Posted on December 23, 2011
In commercial real estate there are many challenges and difficulties to handle when you are a salesperson. Every day brings new issues to the table in property listings, sales, and leases.
The most common problems and issues that are seen in all salespeople is an aversion to completing the required paperwork, understanding the finer detail, and following through on the deal to the very end. That's what real estate salespeople hate.
The 'hate' problems come in this form (and in no particular order):
- Putting together the detailed listing for the client to sign, and then getting it correctly signed ready for use.
- Doing the full inspection of the property for the listing process, the due diligence, and documenting the property detail before going to market.
- Getting a property title searches plus all the other encumbrances, rights of way, and easements needed to document the property legal aspects
- Creating adverts that sell the property features and then making sure that the client approves them before going to the market and the media.
- Implementing the marketing campaign to all the selected media channels in a timely way.
- Taking enquiry and putting it into your database, so that it can be accessed when the right property comes along.
- Researching and prospecting your market for the right enquiries and then tracking your progress in notes and database records.
- Putting together accurate detailed leases, agreements to lease, or letters of offer for a landlord to consider or sign.
- Documenting any conjunction agency arrangement with other agents correctly before the inspection with your client or buyer.
- Putting together accurate contracts and letters of offer or counter offers for a property owner to consider in the potential sale of a property.
- Documenting, approving, and collecting marketing funds from the property vendor before the advertising and marketing campaign commences.
- Creating an Information Memorandum for the property listing that is comprehensive and accurate. That will then be used in the marketing campaign.
- Creating a Marketing Proposal to take to the seller of a property to allow them to consider the agency and their offering in the marketing of the property.
- Ensuring that all deals and subject to provisions are being actioned and satisfied for the client in a timely way.
- Completing the listing paperwork and putting it into the office system.
- Collecting deposits in a timely fashion, and banking the required money in accordance with real estate agency laws.
All of these things are detail related and are a key part of the property listing and marketing process. If you want to be successful in the industry it is essential to develop a focus on these things and a personal process of taking the right action at the right time.
Yes, salespeople are not good on the detail in most cases, so all of the above requirements become a real challenge. The temptation for salespeople is to cut corners with some or most of these documentation issues. This is where litigation and disputes arise. The local court is not a good place to do business.
Beware lack of documentation accuracy and attention to detail is a weakness that can threaten the real estate deal, loose commission, open up claims against your agency or you for negligence, and see the client move the listing to another agency. When this happens you can 'shred' your personal reputation in the market place, it will be in tatters. You will soon be known as someone of little skill that has to be avoided.
If you choose to be a professional salesperson working in real estate, then your diligence to create and follow-up on all the paperwork is paramount. 'Average documentation' and 'successful salespeople' are not part of the same equation. Do your job well!
Posted on December 7, 2011
It doesn't matter if you have been in the real estate investing business for 2 months or 20 years. We all know that we make the money in real estate when we buy, especially a commercial income-producing property. Though the buying process is one of the most important components of investing, many entrepreneurs don't have a clue how to determine the true value of an income-producing property or its potential. Here are some simple tips to help you build more confidence in taking action.
Leave Your Emotions at Home
Many investors find a beautiful property where the seller promises the world of returns. Because of this beautiful property they "fall in love" with, they end up paying more than the true property value. The real pain begins when the property does not perform the way it was promised in that pretty picture, and the deficit begins to hurt the cash flow. Investing in commercial real estate is like investing in a business. You find the true value in the income it generates versus the costs associated with running and growing it. Don't fall in love with the property; fall in love with the numbers.
Let the Seller Prove It to You
How did you arrive at that price? Don't just take the seller's word for their opinion of the property value; ask them to prove it to you. You need to evaluate the property numbers to determine the true value, so begin by asking the seller or seller's representative to provide you with all of the supporting evidence that proves the value of the property (financial statements, tax returns, bank statements, rent rolls, etc.).
Once they provide you with their case, you must always verify that the information is accurate and up-to-date. If you are unsure of some of the information they give you, be honest and ask for more details. What you are looking for is the actual operating expenses and the actual rental income that this subject property is producing. Here are some common expenses for commercial properties:
- Insurance: Liability
- Insurance: Workers Comp
- Insurance: Property
- Advertising
- Legal and Accounting
- Maintenance Labor
- Rent Discounts
- Repairs
- Reserves (Capital Improvements)
- Supplies
- License and Permits
- Taxes
- Management: Onsite
- Management: Offsite
- Telephone
- Utilities: Gas, Electric, Water & Sewer, and Trash
In most cases you will not find capital reserves in the seller's numbers. This really should be addressed in your initial evaluation during your due diligence period. You should create a budget of the essential property improvements that will have to be executed over time to increase the property value. Please note that the operating expenses do not include the debt service (mortgage).
Posted on November 23, 2011
Life's Experiences, Lessons learned, Classes taken, Books and Articles read, and then summarized for your viewing pleasure in the following article on Commercial Real Estate Negotiating tips
- Don't let contract negotiations go back and forth more than twice - the more back and forth, the harder it is to get a deal done. Round 1 and both are focused on the sale. Round 2 and the focus changes to money. When you get past Round 2 parties can begin to nitpick, start to resent each other and lose focus. Issues can then become personal.
- Focus on completing the sale. Don't get sidetracked by emotions, unimportant details, unforeseen challenges or difficult situations that arise.
- Endeavor to put all contract offers and subsequent pertinent details in writing. This avoids the misunderstandings, misrepresentations and omissions that typically accompany verbal communications and lead to a breakdown in the process.
- When you give a concession, ask for something in return. You might not always get it but the fact that you've given in on an issue ought to give you the standing to ask for and often times receive something in return. Just by asking and not receiving you avoid the other side continuing to ask concessions of you and your Client.
- It's best to not take the first offer too quickly or too easily. Wait at least a few hours. When talking about it with the other Agent don't talk about the ease of getting the property under contract. The other side will immediately think they made a bad deal and from that point forward the closing process can become more difficult than it should be.
- If you get to an impasse, change the focus and resolve less complicated issues. Then go back to the difficult ones. The process will go smoother and once you have worked through the easy ones, momentum will help get things finished.
- If you aren't sure how to reply to a request or if you know the answer but want to soften the blow, use the "limited authority" approach. "I'm not sure, let me check with my Partner", or "Let me take a look at such and such data" so that you can better provide a more meaningful reply.
- In order to support your position, rely on precedent. Suggest that this is the way that issues like these are typically addressed or that you've done such and such before with great success.
- Ask the other side for something that isn't critical to making the deal so that perhaps you can trade this item away for something more important to you.
- Negotiations are a process. It doesn't matter how quickly you want things to move, the process will move based upon the comfort level of your Client. Maintain focus, but keep in mind that the process will most likely not move as fast as you want it to.
- Stay away from high pressure tactics including ultimatums, demands or anything that sounds final and/or threatening. Most of the time it doesn't help and it can lead directly to emotional responses that then creates animosity.
- Work towards a win / win. In order to have a successful negotiation, both sides need to win on some points. Give and take. Strive to achieve most of your goals understanding that the other party is trying to do the same.
- Present all of the facts to your Client. It's your fiduciary duty as a Realtor to apprise the Client of all related facts to the negotiations - good and bad. Don't push for the higher dollar offer if other terms of the offer put the Client at undue risk.
- Remember who you are negotiating with. Sooner or later you'll be back at the table again with the same Agent. Don't burn any bridges by transacting in a less than professional manner.