Sell by industry · Real estate
Selling your real estate business
How property management, home inspection, brokerage, title, and appraisal businesses are bought, and what the buyers pay for.
A real estate business is sold on the contracts and relationships that outlast the owner. Buyers read the same list every time: the management agreements and whether they can be assigned, the doors that stay, the referring agents and how widely they are spread, the licences, and the trust accounts. Part of the price is often held against the doors retained over a set window, and the money in the trust accounts stays with the clients.
What buyers pay for
In real estate, buyers pay a premium for a few things and discount the rest
Every offer is built from the same ledger. One column is what moves a real estate business up the range. The other is what a buyer finds in diligence and takes off the price.
Priced up
- Management agreements that can be assigned without the owner's consent
- Doors that stay through the sale, with no one owner holding a large share of them
- Referrals spread across many agents, with no top five above 35 percent of revenue
- Trust accounts reconciled three ways every month, and every licence current
Priced down
- Agreements that transfer only with each owner's consent, so the close waits on a consent round
- Doors leaving in the last year, or one owner who could take a large share with them
- Referrals concentrated in a few agents, which a buyer answers with an earn-out
- Trust reconciliations a buyer cannot see monthly and three ways, or a licence that is not in order
Who is across the table
The buyers who show up for a real estate business, in the order they usually do
Five kinds of buyer exist in every sector. Real estate draws some of them more than others, and each one reads your business a different way. A competitive process puts more than one of them at the table, so the terms are set by competition.
Private equity platform
A sponsor-backed roll-up in residential, association, or commercial management, or a franchise system in inspection, two of the four named ones owned by private equity. Buys the entity where it can, and holds part of the price against the doors that stay.
- Wants
- A durable business to build on with add-on acquisitions.
- Pays
- A market multiple, with rollover equity for a second exit.
Strategic acquirer
A larger regional manager, a brokerage, or a proptech firm adding your doors or your market. Pays for the contracts and the people that transfer.
- Wants
- Your customers, product, or territory added to theirs.
- Pays
- Often the highest price when the fit is real, with synergies priced in.
Private equity add-on
A roll-up platform's manager or inspection brand already in your market, adding your doors or your inspectors. Part of the price is often earned out against referrals or doors retained.
- Wants
- A bolt-on to a company they already own.
- Pays
- A multiple close to the platform's, with faster diligence.
Individual or search fund
A search funder buying a small firm, or a regional operator of 10 to 40 inspectors buying with an SBA 7(a) loan and a seller note. The buyer the research names for a firm of a few people.
- Wants
- A business to run themselves.
- Pays
- Bank-financed prices with seller notes common.
How the sale runs
Four phases, and what diligence reads first in real estate
Selling a real estate business follows the same path as every FNDRS sale: the Go-To-Market Analysis, then four phases, prepare, market, select, and close. What changes in real estate is what the buyer's diligence reaches for first.
Diligence reads first
- Every management agreement's assignment and termination clause, and which need an owner's consent
- Doors leaving over the last year, and the share held by any one owner
- Monthly three-way reconciliations of the trust accounts, and 24 months of referrals ranked by agent
- Every inspector's state licence, and for a title agency its age, margins, and employee tenure
- Before the saleThe Go-To-Market AnalysisA buyer's read of the business, with your CPA in the room
- Phase oneGo-to-market preparationThe financials and the materials a buyer will read
- Phase twoMarket launch and offersBuyers under NDA, and the offers by one date
- Phase threeMeetings and final selectionThe shortlist, the counter-offers, one letter of intent
- Phase fourDiligence and closeThe buyer checks everything, and the money moves
The terms
The deal terms a real estate business is most likely to see
The headline number is one line of a term sheet. These are the terms that come up most often when a real estate business is sold, what each one means, and how it tends to be used in real estate.
- Earn-out
Part of the price paid later, if the business hits agreed targets after close.
In real estate. Tied to the doors retained over a set window after close, or to referrals that stay when a few agents send most of the work.
- Escrow and holdback
Part of the price held back for a period to cover claims under the purchase agreement.
In real estate. Part of the price held back against the doors that leave in the window, released once the count holds.
- Working capital peg
The normal level of working capital the buyer expects to be left in the business at close.
In real estate. Trust accounts hold client money and never transfer, so they sit outside the peg.
What owners are told
Three things owners in real estate hear, and what buyers actually do
Each one is common enough to have cost a founder money. Open a row for the correction.
Every contract comes with the business when I sell.
FactIn an asset sale each management agreement is assigned one by one, and some transfer only with the owner's consent. That consent round is why larger buyers prefer to buy the entity.
The money in the trust accounts is part of the price.
FactIt belongs to the clients. Trust accounts never transfer, and a buyer asks for monthly three-way reconciliations to see that they have been kept that way.
My referral relationships transfer with the brand.
FactAn inspection buyer ranks 24 months of referrals by agent, and a top five with a large share of revenue draws an earn-out, because the buyer is paying for the relationships that stay, not the name on the truck.
Real estate
Real estate owners on working with FNDRS
Short testimonials from owners who went through the FNDRS process. Most are under two minutes.
No founder in this industry is on film yet. The first testimonial goes here once it is filmed; until then, every founder we have filmed is one link away.
Not ready to sell yet
Scale the real estate business first, then sell it for more
The valuation playbook for real estate reads the same market from the other side: the value gap in numbers, the element buyers weigh first, and the order of work that closes the gap before you go to market.
Selling a real estate business? Start with a conversation
The playbook gives the range. The deal team gives the number, the buyers who will show up, and the terms to expect.