It takes a considerable amount of work to get a client. Once we get one, we want to keep them. In fact, many agents appear to believe they have “ownership rights” to a client that they have worked with in the past.
At the very first meeting between agent and prospect there is a “sizing up” period. Once the prospect selects the agent, that prospect becomes a client to that agent. Over the course of a transaction, a trust on the part of the client is often formed. That trust often extends beyond the initial transaction. How careful is that agent with that trust?
We have only to look at the definition of fiduciary, which is “held or holding in trust”. If you are in San Diego and you have a client who asks you to list their property in Sacramento, you have the license to do it. Yes, it is outside of the area in which you have knowledge. But, the business is a little slow and you really want to help your client, (and earn a fee) so you agree. Are you keeping your fiduciary responsibility to your client?
Our job as real estate agents and brokers is to represent our CLIENTS best interests, in fact, before our own. If the agent has little or no knowledge of the area of the property, how effective will they be with this task?
When an agent elects to take that listing, the fiduciary responsibility of that agent would appear to be secondary to their need for a commission. Meanwhile the client believes their trust is wisely placed.
I use the example of a geographic distance as it is very easy to see. However this type of breach occurs all the time when a residential agent agrees to represent a client in a transaction for a commercial property. Commercial and residential real estate are worlds apart. To use our fiduciary responsibility toward our clients means putting their interests ahead of our need for a commission.
How do we bridge this breach while taking care of our valued clients? Here are a few suggestions:
1. Create relationships with a trusted commercial real estate agent/broker in your area, before you have a client to refer. You need time to build up trust with them before you are willing to “hand over” a trusted client.
2. On any referral you give to a commercial agent, get the commission agreement you have with them in writing BEFORE you give them the client information.
3. Learn about commercial real estate so that you more fully understand why a referral is often in the best interest of your client. Take our Intro to Commercial Real Estate course to learn more about our industry.
For additional information about commercial real estate, read my post on 10 Things. When you have buyers or sellers of commercial or investment real estate in the Sacramento, CA area, please contact me. I look forward to bringing our “customer-centric” approach to your clients.
December 2006
Provided by Sheryl A. Smith, CCIM, CEO of Smith Real Estate Services
Sacramento Retail:
- Street Retail had the highest average asking rent of $2.13psf/mo.
- Average Asking Sales Prices have come down about 3.9% since mid 2006, across all retail property types.
- About 52% of the listed retail properties are between 5,000-24,999 sf.
- 14th lowest retail vacancy market in the USA for Q4/2004.
Average Asking Price by retail building size
5,000-9,999sf $258 psf (31% of available property listed)
10,000-24,999sf $224 psf (22% of available property listed)
25,000-49,999sf $192 psf (7% of available property listed)
Sacramento Industrial:
- Flex/R&D had the highest average asking rent of $0.89psf/mo.
- Average Asking Sales Prices have gone up about 4.5% since mid 2006, across all industrial property types.
- About 62% of the listed industrial properties are between 5,000-24,999 sf.
Average Asking Price by industrial building size
5,000-9,999sf $143 psf (27% of available property listed)
10,000-24,999sf $128 psf (35% of available property listed)
25,000-49,999sf $ 99 psf (9% of available property listed)
Sacramento Office:
- Office buildings had the highest average asking rent of $1.82psf/mo.
- Average Asking Sales Prices have gone up about 3% since mid 2006, across all office property types.
- About 69% of the listed office properties are between 0-9,999sf.
Average Asking Price by office building size
0-5,000sf $347 psf (47% of available property listed)
5,000-9,999sf $291 psf (22.5% of available property listed)
10,000-24,999sf $272 psf (19% of available property listed)
Sacramento Multi-Family:
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Du/Tri/Fourplexes had the highest average asking sales price of $190,468 per unit.
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Average Asking Sales Prices have gone up about 1.4% since mid 2006, across all multi-family property types.
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About 68% of the listed multi-family properties are between 2-9 units.
Average Asking Price by unit mix
>5 units $190,251 per unit (52% of available property listed)
5-9 units $112,271 per unit (15.6% of available property listed)
10-19 units $ 90,572 per unit (10.3% of available property listed)
Sacramento Vacancy Rates (Forecast Q4/2006)
Office 15.3%
Industrial 12.0%
Retail 6.2%
Multi-Family 5.3%
National Vacancy Rates (Forecast Q4/2006)
Office 12.9%
Industrial 9.5%
Retail 8.1%
Multi-Family 5.4%
Western Region Average Cap Rate
Office 6.9%
Industrial 6.8%
Retail 6.4%
Multi Family 5.4%
Sources: Loopnet Local Insights & the NAR Commercial Real Estate Outlook Report
1. Most commercial “brokers” are not brokers. They call themselves brokers because they broker the deal, but many hold a Salesperson’s license, which actually makes them an agent. By law, a salesperson or agent must hang their license under a broker. A licensed broker can elect to put their license under another broker; however, a salesperson does not have the option.
2. Most “brokers” that work for commercial brokerages without a residential arm are not Realtors. A Realtor belongs to their local real estate board. Historically, the local and national real estate boards have done little to support commercial real estate, though that is changing. Consequently, commercial brokerage houses generally do not join the board of Realtors;
3. A title like Vice President generally means they have achieved a certain level of sales volume, not that they are managers of people;
4. Land is considered commercial real estate;
5. The license for a commercial salesperson or broker is the same as for a residential salesperson or broker. That means that anyone with a license can sell either commercial or residential. However, it is more common for a residential agent to sell commercial than the reverse. Commercial “brokers” understand that the two businesses are very different and would generally prefer to stay within their area of expertise;
6. Commercial “brokers” don’t generally see listings on the MLS because they are generally not members of the local board. The local real estate board generally governs the MLS, thus leaving commercial “brokers” out of that loop. The closest multiple listing services that we have are Loopnet and CCIM.Net, both of which are national organizations. However, it is not mandatory that “brokers” place their listings here so these services show only a fraction of what is available;
7. Commercial “brokers” have a network that residential agents and brokers do not generally have access to. It is important to learn what those networks are in your are;
8. Commercial “brokers” generally specialize in an area. They may do many different parts of the business, but there is typically one area that they know better than the rest. It is wise to work with a “broker” who knows the property type that you need assistance with;
9. Many of the designations in commercial real estate are from organizations that are affiliated with the National Association of Realtors (NAR), including CCIM and SIOR. IREM and ULI are also affiliates of NAR;
10. As a general rule of thumb, only about 50% of commercial deals that go into contract actually close. This is one reason that people complain that commercial “brokers” don’t return phone calls. “Brokers” are always weighing in on the probability of a closed transaction. If the caller knows little or nothing about what it takes to get a commercial deal closed, the “broker” would rather not invest the time.
If you would like to learn additional information about how commercial real estate works, go to www.SmithREServices.com and go to the Learn section to get registered today. There are several different courses to choose from.
