SO WHY WOULD YOU HIRE A RESIDENTIAL BROKER TO NEGOTIATE A COMMERCIAL SALE OR LEASE?
With the advent of online marketing platforms to view property today, anyone and everyone can see what’s on the market. And while it is good exposure for the property owner, it often leads to licensed agents outside of the commercial real estate spectrum to try to transact a lease or a purchase of office, retail, industrial, and investment property, when they do not have the training or experience to do so.
Too often, we at Triniti Partners, Inc., are seeing people in the residential real estate brokerage space venturing into the commercial space, and it isn’t going well. As a commercial real estate brokerage specializing in North Los Angeles property transactions (including Santa Clarita, Simi Valley and the San Fernando Valley), we have negotiated every possible type of commercial lease and sale. In doing so, we have learned what strategies work best for the clients we represent. But those who venture into the commercial space, don’t always have this level of experience and it is proving harmful and damaging for their clients.
Recently, while representing the owner of a Hollywood studio property owner, we were contacted by a residential agent who was touring the property with an unknown “trust fund client.” From the moment we met this person, it was evident that this individual did not understand how a studio works and was not familiar with the components of the deal. His broker had failed to vet him property to see whether his expectations were realistic and whether he was a true prospect for this deal.
Instead, the agent heard that this person had some money and that was enough for them to take him seriously. In the end, the deal blew up because the buyer would not perform and didn’t have the money that he said he had. This created a lot of unnecessary work for us as we had to educate the broker, who did not know how to even write a letter of intent. We also had to educate their and the client in the process. A lot of people’s time was wasted here. Had the residential agent stepped aside and instead, referred this person to a commercial real estate broker, these issues would not have happened.
Stay In Your Lane
I refer to this process as “staying in your lane.” This agent may have known residential real estate very well, and was a very nice person, but simply didn’t have the knowledge or experience to represent someone in the industrial/commercial market.
I have also seen situations where a lot of money had been lost because of the broker’s lack of experience. Several years ago, a broker I knew was representing tenants in a land lease in the Port of Los Angeles. On the opposite side, a residential agent was trying to represent the land owner. Because that agent did not know what the market rent was for industrial land, they incorrectly advised the owner to accept a deal that was over 50% lower than the market rent. In this case, the tenant was represented by a knowledgeable commercial broker while the owner was represented by a residential broker with limited experience.
In another situation, an industrial landlord refused to hire an experienced broker to on a lease because they did not want to pay a commission fee. By self – representing, he lost triple the amount of what he would have paid in commission when the deal was transacted. The commission would have been $60K; the lost rent was closer to $300K.
A good rule of thumb to remember is that an experienced commercial broker should be able to double the value of their commission in the deal they bring to their clients. But again, this is not always the case, especially when you have an inexperienced broker on the other side.
If you are residential broker and do not know the intricacies of doing a commercial deal, please refer it to an industrial broker who does. We would never consider representing ourselves in a residential real estate transaction because we know that we will get better value when we hire someone who is working fully on that mission. I have, and will continue to use a residential agent in any residential transaction I encounter.
If you are ready to place your confidence in a commercial real estate broker who is looking out for your best interests, Triniti Partners has the experience and the credentials to negotiate the best deal for you.