What are the 5 Key Steps to Hiring a Commercial Real Estate Broker?
Hiring a Commercial Real Estate Broker… what do they do? Are you a Landlord who needs to lease or sell property that you own? Perhaps you’re a tenant looking to find a new location. Regardless, hiring a professional is half the battle of successfully navigating the real estate waters when you’re in the trenches of commercial real estate. But just what are the steps to hiring a commercial real estate broker? Below, we’ll help you with the details to look for when hiring a real estate broker who specializes in commercial properties.
1. What Are Your Specific Needs?
Depending on what you specifically need, you may be looking for unique commercial real estate broker talents. Do you have office or warehouse space that you’re working with? Retail leasing space? Something different? You’ll definitely want to make sure you’re hiring an expert who specializes in the type of commercial real estate you are working with. Different commercial brokers handle different commercial needs. You’ll find brokers and agents representing office, industrial, retail, land and investment. From here, they will also be broken down into tenant versus landlord representations. It’s imperative to hire an agent who specializes in the type of property you seek, or are trying to list.
As TheBrokerList.com says, this means that working with someone who “sells houses most of the time” and “is getting into commercial real estate” may not be the best fit. This type of agent may not be able to provide the value that you need. There may be an exception in smaller markets where there isn’t enough supply to warrant a specific retail specialist. But for the most part, choose someone who has the credentials for success.
Since you are more than likely working in a specific location, you’ll also want to make sure that your broker has positive location specialization in that area. This allows an agent to really know what is going on in a specific market. They know where the deals are, who landlords are, and have a good handle on the different negotiation styles in the area. These types of brokers are going to know when leases in the area are expiring and will already be aware of the characteristics of the spaces that are available in the area.
2. What is the Agent’s Level Of Experience?
Now you know what you need to focus on for the transaction to be successful in your commercial real estate area. Next, you’ll want to find a good commercial broker skilled in the specialty you need. First, look at their designations. These are earned from a combination of master’s degree level continuing education, along with work experience. A broker must have worked in the industry and completed a number of transactions and passed tests before receiving these designations. Commercial real estate can be a easy to get into, given the potential upside, low barrier to entry and flexible hours.
So you may come across some agents who are older, yet rookies. It’s also a popular part-time business, so make sure you find out how many projects an agent has actually been involved in throughout their career. This is where looking at the type of education they’ve received sets commercial brokers apart from their peers.
It’s also wise to look for a team of brokers to work with, rather than just an individual. Why? Because it will be the most productive way to leverage your results. Two people with different levels of expertise on the same team can contact twice as many prospects for you. While you may not need a large, international brokerage house, working with a firm can give you a broader reach and multiple resources than an individual. You want to make sure that you are not hiring someone who is new to the game and isn’t proficient in finding and evaluating space and a commercial lease review!
3. Interview, Interview, Interview
Make sure you interview the brokers you are looking into, like you would any other job candidate! Make sure you are hiring someone that you can hold accountable, as well, so think twice before hiring that long-time friend who says they do “commercial real estate”. You don’t want to find yourself in an uncomfortable situation when you’re not getting the results you want! You will also want to make sure you’re asking for specifics during the interview. Find out what has been their most challenging transaction. Why? Do they have a competitive property? Where? You will want to learn about their process and see how they would market your property. Have they been successful with these types of situations in the past and how long did it take?
Make sure you are getting specific examples and ask questions that you won’t want to be surprised with the answer down the road. Things like the length of the listing term and what fees they charge. Don’t be afraid to talk dollars! Ask questions about how they saved clients money other than in rent. And what are the top clauses to negotiate a lease, other than the rent?
This is the time when an agent will want to showcase their attention to detail, so make sure their strengths line up with what you need accomplished. You’ll also want to ask about what databases their firm or brokerage house subscribe to. Do they have other services in-house that can easily be pulled into your project, should the need arise? Make sure you ask the right questions and follow up with any references that you are given. It can save you lots of headache and money down the road!
4. Trust and “Likeability”
While it’s definitely not imperative to necessarily like your commercial real estate broker, it sure will make the process more enjoyable! It may also work to your advantage when it’s time to get down and dirty in negotiations with tenants or landlords. Having a likable agent will help keep the process moving smooth on both sides. Just make sure they are firm, but fair! Trust, on the other hand, is imperative. Let’s face it, commercial real estate can be an extremely “big ticket item.”
Do you trust that your agent will present the best options to you that work for YOUR situation, when they could be staring at a big commission if you were steered into a different direction from them? It can be hard to figure out who to trust when you’re interviewing different agents. Everyone puts their best foot forward in these situations. But you need to pay attention to see who appears to be the most genuine during the follow-up stage. You’re working to pick the right agent and you’ll need to sense who is being the most sincere to help you out in YOUR specific situation, not what would be best for them!
5. Conflicts of Interest
One of the most obvious ways a commercial broker could have a potential conflict of interest is if they represent a number of landlords in an immediate area. Believe it or not, they may even own competing properties! How could they potentially serve your needs when they’ve already promised other landlords in the area that they will fill their vacancies? And get the highest rental rates possible? Only you know how much this matters to you. You may also want to find out if they have other clients similar to you, who would also potentially be interested in the spaces you may be interested in. How would they handle this?
This also ties into the trust factor, discussed in the previous point. If there are buildings that pay a higher commission than other buildings, are they going to be up-front and tell you about this? Would they reject the bonus commission? This may be more important to some than others. It’s worth thinking about as you are choosing your commercial real estate broker. Make sure to hire someone who specializes in the type of transaction you are looking to handle. Good luck with hiring a commercial real estate broker!