Posted: Thursday, January 12, 2023
Author: Troy Dana, Designated Broker | Licensed in WA, AK
For Sellers of remote Alaska properties, there may not be a better time to sell than now. Never before has Alaska captured the hearts and imaginations of so many from all around the world. Alaska offers spectacular vistas and geography, ubiquitous wildlife, and recreation opportunity unmatched anywhere in the world. Interest in Alaska is not limited to the United States, its truly global and visitors from all around the world will travel just to see massive grizzly bears eating salmon at Brooks Falls.
Sellers face many of the same challenges Buyers do and more, given current market conditions. Each Sellers motivation for disposition varies. However, there is a spectrum of Sellers, from those content with fair market value and others who really don’t care what fair market value is, they are only willing to sell if the price is comparable to a winning lottery ticket. Traditional methodologies for valuation on land or income properties can be comp sales, cost to replace, cap rates, EBITDA formulas, or in some cases, discount rates. Pricing Alaska property can be challenging because truly all Alaska properties are demonstrably unique, at this point the agent’s intuition and experience then become factors for valuation. Alaska sellers who place extraordinary value on what a Buyer may experience off the property can anticipate a longer sale cycle and likely valuation differences. “The best fishing/hunting” in Alaska is a very subjective selling point and occasionally may support the justification for an irrational value, but this is atypical and most sellers in this situation will likely become frustrated and even disappointed when the market simply does not see the property in the same light. Buyers for these types of offerings with the economic resources to fund a purchase from $1 - $20 million dollars for a remote Alaska property are generally savvy and understand the value of real estate. Virtually all these buyers will ask at some point in the sale cycle, “how did you arrive at the list price.” Sellers will want to have this discussion with their agent prior.
Having an agent on the seller’s team who can objectively and logically explain the offering and value to the buyer pool is a critical and key piece. Sellers whose objective is to place irrational value in hopes of finding an irrational buyer can, from time to time, be successful, but the seller may be in for a longer than normal sale cycle. Even in Alaska, it is rare that an offering truly rises to the level of a name-your-price “trophy” property and, conversely, a dictatorial marketing approach.
Property values are established by Buyers, not necessarily Sellers. The seller’s ability to capture over-the-top irrational value not supported by comps or income is directly proportionate to the seller and or seller’s agent’s ability to convey the story and de-risk the investment. For example, one of our Alaska property listings has had over 2,000 visitors, and our video has been watched over 45,000 times with nearly 3,000 inquiries, yet not a single offer. The value proposition is not compelling enough for Buyers. The Seller has also been unwilling to present a posture to the market that would help a Buyer de-risk the investment. Sellers often try to place value on what they believe the “potential” presents to a buyer. For example, if a Seller is looking for a value three times that of the market value because the seller believes a Buyer “may” build a lodge in the future or may mine some gold and make money, that seller will need to de-risk the deal for the buyer to realize that type of premium. Smart Buyers and Buyers Agents know not to fall into that trap unless the site is truly a one-of-a-kind iconic offering and the seller understands de-risking the investment. Valuing Alaska’s remote properties is as much intuition and experience as it is analytical and comp sales driven. Divesting this type of asset is no longer simply an ad and a handful of pictures. Sellers should prepare for a marketing and sale process anywhere from 6-24 months. Just like attorneys, not all real estate Brokers and Brokerages are the same. Sellers may want to interview several firms and agents before deciding which is the best fit for them. Lastly, Sellers, you get what you pay for! With a probability curve at or near 50%, the right brokerage not only can bring buyers, but they know how to cultivate equity.
Here are a few things you will want to consider as a seller for a remote Alaska property
Seller’s considerations when mulling a divesting event are the same as Buyers.