Here is what a lot of sellers think. “I bought this building a couple of years ago. I fixed it up. So now it must be worth this much.”

It doesn’t always work like that.

So how do you find the right price? Here is how I do it.

Why isn’t the price what you paid, plus what you put in?

Your price comes from the full picture. First, what are buildings like yours selling for now? Second, if your building has tenants, what does it earn?

What is a broker opinion of value?

A broker opinion of value is my written view of what your building is worth. Some people call it a BOV.

I make one for each seller. It has two main parts.

Part 1: What are buildings like yours selling for?

This is called the sales approach. It starts with comps. Comps is short for comparables. These are buildings like yours that sold not long ago.

First, I pull all the comps in your area. Sometimes I look in other cities, too, to find good matches.

I also have a good number of appraisal reports from different parts of Cleveland. An appraiser is a pro who judges what a building is worth. They write appraisal reports. I study the ones that fit your building best. Then I look at the details of each comp.

Part 2: What does your building earn?

This is called the income approach. I use it when your building has tenants.

First, I look at the income the building makes after its costs. Then I use a cap rate. A cap rate is a percent that buyers use to turn income into a price.

The cap rate has to fit your kind of building in your part of town. This is where the appraisal reports help, too.

Sometimes it’s not the number that the seller has in mind. It’s a full picture of everything.

In Kas’s words

What if the number is not what you hoped?

That happens. A seller’s number often comes from what they paid. Or from what they spent to fix it up.

But the full picture shows what buildings sell for in your area now. It also shows what your building earns.

What this means for you

Thinking of selling? Try these three steps:

1. Don’t set your price just on what you paid and what you put in.
2. Ask for a broker opinion of value with the most recent comps.
3. Have tenants? Ask how your income and the cap rate change the price.

My take

What you paid and what you spent are only part of the story. Look at the full picture before you set your price.

How I can help

I help owners in Lakewood and across the west side sell and lease their buildings. Read more Lakewood articles. Want to fill space instead? Read how a Lakewood landlord filled five small offices.

Want to know what your building is worth? Ask me for a broker opinion of value in the form below.