Commercial Real Estate Brokerage FAQs

Selling FAQs
Q: How can I get the best price for my commercial property?
A: No matter when you sell, one important step in getting the best price is to ensure that the property is effectively exposed to the market and promoted to potential prospects. Strategically developing and implementing marketing for the property enables you to target the ideal buyer and usually produces the best results.

Q: Should I hire a broker to sell my commercial property?
A: There are definitely great advantages to hiring a broker. Brokers have local market and real estate knowledge, marketing resources and negotiating skills that you may not possess. Hiring a broker that has extensive commercial real estate experience and expertise plus a history of success are key to attaining results.

Q: What type of questions should I ask a broker before hiring them?
A: You should ask a broker to provide details about their commercial real estate work experience. Also, ask for specific and recent sale transactions that they were involved with and their roles in those transactions. Client testimonials are also a good way to evaluate a broker’s accomplishments.

Q: What type of listing agreement should I want as a seller?
A: A listing agreement is an employment contract for professional services between the seller and the broker. It should always be in writing so each party understands the relationship. Though there are a few types of listing agreements, an ‘exclusive right to sell’ agreement appoints one broker as the agent for the seller. This arrangement is advantageous to the seller because this one broker is responsible for all marketing, communicating and negotiating on the seller’s behalf. A broker will also spend more time and effort on this type of listing since the seller has given a commitment to the broker.

Q: How does the broker price my commercial property?
A: Methods used to price a property vary and the method used depends on the property type. Owner occupied properties require a comparative analysis of like property sales to the ‘for sale’ property. This requires the broker to review the market for recent sale transactions and current listings and then to formulate a price from the data. Income-producing properties are most often purchased on their cash flow. This requires the broker to make income and expense estimates which will be the basis for accurately pricing the property.

Q: What should I expect from the broker?
A: You should expect the broker to represent your interests and to offer you practical advice. It is important that the broker has working knowledge of commercial real estate, implements effective marketing for your property and communicates with you and prospects in a professional and timely manner.

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Buying FAQs
Q: Does the listing broker represent the buyer?
A: The listing broker represents the interests of the seller, as do all other brokers involved in the sale, unless a relationship in writing has been established with a broker to represent a buyer’s interests. If the buyer enters into a relationship like this, the broker becomes a buyer’s agent and has an obligation to represent his/her interests. This broker can be instrumental to the buyer in locating a suitable property, negotiating price and terms of the purchase, providing advice during the purchase process and assisting with mortgage financing options.

Q: How can I find a property to buy?
A: Brokers are your best source for finding a commercial property. Brokers scan inventory daily and are constantly in contact with property owners. For this reason alone, it would be a mistake not to communicate your requirement details to a broker. An experienced commercial broker can present buying opportunities that may not be available to you or even the public. The process of finding an ideal property may take weeks or even months, so utilizing a broker is invaluable.

Q: When I find a commercial property what is the next step?
A: If the property meets your needs, then start the due diligence. If you are going to use the property for owner occupancy, make sure its location, size, condition and features are acceptable to you. If it’s an income-producing property, request copies of the income and expense statements and review them.  Also, among other items, request a plot plan to review the boundaries and building footprint, check the zoning to make sure the property can be used for your use and look into your mortgage financing options. An experienced broker can assist you with all these items.

Q: How do I go about purchasing the commercial property?
A: You need to submit a written offer to purchase to the seller with a monetary deposit. Among other items, it should include a purchase price, provisions such as dates of performance and any contingencies such as a satisfactory property inspection and mortgage financing approval. In circumstances where the buyer and seller come to an immediate agreement on price and basic terms, it is customary to proceed directly to a purchase and sale agreement. It is recommended that buyers consult with a real estate attorney prior to signing any legal document.

Q: How long should it take before I close on a commercial property?
A: It should take about 60 days from executing a purchase and sale agreement until the closing. During this time, a buyer will secure mortgage financing and more due diligence is performed on the property. Fees and costs for these items are mostly borne by the buyer and have to be completed by specific dates. But, if the property involved is vacant land or a site that is being permitted for development, then the closing may take 90 to 180 days from executing a purchase and sale agreement since permits and approvals for the development are usually required prior to closing.

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Leasing FAQs
Q: Should I hire a broker to lease my commercial property?
A: Landlords usually don’t have the time necessary to effectively lease the space or a broker’s access to potential prospects. Therefore, it is important that the landlord hire a broker with commercial leasing experience. This broker will save the landlord valuable time and provide the landlord with competent representation.

Q: What is the difference between a leasing agent and a tenant representative?
A: The leasing agent represents the interests of the landlord. On the other hand, a tenant representative represents the interests of the tenant. The tenant representative will locate spaces for the tenant and advise them in negotiations.

Q: What type of listing agreement should I want as a landlord?
A: A listing agreement is an employment contract for professional services between the landlord and the broker. It should always be in writing so each party understands the relationship. Though there are a few types of listing agreements, an ‘exclusive right to lease’ agreement appoints one broker as the agent for the landlord. This arrangement is advantageous to the landlord because this one broker is responsible for all marketing, communicating and negotiating on the landlord’s behalf.

Q: How does the broker determine a rental price for the space?
A: This is done by identifying, collecting and reviewing recent rental data of similar space in the competitive market. For instance, if you have 30,000 square feet of warehouse space for lease, it can be priced based upon rental data for warehouse spaces in the 20,000 to 40,000 square foot range. In addition, the market conditions and amount of inventory of similar space for lease play an influential role in pricing the space.

Q: What is the difference between net and gross rents?
A: Net rents pass expenses through the tenant while gross rents include expenses. There are several variations of net and gross rents. The most common net rent is triple net rent. This rent is primarily used for retail and industrial space. In this instance, the landlord charges a base rent to the tenant. In addition to this base rent, the tenant pays for individual utility charges plus the tenant reimburses the landlord for expenses such as real estate taxes, insurance and common area maintenance. On the other hand, the most common gross rent is a modified gross rent. This rent is primarily used for office space but can also be used for other types of spaces. In this case, the landlord charges the tenant a rent inclusive of expenses plus the tenant pays for individual utility charges.

Q: How many years should I lease the commercial space?
A: There are a number of factors that influence a landlord and tenant’s decision to signing either a long term or short term lease. A long term lease is one that is five years or greater. It is ideal for a tenant whose business is stable with no projected space changes. Most landlords will provide favorable rents and terms to long term tenants that have financial credibility. Conversely, a short term lease of one to three years gives the tenant flexibility especially if they have uncertainties about their future space needs.

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