By Marcia Stewart
Choosing a broker to help find commercial space for your business and negotiate a lease on your behalf takes more than a little luck. You'll want to make sure that the broker's skill level, experience, professional situation, and personal style will suit you. You'll gather some of this information when you start looking for a broker. But when it comes to actually choosing a broker, you'll want to dig deeper. This requires collecting information both about the broker and from the broker.
Questions to Ask People Who Recommend a Particular Broker
Before contacting a potential broker, ask the following questions of people who made the recommendation. (You'll want to ask the same questions of any references a broker gives you.)
- What is the broker's reputation for honesty, experience, thoroughness, and accessibility? The person who has recommended this broker may have the answer. If not, ask other real estate professionals you might know—the agent who sold you your house, for example, or your lender (mortgage lenders work with brokers all the time).
- What were the broker's weak points? In even the best working relationship, there are normally a few bumps along the road. Find out what they were. If these problems are likely to upset you—for example, the broker doesn't reply to emails quickly—then it's best to know now.
- What were the broker's strong points? There may be one aspect of the space-hunting game that is of paramount importance to you, and you'll want to make sure that you find someone who can deliver. For example, if you need space for a specific need such as a gymnastics studio, you'd like a broker with imagination who can think creatively about adapting space to your highly special needs.
- Would they use the same broker again? This question appears rather obvious, but in fact it's very useful because you'll typically get information that a specific question might not have elicited. For instance, you'll often hear a response that starts "Well, yes, because what I really liked was …" The rest of the sentence often recounts a personal trait or professional skill, such as attention to detail, which may be especially important to you.
Questions to Ask Commercial Real Estate Brokers
When you're ready to speak with a few brokers who have been recommended by others, make an appointment with each one and come equipped with the following questions.
- What is the broker's experience with commercial needs like yours? Hopefully, you already know that the broker is familiar with the needs of businesses like yours. But if you're not sure—or even if you think you have a specialist—it's wise to confirm your conclusions. Describe your rental priorities and ask how the broker can help. Ask for references from small businesses like yours.
- What is the size of the real estate office? Sometimes you'll have a choice between a broker in a large real estate office and one in a smaller one. If you're a small business owner with modest space needs, it's possible to get lost in the shuffle if you go with a large firm that primarily deals with big tenants who need space of 10,000 square feet or more. The result may be that you'll get stuck with a less experienced broker.
- What are the compensation practices of the broker's office? Most brokers earn their money by straight commissions—they're not salaried. Since the commission goes up as the length of the lease, the square footage, and the rent increase, brokers' interests are not exactly aligned with yours. And none of the commission gets paid until the deal is inked, which puts tremendous pressure on brokers to close the deal and move on to the next one. Larger firms, however, may place some brokers on partial salary, reducing their dependence on commissions, which may lessen thepressure to inflate the lease and finalize the lease as soon as possible. This translates into a more long-term approach to your space hunt.
Once you've done your due diligence and found someone you want to work with, always sign a written contract with your broker to cement the relationship. This should cover payments to the broker; whether the broker has an "exclusive" or "nonexclusive" arrangement with you; how your broker will handle any conflicts of interest that may arise, and the details of the legwork the broker will do for you.
This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman.