WHO IS A COMMERCIAL REAL ESTATE BROKER AND WHAT DO THEY DO?

Who is a Commercial Real Estate Broker?

A commercial real estate broker is a middleman between sellers and buyers of commercial real estate, who helps clients sell, lease, or purchase commercial real estate. A commercial real estate broker can work as an independent agent, an employer of commercial real estate agents, or a member of a commercial real estate brokerage firm.

A commercial real estate broker (also known as a commercial broker) is a professional who helps clients with purchasing, selling, or leasing commercial properties. They start off with the same license as residential real estate agents but gain on-the-job commercial real estate experience afterward. A commercial broker is similar to a commercial agent. However, the broker has the license to manage their own business and receive commissions directly from sellers and landlords. Commercial agents must work under the umbrella of a commercial real estate broker.

The job of a commercial real estate broker is challenging to get but can be very rewarding. With proper training, a successful broker will have the necessary expertise to help clients lease their buildings or find the best properties for their needs. The broker will also provide expert analysis of market conditions and financial factors and will be able to negotiate the best terms for the client. A broker will handle all the aspects of a lease or sale and will negotiate the best price possible.

 

How Commercial Real Estate Brokers Work

Many small business owners find it invaluable to enlist a professional real estate broker’s help in finding rental space, especially if your landlord will have one, and particularly if your needs are unique or space is at a premium. To act as a real estate broker, a person needs to get a license. The requirements vary by state but usually involve passing an exam, taking continuing education courses, and adhering to strict rules issued by the state. Brokers may play different roles in landlord-tenant transactions, so it’s a good idea to understand the various types of arrangements before you start looking for a broker or signing a contract with one.

 

1. Brokers Who Work for Landlords

In a traditional commercial leasing situation, the landlord lists available space with a broker who then goes out looking for tenants. If a lease gets signed, the landlord pays the broker a commission typically in the range of 3 – 6% or so of the gross rent paid over the life of the lease. The broker with whom the landlord lists the property is called the listing broker. If another broker (a non-listing broker) brings in a tenant and a lease gets signed, the two brokers usually split the commission. Under this traditional way of doing business, the listing broker is the landlord’s agent and is duty-bound to work out a lease that’s as favorable as possible to the landlord.

 

2. Brokers Who Work Exclusively for Tenants

As a tenant, you might feel uncomfortable dealing on your own with a landlord or the landlord’s broker, then you can engage your own broker, who will represent solely your interests. A broker who works exclusively for you has one main assignment to get you a good deal on a space that meets your needs and not to help the landlord quickly fill the building or get top-dollar rent. An experienced broker can help you evaluate the financial consequences of the landlord’s lease terms, and can spot hidden charges that translate into higher rent. 

Finally, the broker who’s acting as your agent can help in lease negotiations, being a great negotiator comes in handy here. The main disadvantage to hiring your own broker is that you might have to pay all or a portion of the commission (unless you negotiate a different payment plan, such as a flat fee). If your share of the commission is half of 3% of the rent over the life of your lease, you could be looking at a significant amount of money. 

 

3. Brokers Who Work for Landlords and Tenants

The next best thing to engaging a dedicated tenant’s broker is to find a reputable broker who works for landlords or tenants. You’ll have an easier time finding a broker like this to work for you, as opposed to finding a broker who works exclusively with tenants. Such arrangements will work just fine when your broker is showing you properties represented by brokers in other offices. However, the situation gets cloudy if your broker’s own office has taken listings for spaces that you want to see. This puts your broker in an awkward position. The broker is duty-bound to find you the best space, regardless of who has the listing but is also committed to contributing to the success of the office. You’ll want to address this potential conflict in your written contract with the broker.

 

4. Brokers Who Are Dual Agents

A final option, allowed in some states, involves asking the broker to step away from his or her role as an advocate and instead assume a neutral stance. A broker who works like this is known as a dual agent. Since this type of broker’s role is limited to attending to mechanical details and helping to make sure the transaction flows smoothly, the benefits of using a dual broker are limited. You won’t really get much, if anything, in the way of useful advice or practical guidance, since the dual agent can’t be your advocate.

 

How to become a commercial real estate broker

If you want to become a commercial real estate broker there are several steps you must follow.

 

1. Obtain a Real Estate License

All real estate agents must obtain a license from the state in which they wish to practice in order to represent buyers and sellers, as well as lessors and lessees in property transactions. This is the same license regardless of whether you want to sell commercial or residential properties. 

 

2. Gain your experience as an agent first, before you become a broker

After zeroing down on the type of commercial real estate market and the property you wish to deal with and sell, the next step is to gain experience as an agent. It is mandatory by all states, and you are required by the state laws to first gain at least one year of experience as a real estate agent before you become a commercial real estate broker. You then have to take mandated college classes and work as an agent for two or more years. Some states also require that you complete some transactions as an agent. Some states will accept a bachelor’s degree instead of agent experience.

 

3. Earn the commercial real estate broker’s license

After having gained a fair amount of experience as a real estate agent and being ready to become a commercial real estate broker, you must sign up for commercial brokers’ license exam courses conducted by various institutions. After having completed a bunch of commercial broker’s license exam courses, apply for a real estate broker’s exam, pass the exam and move ahead with applying for your license to work as a commercial real estate broker in a particular state. You have to bear in mind that commercial real estate broker exams are extremely state-specific. So, you have to be well equipped with the curriculum and the examination patterns.

 

 

Responsibilities of A Commercial Real Estate Broker:

• Assists sellers in promoting their properties to attract qualified buyers in a reasonable amount of time.
• Provides guidance on agreements, mortgages, and market prices.
• Drafts legal documents and contracts.
• Helping in some aspects of financial underwriting of listed property 
• Coordinates exchanges of ownership.
• Assists with negotiations between buyers and sellers.
• Manages a portfolio of rental properties.
• Fulfills a range of marketing functions, e.g. promoting properties by listing, writing advertisements, or arranging viewings.
• Attend networking functions and occasional workshops.

 

How Do Commercial Real Estate Brokers Get Paid?

As a commercial real estate broker, you get paid in commission for each deal that you close. The amount of commission you receive depends on the contract you negotiate with your client, the other broker, and their client. In most cases, the commission is between four and six percent of the sale price of the commercial property. When you represent clients who buy or sell a property, you receive your commission payment following the closing. Brokers can also be paid a flat fee or commission by the real estate agents who work under them.

The commission is typically paid by the seller of the property, but the buyers of the property may also owe the broker a payment as well. Who pays the commission depends on who the broker is representing in the transaction. When representing both parties, both the seller and buyer will pay the broker a commission fee. If there are two brokers involved with the deal, they will split the commission between each other.

 

 

CONCLUSION

Ask questions and perform research before choosing a real estate broker. The real estate broker you choose should be an expert, properly trained, and committed; one who acts in an advisory capacity rather than just hurrying to close a sale. Further, he or she should have good past transactions and timely communication. Your chosen broker should have valuable knowledge of location trends and the current market, lead you through the transaction with ease, and follow up with you after the deal closes.

 

As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.