How to Sell Auto Repair Shop

Question

Help fellow BPers!

Here is my situation: my father is trying to retire and owns an auto repair shop in Madison, Wisconsin free and clear. It is about an acre in a high traffic area and would be a great place for condos/retail stores.

I'm not sure who pays for an environmental study, does that need to be done (or should it be done) prior to listing, or will the buyer do that during inspection?

Does anyone else have experience buying/selling auto body or repair shops? Any additional considerations you can point out would be SO helpful.

Thanks for the help!

Harry

Michael Hall · Answer

Harry,

You have some good advice here from a variety of people. I believe you are correct in that the value for this property is in the land/building not in the business your father has been operating. The two main items to understand is the zoning as well as the environmental condition of the property. Particularly with old service stations / C-stores, there is concern over Underground Storage Tanks (UST) I would do some preliminary research on your site on the state database of Storage Tanks  (https://mydatcp.wi.gov/Home/ServiceDetails/4a17152...)  and see where you are. As a condition of closing most buyers will require that those tanks are removed and the site is eligible for participation in some sort of brownfield/UST remediation fund and liability protection. Starting the conversation with a commercial broker knowledgable about these types of properties will be a good place to begin, but I would seek outside counsel from an environmental firm to better understand the property you are marketing/developing so that you can adjust price expectations accordingly.

Maria Garcia · Answer

Here are some of the aspects:

• Be prepared to cost-justify
• Know your customers' buying habits
• Have the right tools available
• Emphasize the benefits
• Let the customer know you have great news
• Use an assumptive close
• Schedule the next appointment
• Never put money ahead of people

Joel Owens · Answer

Harry if that's the case the amount of money paid goes down. If environmental cleanup has to be performed and a building torn down that has asbestos etc. then it costs much more to in costs to clear the land to a useable state again.

The dirt is the value here and you need a commercial land broker.

Steve Magdziak · Answer

Have you checked to make sure the city has zoned your land as residential? It might only be zoned for commercial/auto etc.

You or the buyer would have to get it re-zoned.

Harry Asnien · Answer

Thanks Everyone! Unfortunately I don't think there is a business value since it's owner run and has slowed down a lot over the last several years.

Sounds like a discussion with a commercial real estate agent is in order.

Fred Sams · Answer

Check out the Commercial Edition of the ScotsmanGuide. There are many business

brokers in that niche area in the Lender search area. Good Luck!

Joel Owens · Answer

The buyers will not generally believe your phase one and will want their own. Buyers are suspect of inspection reports from a "buddy" of the seller.

They want these reports completed with absolutely no ties to the seller and that includes a survey.

There is business brokerage and sale of the business only and then a hybrid of the business and the real estate.

With the business you first have to determine if it's a saleable asset or not?? What I mean is if you take your dad out of the picture are their any sales?? Has their been increasing sales year over year and a repeat customer base or has things been declining??

You have to figure out if the dirt has more value than the business to see which way extracts the most money.

Business brokers do not necessarily understand the dirt value so make sure whoever you are using knows both sides of it. The business being owner operator or does it have management in place and profits nicely being hands off??

Expect if you sell the business a typical deal is to sell at 2 times multiple of net profit before taxes. So if it makes 100k profit then a buyer wants to pay 200,000 for it and put half down etc.

Troy Fisher · Answer

... argh.  So that you can get the right price.  To answer your question the buyers are going to get the environmental phase 1 done if they want insurance on the property.  But it may not be a bad idea to do it yourself so you know what is going to be in the report.

Troy Fisher · Answer

I would suggest that you talk to a business broker, to see if they can sell the business.  Your dad sells the business and then collects rents for the next 20years, is a win/win.  Or he should sell them separately.  Try to sell the business and then try to sell the property.

Either way, the best way to go about it is to use a professional so