Wednesday, May 9, 2007

Buyer's Agents in Commercial Real Estate

When you're in the market for a new home one of the first things to do is contact a real estate agent in the area to see what houses are out there in your price range. This is pretty common and in fact Buyer's Agents are getting more and more popular every day. They have a simple agreement that is signed and you agree not to negotiate the purchase of any house without your "buyer's agent" being involved. It's pretty simple and makes a lot of sense. Why would you make one of the largest investments of your life without the help of an expert???

Why hasn't this idea caught on with respect to commercial real estate transactions? Not for nothing but if you're considering purchasing real estate for your business or even just considering leasing space, this investment may very well be even bigger than the purchase of your home. Why wouldn't your first call be to a commercial real estate agent when considering such a transaction???

There are several reasons to engage a professional to guide you through the process.

  1. A commercial real estate agent knows the market and it's his job to know real estate. You chose to enter into a different field so why pretend you're a real estate expert?
  2. You don't have time to run your business and be on the phone all day long calling on classified ads, searching the Internet, and driving around taking phone numbers off of signs. A buyer's agent can do all that in his sleep.
  3. The person selling the property that you want to buy has already hired a real estate professional to sell his building so right off the bat you're at a disadvantage. He has professional representation and you're on your own to figure out if you are getting a fair deal.
  4. It just makes sense...You wouldn't go into court without an attorney, you call a travel agent when you want to book a vacation (and if you don't use a travel agent because you think you're getting a better deal with an online travel site you're mistaken...but that's a story for another day) so don't go into a major commercial real estate transaction without having a real estate professional representing your interests.

The big question is how much is this representation going to cost? Generally speaking, this is a free service that is provided to the Buyer/Tenant. Now in some rare occasions a fee may be due. Let's say you are looking to buy a particular type of building and your requirement is very unique. Your Buyer's Agent locates a property that is advertised for sale by the owner and the owner is not willing to pay a commission. Let's say your Buyer's Agent is able to get the seller to reduce his price from $500,000 to $450,000; a savings of $50,000. A typical brokerage fee is around 6% so the Buyer's Agent would typically be entitled to half of that fee. In this case you would have to pay the Buyer's Agent a fee of $13,500.

The fact is, Rather than asking how much is the Buyer's Agent going to cost me, ask another question, "How much am I going to save by having a professional on my side? If a buyer's agent charges you $13,500 and his services result in a savings of $50,000 off the asking price then you just made $36,500.

What if his services resulted in a savings of $100,000? Would it then be worth the $13,500 you paid to have the professional representation?

Please also check out the Top 5 Reasons Not to Hire a Buyer's Agent


Anonymous said...

I just got a new site through real estate website design they told me it takes time to gain rankings or even be listed on the search engines. Is that true? Please advise.

Beland said...
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