Reprinted from the Kansas City Real Estate Examiner ... ME!
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Why you may have better results with a local agent than a big commercial real estate firm!
For many years BIG commercial real estate firms held a monopoly on commercial real estate, but technology and hard work are changing how things work. For many big real estate firms there was little competition from the local Realtor®. The local guy did not have access to the tools, information and forms used in commercial real estate.
With the advent of the Internet and with some hard work, many local real estate professionals have been able to make inroads into the market that was once dominated by only the BIG boys on the BLOCK!
There are many secrets in the commercial real estate field; contacts, under the table deals and restrictive marketing plans. But some have been able to crack the code of silence and much like a secret society, learn the handshakes and the ways of the elite.
So what advantage do you get from listing your commercial real estate with the big guys as opposed to your local real estate broker? Very little!
- Pocket Listings: A pocket listing is a listing that is not shared with other agents. Many large commercial real estate firms use this to get (both sides) of the deal. Selling out the interest of the client in hopes that they can cut a "sweetheart deal" with one of their personal contacts, keeping the entire commission for themselves.
This is a closely guarded secret in the commercial world, by not marketing the property they are willing to accept less for the listing than they would if they had to share the commission. The seller loses!
- Marketing: A good real estate agent will use every means at their disposal to market a listing directly to the client, even using social media, Facebook, Twitter even posting the listings to YouTube and Craigslist to attract buyers. Most Big commercial real estate firms not only don't use those services, many don't even use the local MLS, thereby limiting access to the information to only a select few, elite commercial brokers.
Sort of a way to keep it all in the family; you scratch my back-I'll scratch yours. By doing this they are forcing the buyer or commercial tenant to go through another elite broker to find the listings. Sites like Costar and Xcelligent are selective and only allow members to gain access. Many potential buyers are looking online and if they do not see your property listed they may never know of its availability.
You found this article by searching the Internet or perhaps through some means of social media that the author uses; that is how most buyers and renters find the property they are looking for.
- Loopnet.com: Loopnet has pioneered the way in granting access to buyers, tenants and sellers to find the property they are looking for, and to even market their own properties to the general public. While some big commercial firms will use Loopnet, they often use it sparingly and only if they think it will benefit them.
Loopnet does not require a membership to search most of their listings; Loopnet's listings come up in most search engines, and can be viewed by the general public.
- Accessibility: Most big commercial real estate firms post only limited information on their websites and make it hard for the average individual to find the details without giving up a lot of personal information.
- Registration of buyers: One of the latest trends by big commercial real estate firms is to register all interested parties before any information will be released to the client; thereby gaining access to personal information and contact information of the buyer who may want to remain anonymous until an offer is made.
- The Big Three: Loonet, CoStar and Excelligent are without a doubt the big three in commercial real estate search engines, without one or more of these your listing will not be seen by commercial real estate executives and agents.
While all three of these sites do have paid memberships, some are so cost prohibitive that only the really large companies can afford to be members. A little known secret is that any broker can add their listings to these sites for free, making them available to anyone who has access to the system.
- The MLS: While your local agent likely is a member of the MLS, most big commercial real estate firms don't even subscribe. Many are not even members of the local Association of Realtors and because of that they are exempt from many of the rules that force the rest of us to play nicely with others!
HUNGER: There is nothing that will glean results like an agents biggest listing, while most big commercial real estate firms are marketing billions of dollars of real estate at one time, your local agent will work his/her tail off for your million dollar account, because it is likely the largest account they have in their portfolio. If your million dollar account is a drop in the bucket to the Billions of property listed with the Big guys, you can bet it will be treated as such!
What to know before listing with a local real estate agent instead of the big guys:
- Market Knowledge: Do they know anything about commercial real estate, have they taken the time to take classes, get educated and learn the complex world of commercial real estate.
- Experience: Do they know what a CAP rate is? Do they know the difference between a gross lease and a net lease. Can they tell your prospective buyer what their internal rate of return will be, can they draw up a proforma and confidently market the property?
- Comps: Do they have the ability to do the research and pull comps to effectively evaluate the value of your investment. Can they provide you with hard data of similar property that has sold or is being marketed to base your sales price on.
- Terms: Commercial real estate is a whole new world, if your agent has spent the last 25 years selling pretty kitchens to soccer mom's they are likely not ready to try to hammer out the intricacies of a commercial lease with stop gaps, common area maintenance and annual increases tied to market fluctuations.
It's not rocket science though, there are several great courses available for real estate professionals to bone up on commercial real estate. The Institute of Real Estate Management, CCIM and some other organizations offer many courses and your local real estate school may offer some also.
With the coming changes in commercial real estate, there will be many more options for buyers and seller to choose from and as I pointed out in The Upside to commercial real estate in 2010 the market is making some significant changes.