Selecting a Commercial Real Estate Broker

HIRE AN EXPERT !!!! Do you fill your own cavities or do you go to a dentist? Anyone who has been a client of mine or who has read my postings, knows that I am a firm believer in doing what you do best and leaving the rest to the experts. This certainly holds true for buying commercial real estate. Buying commercial real estate is a complicated process. Thus, I am leaving it to an expert to provide some helpful information on how to choose and compensate a commercial real estate broker.

The posting below has been provided by Ray Orowetz, P.E. of NAI Pittsburgh Commercial.

Why are buyers of real estate reluctant to pay a commission to the broker who’s representing them? Think professional. Lawyer, engineer, doctor, architect, accountant. They provide a service and get paid by their client. Why not the broker ? The fee for services is established early on with these folks. Why can’t a reasonable fee, or some mechanism, be established to compensate “your” broker ?

OK, maybe it seems counterintuitive. Brokers typically get paid based on a percentage of the purchase price. It doesn’t seem right that they’d work to get the lowest price possible and thus drive down their fee. Is that the problem? Ever wonder how many people you would tell about the broker who got you a really great deal and earned a fair commission? Maybe you wouldn’t tell anyone because you’d want to keep him all to yourself and give him more assignments. Either way, that broker’s going to get more work as a result of providing good service and truly representing your interests. For the truly professional broker, the fee is not the key. It’s a long term repeat business and qualified referrals.

Ever have a broker call you and ask you if you want to sell your property ? What’s the first question you ask. Right. How much are you going to charge me ? What if he said “Nothing, my buyer’s paying me”. That response is intriguing to any seller and it conveys a clear message to the seller that he’s got a serious buyer on his hands and he’s all business. As the buyer, you’re now in a different negotiating posture if you play your cards right and let the broker do his job.

And get this ! The fee you pay to your broker is an expense of the sale. A one time lump sum write off. You don’t get too many of those !

For more information, please contact Ray directly.

Ray Orowetz, P.E.
NAI Pittsburgh Commercial
Phone: 412-860-8898
rorowetz@naipittsburgh.com

Do You Provide More Value Than Your Competitors?

What do you do for your customers? Do you repair computers or do you teach your customers how to use the latest technology? Does your business rent office space or do you provide an environment conducive to a tenant maximizing productivity? Do you sell insurance or do you enable a client to be worry-free about the protection of his/her assets?

Yes, there are some terms, words or phrases that we are all tired of hearing - bailout, recession, mortgage mess, etc. But two that we should never tire of hearing - and saying and thinking and doing - are "value added" and "thinking outside the box." Yes again, they are over-used terms. Nevertheless, some terms and phases such as "don't put all of your eggs in one basket" and "if it is too good to be true ....." are used over and over again because they are true. (Just ask the Madoff and Enron investors). They have passed the test of time. The same is true for "value added" and "thinking outside the box." If you want to dominate your industry, you MUST provide more value than your competitors. To provide more value, you MUST think creatively.

In September, I discussed the importance of differentiating yourself from your competitors. Unfortunately, most business owners and managers never think about that. They take the easy way out by saying. "We give really good service." That is the very same thing your competitor says !!!!!!!

If you have any question about whether or not you are providing extra value, just ask yourself one question. "Why should a customer buy from me instead of any of my competitors?" If the only answers you have are, "My prices are lower" and "I give really good service," then you are going down the wrong path.

Here is one of the best examples I know about providing value. In 1970 I got engaged. Like most young men, I knew nothing about diamonds. A friend recommended a jewelry store to me and off I went to buy a ring - on my lunch hour. I walked into the store and announced to the jeweler that I wanted to buy an engagement ring. The very wise jeweler said to me, "Well kid, do you want to buy a ring or do you want to learn about diamonds?" The tone of his voice and the expression on his face told me I had better learn about diamonds first. He was right. Four hours later I walked out of the store having purchased an engagement ring. I felt satisfied that I had made a good decision because I had become an educated buyer. They didn't just sell rings. They taught customers about diamonds. That's extra value. Needless to say, I recommended that store to everyone who needed to buy jewelry. And yes, they are still in business today.

What can you do to add value to your product or service? Just think outside the box.