SmithREServices - Sacramento Commercial Real Estate & Investors Guide

03.11.2007

Commercial building You get a new listing on a piece of commercial real estate and you are so happy! You’ve heard about the large commissions for commercial real estate so you want to handle this listing right.

You put in on the MLS, post a sign, add it to the Realtor caravan, and send out just listed postcards. 30 days pass and you have very little activity. You decide to have an open house. A few of the neighbors trickle in but no serious interest. You even get the client to agree to a price reduction. You get a couple of more showings but that’s it.

Your long term client with whom you’ve sold many homes is very disappointed in you and cancels the listing. They list it with a commercial broker and the property closes about 90 days later.

What went wrong for you? If you read my Ten Things You Need to Know About Commercial Real Estate, you would know that commercial brokers are generally not members of the local Realtor board. Consequently, they do not use the MLS. Since a buyer of commercial real estate will often use a commercial broker, leaving the property out of view from commercial brokers is a huge oversight.

Now, let’s say that you do get an offer in from a commercial brokerage firm. Because they are not members of the Realtor board, they typically do not use CAR (this refers to the state of California) forms. The CAR forms you know contain all of the customary legal protections. They also prompt you to provide certain disclosures and time lines. You know where to look for things on these forms.

The large brokerage firms often paid their attorneys a lot of money to draft their own contracts. Each firm often has a different contract. Additionally, the offer may come in on an AIR form (American Industrial Association). You’ve never seen these before. Are they legal contracts? How do you counter since you don’t have the same contract?

The basic answer is yes, they are legal contracts. They are simply different from what you are accustomed to. As for the counter, you would need to check with your broker to see how they would like you to handle this. I’ve seen different firms handle it differently.

However, what’s important about this in not the answers to the questions I posed, but rather to realize that this is just the tip of the ice burg when it comes to differences between commercial and residential real estate transactions. When you are selling your expertise and your time, you want to be relatively certain that you will get to a closed transaction. With that in mind, sticking with your area of expertise is in the best interest of both you and your client.