Determining Selling Price

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For those that currently are for sale, or have sold, how did you determine your asking price?  Obviously, some of it will be based on area averages, but I should think an established, successful business would go for more, but how much more?

I've seen adverts for consultations and for people with experience selling B&Bs.  Has anyone gone that route?  I'm afraid to even guess how much it would cost to fly someone here and have them give me an estimate of price.  Has anyone sold their own inn, without a realtor? I don't really want to go that route, but the commission is going to be outrageous, and I just cringe at losing that money. 

Any tips in my beginning stages are greatly appreciated.  I'm looking at the first of the year for putting it on the market.

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Well, I'm having a  couple of lunches with the seller/buyer of an Inn near me next week.  This was a unique sale in that the seller listed it himself (no realtor or consults), on a couple different "inns for sale" sites.  The buyer was halfway across the country, saw it, flew down one time and made an offer. UNHEARD OF!  So I thought I'd spring for lunch and pick at their brains, see what worked so well for them. 

I have made the decision to try a go at selling it myself, without a realtor's help, and see where it goes from there.  My BIL is a realtor and will help with questions, documents, listing on MLS, etc.  So I have the support for that, but  I dread the showings and the questions. I get pretty irritated with personal questions from my guests, and they're paying me!  So I need to start adding some layers and not let the questions get to me. 

I will be here a lot, asking for a lot of advice.  Still scared, but not unsure anymore.  I think the fear comes from not knowing what's next for me.  But I do know it's time. 

Madeleine's picture
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Make a little handout you can give to the lookers to fend off some of the questions. Number of rooms, general info about high season/low season, amenities, things to do in the area, a couple of pix to remember the place by (we looked at too many inns at once!), and the basic stuff you tell someone about a building they are buying: type of heat/cooling, sq ft, outbuildings, etc.

It also helps to let them know what you are NOT including with the sale. Or, pack it up now if that's possible.

We laugh about this but the PO's put on the list of improvements that they bought a couple of lawn chairs. What?! How about new furnace, new roof, new sinks and appliances! Well, no, they didn't do any of that. They bought lawn chairs and pictures to hang on the walls.

__________________

Everyday, for good or ill, we intersect with some else's story and become a part of it.

 

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Yes, I thought I'd use one of Vis ta Print's Group on specials they are always running ($17 for $70 worth of product) and make up some brochures.  I don't think this will stop the questions though. In addition to questions about the inn (which I don't mind), will be questions of me, and my personal life, and how long I did this, and what I like and don't like, and why I do things a certain way, and why didn't I ever host larger weddings, and why didn't I convert my storage room to another guest room, and doesn't it bother me having my quarters so close to the front door, and why am I now selling, and  on and on and on.  I can just hear it now, and if they are SERIOUS inquiries, I suppose that won't bother me too much either.  But really, how do you know if they're serious?  I can't ask for their prequalification letter the second they walk in the door, or give a little interview about why they want to buy a bed and breakfast.  This is the part I dread - people would not ask these questions of a realtor, but they will ask them of me. 

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05/22/2008

You need to put together a web site as well and address some of these issues.

You don't have to tell first time lookers all this stuff. And ...some of it is none of their business.

They will run things the way THEY WANT TO...not the way you do. So that is something else you have to remember. Don't put them in your place...they have their own ideas.  

Maybe you can have a friend be there to show the place sometimes. That way, they just get the literature, look at the website and get walked through like a realtor would do.

 IF they are REALLY SERIOUS, then the second or third time back, you can address those kinds of issues. I would not go there with people who just want to "have a look." Most people don't have a clue, and they don't even know if they can get a mortgage unless it is someone who REALLY wants to do this.

I love Maddie's non disclosure form signed as well before they set foot in the door. That will rule out some of the "curious."  Do not put a for sale sign in your front yard or you will be in for trouble. Everyone looking for it to be a free open to all...NOT!!!

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I also really like the non disclosure agreement, and found one on line that I can use.  I'm confused as to her comment regarding a statement from the bank -Maddie, are you referring to a prequalification letter, or is there something else I should be asking for?

Definitely no sign in the yard - will not be mentioning it to guests either.  I have never, in nine years, had anyone say to me "Do you know of a bed and breakfast for sale near by?"  ~ and it's not likely to happen now!  I don't plan to put it in the local paper either, because I don't want everybody and their brother asking me about it when I'm out and about (it's not a really small town, but it's small enough that this WOULD happen). 

