and Albert worked together, Salvatore came to know that Albert was not an easy man to work with. Albert was demanding and had high expectations. Salvatore learned that Albert started doing business with him not so much because they were acquaintances but because the previous REALTOR® he worked with had not lived up to Albert’s expectations. Salvatore enjoyed the business he did with Albert, so he was very careful to cover every detail in his dealings with Albert.
Before he started working with Salvatore, Albert had purchased a commercial property in an area that was undergoing gentrification. For the time being, Albert was simply renting out the premises to cover the mortgage costs, but he had visions of redeveloping the property to fit in with the neighbourhood to bring in higher rents or maybe even a really good sale price.
It wasn’t long after Salvatore and Albert started working together that Albert decided to sell the commercial property. He realized that his heart wasn’t really into working on it – he enjoyed redoing residential units but didn’t know enough about commercial properties to feel comfortable making changes.
Albert asked Salvatore to list the property for sale and Salvatore, of course, agreed. This was his first commercial building, but really, he thought, how different could it be from a residential property?
He proceeded to do a CMA (there really weren’t a lot of comparables) and looked at what Albert had paid for the building five years earlier. He then looked at how much property values for residential properties in the area had changed in the five years. Salvatore was smart; he knew a commercial building in an up-and-coming neighbourhood would be valuable – someone was going to turn it into a coffee shop or a gallery or bistro. After looking at the numbers a dozen times, Salvatore decided that if house prices had risen 25 per cent in the last five years in this neighbourhood, then surely a commercial building would see not only the same increase, but even more. He just wasn’t sure how much more.
After much deliberation, Salvatore decided that he couldn’t go wrong in pricing the building with the same percentage increase residential properties had seen over the last five years. If the price was too low, then there would be a bidding war (there were bidding wars for good commercial properties, weren’t there?) and Albert would be very happy with a higher amount. If it was too high … well, Salvatore wasn’t sure how to tell how much too high it was – there weren’t any other commercial buildings for sale in the immediate area. Salvatore also decided that he would market the property as a potential coffee shop/bistro or gallery, because the location was perfect. Taking a deep breath, he completed his opinion of value and went to see Albert.
It was only a few hours later that Salvatore found himself no longer partnering with Albert, who told him in no uncertain terms that his services were no longer required.
Where did Salvatore go wrong?