What do commercial real estate brokers and agents do? - by Edward Smith, Jr.

Edward Smith, Jr., Smith Commercial Real Estate

This column is offered to help educate agents new to commercial and investment brokerage and serve as a review of basics for existing practitioners.

Whether you are buying, leasing or selling commercial property you need a real estate agent who has been specifically trained in commercial and investment brokerage.

Agents are constantly monitoring local marketing conditions and activity; they have been working for you long before they even met you! Values are based on the market, requiring examination of comparable (prior) property transactions and your current competition (what is on the market) to determine the correct price for your property. For investment property they will need to do a complete financial analysis. Remember, the market determines the price, not the agent.

Most agents and brokers regularly attend educational courses and seminars to continually increase their skills and industry knowledge.

As part of the listing process agents will need to inspect the space and have an extensive interview with you to discuss your desires and the property features. Once your property is listed agents do extensive marketing by, creating flyers, brochures, and/or videos; which must then be distributed. Sending mailings, emails, and texts to their existing customers, the surrounding businesses in the area, and other commercial brokerages firms in the area offering to co-broke with them. Internet marketing today is essential, which requires them to subscribe to various commercial listing services. Sometimes print advertising may also be appropriate.

As interest builds for your property, they need to qualify potential buyers and tenants, do they have the money? An ongoing relationship with local banks is essential in order to guide potential buyers, as to typical mortgage terms, required down payments and the latest loan-to-value and debt service ratios being used.  Potential tenants often need to be guided through the process of “wanting the space” to creating a Letter of Intent (LOI), requiring agents to have knowledge of lease terms and issues.

Showings are next, which lead to offers to buy or lease your property. The negotiation phase follows where your agent will work for you, to get you the best deal possible. In a sale, the contract is only the beginning; brokers will be there for the property inspection, environmental testing, and the bank appraiser, doing what they can to assist in moving the deal forward. With leases they will work through all the issues to get an acceptable letter of intent; which should be sent to your attorney to draft a lease. When the lease is drawn, your broker will review it, to be sure all agreed issues are in it, nothing more or less. (This extra set of “eyes” can be very helpful to be sure nothing is missed or was misunderstood.)

These are the areas of knowledge, expertise and skills that commercial brokers/agents have. Brokers do all of this work upfront and only get paid when your property is sold or a lease is signed. 

Commission fees may seem like a lot of money, but your agent has been working for you long before you hired them, by developing their market knowledge and brokerage skills. There is an old adage: “You get what you pay for.” Beware of discount brokers.

Your broker/agent will look forward to working with you again in the future or even now; perhaps helping you find and buy another building, especially if you are doing a 1031 exchange. They will also be ready to assist you find a new tenant when you have a vacancy in your building.

Real estate agents and brokers may also be exclusively retained to assist buyers and tenants to find properties.

Edward Smith, Jr., CREI, ITI, CIC, GREEN, MICP, CNE, is a commercial real estate consultant, instructor and broker at Smith Commercial Real Estate, Sandy Hook, CT.