You probably wouldn’t choose an accountant, attorney, financial advisor or babysitter without going through at least a couple of interviews. So why do so many buyers, sellers, landlords, and tenants forego this essential process when it comes to choosing a commercial real estate broker?
Commercial real estate transactions involve hundreds of thousands, and many times millions, of dollars. Even if they don’t reach these levels—it’s still your money that is being invested and it’s important. The majority of these deals are likely to require specialized knowledge that helps guide the represented party through the market analysis, selection matrix, letter of intent, study (due diligence) period, and contractual terms to name a few. This is the base market knowledge and practical experience your broker should be providing in return for their compensation. But beyond these core competencies, what else should your broker provide and how do you know whom to select?
Five Key Considerations for Selecting a Broker
For buyers, sellers, landlords and tenants alike, commercial real estate transactions represent a significant investment of resources. Think of it this way; you wouldn’t want to go into court with an attorney randomly picked from the phone book or select an accountant because their website suggested they were good at math. Similarly, you don’t want to enter a transaction without first ensuring that your broker has the skills and experience necessary to represent you effectively. The best way to make this determination is to conduct an interview of several potential brokers.
When you’re choosing a broker, keep these five key considerations in mind:
- Market Knowledge
- Personality Fit
Experience isn’t simply judged by how long a broker’s been working in the field of commercial real estate. Rather, think of experience in terms of both depth and breadth of transactions and knowledge; a broker may have been in the business a long or short period of time, but they may have accumulated a volume of experience in a particular area that could be extremely valuable to your deal.
When considering expertise, seek out a broker who specializes in your property sector. Look to the broker’s portfolio to determine if most of their past work has been primarily in retail or industrial, office or multifamily. The Shenandoah Valley is a smaller market that doesn’t permit full specialization in one sector, but brokers do tend to gravitate (or be sought out) for their knowledge of one or more in the market. Different sectors require different sets of skills and tools, as well as access to timely information – not all commercial real estate transactions are the same.
When it comes to interests, remember that your broker should be representing yours. You always want to be well informed and aggressively advocated for—so don’t be afraid to ask for examples of past projects, current projects, and client referrals to decipher if this has been the experience of others. It is your broker’s responsibility to guide and assist you throughout the transaction, which often means sharing hard truths throughout the process, but especially when establishing a price and during negotiations. The process always goes a lot smoother if you believe you can trust your broker’s opinion and give it due consideration.
Without timely and comprehensive market knowledge, you are at a significant disadvantage. It’s important you have a broker that understands that commercial real estate is more a knowledge and information based business than a sales position. Verify the prospective broker’s understanding of the local market, sector trends, and pricing strategies. Everyone has (or should have) access to prospective properties, buyers, and tenets.
Lastly, it’s important to find a broker with a compatible personality. After all, you’ll be working closely with this person for months, if not years, at a time. Ideally, both you and the broker will treat the relationship as a long-term proposition. So why choose someone you can’t stand to be around? You don’t have to go on vacation together, but this should be someone you don’t dread a visit or phone call from.
The vetting process doesn’t end at the interview. Once you’ve selected a broker, work with them to develop a set of milestones to evaluate progress. Use periodic reviews and progress reports to track the project. A bit of due diligence during the commercial real estate broker selection process can save you time and effort, and over the long haul, which can translate into more money in your pocket. Investing time into the interview process will allow you to choose a broker that you feel comfortable working with, who will aggressively advocate for your interests, who possesses the specialized knowledge that adds value to the transaction, and who will work with you beyond the closing.
Download Considerations for the Interviewing a Commercial Real Estate Broker>>>
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- About Tim Reamer | Your Position Will Always Be Informed and Well Represented
Tim Reamer provides commercial real estate brokerage and consulting services with Cottonwood Commercial and specializes in investment property (multifamily | commercial | NNN), retail/restaurant site selection, and commercial buyer/tenant representation.SHARE