Why Choose an Exclusive Broker?

 

In speaking with both residential and commercial brokers, each felt that their respective areas of expertise were more dynamic and profitable. It was interesting to hear the perception most residential agents ("Realtors®" if they are a member of the national association) heard of commercial brokers. Typically, they described commercial real estate as an unprotected free for all. They were used to working under some type of exclusive agreement, while most commercial brokers (particularly those representing tenants), practiced “Track shoe brokerage—finding the tenant and running with him. Although one may argue that there are advantages for the tenant working under this type of situation, the reality is an exclusive representation agreement or exclusive service agreement will always serve your interests best.

 

More brokers mean more properties. Until the late 80s, only residential agents had the advantage of computer databases such as the Multi Listing Services ("MLS"), which provided local area availabilities to all members. For the commercial broker, he/she had to go door to door to find out such information as lease termination, square footage, or building information. For that reason, most commercial brokers specialized in a specific type of product (e.g. office, industrial, retail) and mapped all products within a specific geographic area. However, in today's market, most metropolitan areas are served by either national database firms  (such as Co-Star) who provide local market information, or by one of many smaller local companies throughout the US.

 

The idea that having more brokers helping you locate a property means you will be able to find unknown space is a thing of the past. Most brokers use the same computer database, and they all have terminals at their desk. If it's there, any broker can find it. Finding the right space is the key.

 

What are the advantages of using one broker? If your broker is simply acting as a tour guide to show you the market, feel free to pick anyone. If you want your broker to have your interests in mind and not his agenda (remember that commission thing), the simple fact is that he needs to know he's working for you and that his efforts will be rewarded.

 

If your broker is under contract, he can "advertise" your requirement. Although 99% of the availabilities in larger markets are listed on the computer services, by advertising your requirement to the entire real estate community, he can focus more specifically on your requirement rather than generalizing. Remember—the job of a listing broker is to lease or sell his principal's property as quickly as possible at an acceptable rate or price. It a property were to receive your broker's inquiry, it would be in their best interest to go through every listing they had to see if there was a match. Shame on brokers who hold back information. Imagine what his principal would say, knowing you leased the space next door because his broker didn't respond to your broker's request. Without an agreement, no broker would expose his client. Why would he—so another broker can show you a space he already knows about?

Here’s a story that illustrates what we’re talking about. After spending several months planning a client's facility, locating the perfect space, negotiating a great deal, and even negotiating a more favorable lease, we got a call for the firm's VP. It seems the president got a call from a broker friend of his who heard they were in the market. Of course—the broker had heard from us when we called about another property he had listed. He convinced the president that they should be in a building fifteen miles out of their designated area that cost 25% more and was 50% larger! The premises were no secret—not only were they on every database, but we’d been looking at the very space for another client. The CFO was in a panic because of cost overruns. Employees were mad because they were too far from home. The only person who was happy was the broker, who was looking at a big commission. While the VP who signed the agreement understood what was going on, the President seemed stuck in the 60’s, thinking, “whichever broker shows me the space, I go with him." To him, a broker was just a tour guide—sad commentary.

 

The landlord knows whom he's working with. It wasn't uncommon years ago for landlords to get two or three proposals for the same tenant because that tenant chose to go the "open market route." Worse than that, offers that were not always authorized by the tenant often showed up on the landlord's desk. If the broker got a positive response, he would go to the tenant with a sales-pitch saying, "Look what I can get for you.” Dirty, but it often worked.

 

Your broker should become part of your management team. Should you have real estate questions throughout your tenancy, he should be there to help, and he should do so generally at no additional cost to you. It's called a relationship, just like you have with your clients. If you only hear from your broker on one form or another every five years, look for a new one.