Started some major de-cluttering today.  Oh my word...what we accumulate over the years.  All of it neatly tucked away in the kitchen, storage room, and my quarters.  It's nice to have this energy, and no doubts about what I'm doing though. 

Thanks all for your input, please keep it coming.  I have no significant other to bounce ideas off of, and family is helpful, but they can't understand this business and the things we deal with. ♥

 

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BananaE29 wrote:

I also really like the non disclosure agreement, and found one on line that I can use.  I'm confused as to her comment regarding a statement from the bank -Maddie, are you referring to a prequalification letter, or is there something else I should be asking for?

 

Yes, that's what I meant - a prequal.

Altho we did not actually have that when we were looking EVERY broker we talked to refused to show us anything without us revealing our assets to show we HAD money to even be looking. Some explained it better than others.

For you doing this by yourself you may want a list of questions nearby that you ask the looker on the phone. Kind of like an interview.

  • Why are you looking for a B&B?
  • What other business opportunities have you looked at?
  • Do you have any business experience?
  • Do you have a property to sell first?
  • Is your property for sale?
  • Have you taken any classes or gone to innkeeping seminars or conventions?
  • Are you working with a broker or buyer's agent?

A broker would be asking these things. The tricky bit is the looker is not going to want to reveal their hand. They are going to want to hold back a few hundred k for negotiating purposes. You, OTOH, are not gong ot want to deal with someone who doesn't even know what's involved!

And, biggie, because 95% of the lookers won't understand this - you'll need to teach them that they:

  • Must call only between 11 AM - 3 PM (or whatever hours work for you)
  • Must make an appointment to see the property and must let you know if their plans change

EN's idea of a website just for the sale is a good idea. You only need a couple of pages. And don't use the inn name in the info or the domain name. Also, hide the domain owner or someone will just figure out it's you. This is simply something you give to callers to look at.

BTW, we do get people asking about inns for sale. We've been trying to sell 2 places in town for years now. (Not saying that to scare you, just saying we do know people who are looking and who share the looking with us and then ask if we know of anything.)

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First thing you do for anyone wanting to come and look is to have them sign a non-disclosure statement. No signature, no info. If they want to come to look, they must provide you with a statement from their bank that they are prepared to buy. They're just looking, not ready yet, just seeing what's on the market? You send them, send them not give them at the door, the short info sheet.

If they grouse, explain you are running a business not an open house. If THEY want to run a business, they need to get exactly what goes into it. And part of that is using your time wisely.

So, you think you have the list of questions lookers will ask? Write down the answers you want to give, practice saying these things in the mirror so when you're asked the answer flows.

You really don't have to open up to these people. Why are you selling? You're ready for a change in your life. Time to see new vistas, meet new people, move to a new place. Why didn't you do bigger weddings? You love the feeling of a small wedding but, there are lots of opportunities to do much larger events for the person who likes that. Why didn't you convert the storage room? Hate to say it's obvious you need storage! Or, 'what a great idea! That would definitely bring in more income!'

You are, as I like to say, borrowing trouble. You're worried you won't sell and worried you will. You don't want to deal with the lookers but you don't want to pay someone to run interference for you.

Sit yourself down and write out a script. Here's what I'm willing to talk about, here's what I'm not. When lookers get too close tell them your private life is not up for discussion. (Me, I talk too much. It won't be a problem telling lookers anything. But only after they've been vetted!)

I'm sure lookers will ask why my bedroom is in the office and not in the official 'bedroom'. I like to sleep upstairs, they can do what they want. The PO's were scandalized when I said I was going to put the bed in the office. 'Oh no, the guests are right next door. You can't do that!' You do what you like with the space when you buy it.

I'm sure lookers will come thru here armed with ideas for everything they're going to do better than we are doing it. Yippee! Good for them! We did the same thing. Eye-wink

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'm sure lookers will come thru here armed with ideas for everything they're going to do better than we are doing it. Yippee! Good for them! We did the same thing

I sincerely HOPE those who come after me have better ideas and they turn out to be better. I want this business to continue.

