Bargain Sales: A Creative Approach for Sellers

Actually, bargain sales don’t mean you’re losing money.

Trying to sell your commercial property without results? Many times, a traditional market approach doesn’t produce the desired result for the seller. The market demand may not be sufficient or the market may just be soft. A bargain sale approach may be the answer. Many of my clients have used this tax preferred, creative disposition strategy to successfully, and profitably, sell a property.

What is a Bargain Sale?

Bargain sales occur when a property is sold to a charitable organization for less than the fair market value. The bargain sale will result in a charitable gift for the buyer, and a charitable contribution income tax deduction for the seller. This is why a bargain sale approach could, for the right seller, generate a higher transaction value than a traditional sale approach.

The Ideal Candidate

Bargain sales aren’t the best approach for everyone. A good bargain seller must have a significant tax burden (net benefits can be easily determined by bargain sale experts). The property itself should be worth at least $500,000. In my experience, I have found this approach more appealing to sellers that have exhausted traditional sales approaches. Creative-minded sellers, on the other hand, may choose bargain selling as their first sales approach.

Advantages of Bargain Sales

One major advantage, in addition to a higher transaction value, is a short sales cycle – normally, 30 to 45 day close. Unlike a typical sales cycle, a seller may go from contract to close in a very short period of time. Knowledgeable bargain sale buyers are well-versed in this part of the tax code and how to take the sale over the finish line quickly.

Disadvantages of Bargain Sales

Despite this article’s simple breakdown, bargain sale programs are complex; thus, they can easily be misunderstood by a seller. Sellers may also be subject to a review by the IRS; however, when the process and details are handled correctly, there will be minimum exposure for adjustments.

Securing Your Own Bargain Sale

Bargain sales require knowledge and experience to be completed correctly. I recommend talking with someone that has successfully handled and closed bargain sales before. You are welcome to contact me, Douglas McCullough, for guidance, questions and to see if your property or your client’s property makes sense for a bargain sale.

Though bargain sales aren’t for everyone, some commercial property sellers will find that bargain sales are a creative way to sell a property for transaction values that just might be higher than a typical sales approach.