Every month we feature a CRE Expert who answers some questions about topics related to commercial real estate. This month our very own President of Lighthouse Commercial Real Estate, David N. Haug, discusses the importance of hiring a reputable and respected real estate agent.
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“Never trust a real estate agent, they will screw you over the first chance they get.”
“I can’t believe what a scumbag my agent was.”
Have you ever heard any of these statements from friends who have had a bad experience working with a real estate agent? I’ve certainly heard all of them and much, much more, even worse statements not fit to print. You know what the worst part of these statements is? THEY ARE TRUE.
The reason that many real estate agents, and the industry in general, has a less than positive reputation is that all too often people live through these horrible experiences when seeking a new location for their business, selling a commercial property, or when searching for or selling their home.
The cold hard truth is that not all agents are equal, far from it. There are many good real estate agents in the industry. You should do everything humanly possible to find those good agents and once you do, stick with them.
A good agent is one who will always put your best interests first in all they do. When you interview an agent ask questions where you are trying to discover how they will think when you are not in their presence. If you have a gut feeling that they do not really care about your best interests, trust that feeling, and quickly move along to your next prospective agent.
Another VERY important thing to understand with real estate is this simple fact. “If you have not signed a written agency agreement with an agent and their broker, they DO NOT work for you. They are working for the other side.” Only an agent you are under contract with has an obligation to tell you everything you need to know to make the most informed decisions. In commercial real estate this can mean the life or death of your business.
Have you ever had someone say they can show you spaces for your business but they never push for an agency agreement?
“I am happy to show you the space for FREE, the listing agent will pay my commission.”
All too often, a business owner thinks he/she will keep their options open by not being obligated to one agent or another. They can look all they want and never be contractually obligated to anyone, and thus “save money.”
Don’t be fooled.
Here is a real world example that I experienced this week.
I have an agency agreement with a retail strip center owner. The owner is my client.
A tenant representative brought two different coffee shops through to look at the space available. This agent does not have an agency agreement with either coffee shop business owner. In this scenario, the tenant rep is not obligated to either coffee shop owner, he is technically working for me as a subagent (seller’s agent) and not for the coffee shop owners. If he had been working for the coffee shop owners, how could he possibly work for both if they both want the same space? How would he decide which coffee shop owner gets the deal?
And that’s not the half of it. What really grabbed my stomach and twisted it in a knot was when this agent said to me, “I know another coffee shop is going in across the street, but don’t worry, I haven’t told either one of them about that.”
How would you feel if you signed a lease, invested tens of thousands of dollars into a new coffee shop location, and then watched in horror as a new coffee shop opened across the street right before you did? Having signed a lease, you would be obligated to follow through, even though half of your projected revenue just went out the drive through window.
The crazy thing is, this agent did not have an agency relationship with either coffee shop. He didn’t have to say a thing about the competition they would be faced with.
The next time you think about saving money and keeping your options open, realize the true cost might be more than you can imagine. Find a good agent and stick with them through thick and thin.
A good agent will ALWAYS look out for your best interests.