7 Questions to Ask a Commercial Real Estate Broker
Whether you are in the market to lease, purchase or sell property, the commercial real estate broker you choose to work with is crucial to the success of any transaction. However, finding the right one takes more than a lunch date to see if you’ll be comfortable working together—although that certainly is important, too. You need to ask pertinent questions in order to determine if a broker has the experience, knowledge and skill set necessary to best serve your interests and those of your company. Here are seven questions to help you make that determination.
Have you worked with companies like mine before?
No two companies are exactly alike, of course. But if a broker has worked with others that are similar in size and specialization to yours, then he or she will better be able to locate property that matches your needs. Many brokers focus on a particular sector of the market—retail, industrial or office. Look for one with expertise that is most beneficial to you.
Do you have time for my project?
Finding the right property and closing the deal for a client is time consuming. Brokers must search for the right space, work with listing agents, schedule property tours, deal with landlords, and negotiate contracts and so much more. All of this can stretch on for months. If you sense that a broker already has too much on his plate, then your project may not get the attention it deserves. Therefore, you should ask up front about the work they have currently and how they manage their time. Then you’ll be able to gauge whether or not they can properly commit to your project.
What do you think about market conditions?
You need to make certain that the broker you’re considering is knowledgeable about the particular market you are looking in. A good commercial real estate broker understands the local economy, can recognize signs indicating an upcoming change in market conditions and is able to project how those changes could influence business in the area.
If you are a tenant or landlord, a broker’s market knowledge can help during lease negotiations and ensure you receive terms that reflect current conditions. If you are a buyer, then you need a broker with in-depth knowledge of the locations where you’re considering property in order to pay a fair market price.
Do you have a conflict of interest if we work together?
If you’re a tenant, then there’s a distinct disadvantage to working with a broker that also represents the landlord of a building: that broker is contractually bound to securing the best deal possible for the landlord. This is a clear conflict of interest. You want a tenant rep that will be your partner and advocate on behalf of your best interest during lease negotiations and even after signing.
How do you get paid?
Brokers receive a commission for their services. For a purchase, the commission amount is a percentage of the sale price, which can vary depending on the market. With a lease transaction, the fee is a percentage of the total rent over the length of the lease. In almost all cases, the landlord or seller pays the brokers’ commission fees, which are built into the rental rate or sale price. Therefore, you won’t save money if you decide not to work with a broker. In fact, you just might end up on the losing end of a deal without the expertise and experience of a commercial real estate broker.
Can I speak to your references?
The short and quick answer to that question—without any hesitation— should be, “yes.” A broker will likely provide case studies of previous deals, however, nothing beats talking to people that have worked with your potential agent. If asking for references seems to make a broker uncomfortable or defensive, then be wary.
What happens if I don’t want to work with you anymore?
No one goes into a business relationship thinking this might not work out, but you should have a plan if that scenario occurs. You don’t want to get stuck with an unsatisfactory broker. Therefore, be sure to talk about how the relationship would disband if the broker were no longer a benefit to you and your company.
These seven questions are a good start when you’re trying to find a CRE broker. Of course, as you become more experienced, you’ll certainly have others that might be more specific to your needs. The answers you receive could make the difference between working with a good broker or a great one.