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That's another thing I've put some thought into.  If someone comes along and offers to purchase as a home, no B&B, am I going to be willing to do that?  Obviously, their price will be less than the asking, but there's so much more to do if I go that route (selling furniture, etc).  But more importantly, I've poured my heart and soul into this place for ten years. I gave up a damn good income and stability and security and friends and a LIFE to do this.  I get great reviews, a fair amount of repeat guests, I do newsletters, and face book and twit ter and pin terest (although not much on there), trecently started a blog.  There is no deferred maintenance on this property, I have a good reputation in the community...I've worked damn hard to just walk away and not see it continue.  That would be really, really tough.

Maddie, those are all GREAT questions, and it SHOULD be like an interview for any prospective buyers.  They need to have done their homework before wasting mine, and their, time.

 

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BananaE29 wrote:

That's another thing I've put some thought into.  If someone comes along and offers to purchase as a home, no B&B, am I going to be willing to do that?  Obviously, their price will be less than the asking, but there's so much more to do if I go that route (selling furniture, etc).  But more importantly, I've poured my heart and soul into this place for ten years. I gave up a damn good income and stability and security and friends and a LIFE to do this.  I get great reviews, a fair amount of repeat guests, I do newsletters, and face book and twit ter and pin terest (although not much on there), trecently started a blog.  There is no deferred maintenance on this property, I have a good reputation in the community...I've worked damn hard to just walk away and not see it continue.  That would be really, really tough.

Maddie, those are all GREAT questions, and it SHOULD be like an interview for any prospective buyers.  They need to have done their homework before wasting mine, and their, time.

 

Here's DH's take on your issues - once it is sold you have no control over what happens. They could run the B&B into the ground in a year. You have to be ready to let go. I will liken it to giving someone a gift that they then do something stupid with. Once you've given it, it's theirs to do with what they want. Once you've sold, same thing.

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Agreed..but it is hard. I know owners who have tried to talk new owners into things and it just won't work. It is theirs, they paid for it, and they can do ANYTHING they want with it.  Walk away and count your $$$ Smiling

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If you want to sell it and someone wants it as a home. Only you can decide that. but Keep the price high enough. You of course need to prove what the business is worth...but ONLY to REAL prospective buyers. Not just "lookers."  Maybe offer to sell some of the furnishings to offset price difference. Some folks might be glad to have extra bedrooms already furnished. 

Here's an idea of a site. Not done well but you will get the idea. Having this kind of information out there can save you answering many questions. 

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05/22/2008

Hey it's worth a shot. You may be just as lucky. I forget where you are. Are things moving around there.  Remember you DO NOT have to divulge everything to "looky loos"  They need to put up some $$ before they can see your tax returns, occupancy etc.  You can show the place, have a generalized "handout" about occupancy, improvements made, marketing in place, that kind of thing. But unless they are TRULY serious..DON'T show them your finances. It is none of their business when they are just looking. 

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Banana, I just want to check that you're also aware of the capital gains tax you'll have to pay after you sell it as a business. You'll either have to re-invest in another business, do an exchange or pay the tax. It's a whopper on top of the sales commission.

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Oh yes, I'm aware Sad  My accountant has calculated it based on an estimated price.  Ridiculous, but what can you do?  Even if I held on to the house for two years as a primary residence (not using it for income producing), the taxes are outrageous. 

With commission and that tax, I'm looking at almost $60K out of my profit.  And that's IF I can sell it for anything close to what I'm thinking. It just makes me sick.

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the two year rule is out the window. Our accountant told us we will always be responsible to pay back what we got as being a business.

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Yes, unfortunately, I learned that this year.  It was still a valid rule three years ago, the last time I sat down and worked on numbers....but no more Sad

Breakfast Diva's picture
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I know the feeling! It just seems wrong, but nothing we can do about it.

Madeleine's picture
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What buyers are being told in this area is to not pay more than 5x what the inn's gross revenue is. They don't take into account if the property is sitting next to a landfill or the ocean. My property tax is based on an assessed value of more than 5x what I make.

Which is why we're not for sale. And why some absolutely gorgeous properties with decent income are being sold as private homes.

 

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05/22/2008

Well you could at least try to do it yourself as you start out and hope to get lucky. I think JB went that route. But you really do need a professional  or at least an attorney to help you with the legalities. This is not something you just do by yourself.  Sure it is going to cost some money, but better safe than sorry. Hopefully those with more experience with selling will chime in.

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