With the abundance of information online, it may be tempting to try to learn the finer points of buying or leasing commercial real estate to save some money. As you may know, broker fees and commissions can run up to 3-4% of the total value of the deal — and, because we’re talking about hundreds of thousands (if not millions) of dollars, it pays to know exactly what you’re getting into. Even so, brokers can end up saving you money and, in most cases, a lot of time.
Saving Money & Time While Having Your Back
Granted, it is possible to avoid paying broker fees and commissions by attempting to close the deal solo. However, brokers bring more to the table than simply taking you through the process of finding a space and purchasing or leasing it — and that knowledge may just be worth the extra expense. In fact, brokers often act as an advocate for you in the negotiation and closing processes, which is especially helpful as sellers and lessors almost always have professional representation.
Still, if saving on costs is your primary reason for going it alone, know that the majority of broker fees and commissions are paid by the seller or lessor — meaning it costs you very little (if anything) in most cases.
Of course, there are situations in which the seller or lessor does not have an agreement with the brokers to cover the fees and commissions. In these cases, you would be responsible for the commission for your broker, which is usually between 2-3% of the total value of the contract.
Years of Expertise Is Worth Paying For
Part of having a broker is the gift of time. As a business owner or manager in charge of finding a new space, a broker will get to know your needs and wants in a commercial space — such as location, size and amenities — which pares down the overwhelming number of spaces to research. It’s also likely that the broker has a deeper understanding of the local market and will know of a handful of properties off the top of their head that would fit your needs, along with any key details.
Furthermore, brokers often have access to privileged information on market trends — such as demographics, economics, traffic, and sales and leasing comparables — from various paid sources. And, once you decide on a property or space, the broker can then organize any and all paperwork throughout the process, as well as coordinate and schedule inspections and handle negotiations.
It’s important to keep in mind, though, that brokers aren’t paid until a deal closes, so they’re motivated to move things along quickly. Be mindful of this as you progress through the buying or leasing process. If it feels like things are moving too quickly for you to keep up, it’s okay to slow it down and catch up.
Commercial Real Estate Negotiations
Sales and leasing of commercial properties are full of legal documents. There are terms, allowances, conditions, restrictions, jargon and many, many more items that need to be ironed out so that both parties can come to agreement and sign the deal. Here, too, brokers can be instrumental during the negotiation process. That’s because their experience and expertise usually outmatch those of non-brokers and can lead to more favorable deals and concessions.
Keep in mind that, although brokers are compelled to advocate for you as the buyer or lessee, they are also compensated based on the sale or lease price, as well as the term length. Therefore, as you progress through the buying or leasing process, always maintain a clear understanding of what your goals are for the space or building, as well as what is best for your company. In this way, communication and transparency with your broker are extremely important.
In conclusion, as with most things in life, there are pros and cons to hiring a broker. But, in this case, a broker’s pros greatly outweigh their cons if you are upfront and steadfast in your requirements for a space or a building.