Many of us in business have had the experience of leasing, purchasing or selling real estate without the use of professional help and for many of us it was a good and profitable experience. So why use a professional? After all, we could save the amount normally paid out in commissions. Besides, how difficult can it be? We all have an in-law in the business and we know how gifted they are.

Security

Scams do happen. They can be prevented with proper investigation and the professional knows how to do it. Recently a developer contacted my office looking for investors for a residential development. My company provides investors for developments, and real-estate related products through the use of IRAs and other self-directed pensions. The developer advised me that he was interested in obtaining $300,000 to finish a residential development that was nearing completion.

A probe of the property and the developer was quite revealing. The property was not worth the several million he advised and was actually worth less than what was owed. My fact-finding mission in to the property uncovered it was worth around $1,100,000 and the development was already $1,325,000 in debt. Upon further inspection I discovered the developer was not who he said he was and was in fact attempting to obtain money under false pretenses.

What's my point here? There was $1,325,000 scammed out of investors that could have been prevented. My clients didn't lose a thing because of our investigation. Do you have the knowledge and access to conduct such an investigation? Do you even know where to start? The example cited here is an extreme case, and investment and commercial real estate transactions are complicated by definition. It takes someone who knows the questions to ask and whom to ask them of to prevent error and deception. Professionals provide that security.

Cost

We know you can save by protecting your assets with a thorough investigation. There are other ways to reduce the cost of buying and selling real estate as well.

If you employ your own professional as a "buyer's broker" you can negotiate a cost-saving fee. This is accomplished by entering into a contract with the broker much the same as the seller of property enters into a listing agreement. Just like the listing agreement between seller and broker, the buyers broker -- by being under contract to you -- is assured that he or she will have a payday at closing. The broker then is unlikely to go unpaid and all of his or her work will have a just reward.

By removing the uncertainty from the broker's mind, you will have created a negotiating point to use when discussing the fee. Don't be concerned that your broker will be paid twice -- once by you and once by the seller. The broker is obligated by law to reveal to the seller that he or she is being paid by you. When that occurs two things happen: the seller does not pay your broker and the sales price of the property is reduced by at least that amount.

Another cost-saving feature of using a professional as your buyer's broker is that now you have the broker all to yourself. You can use all of his or her negotiating skills for your benefit. Real estate transactions are at the very least adversarial. What is good for the goose is not necessarily good for the gander. A good professional will know the market and be able to apply that knowledge to your favor during negotiations. This market knowledge is extremely useful in leasing situations.

Do you have the knowledge of the market at your fingertips? Can you quote values, costs, and statistics that will tilt the benefits in your favor during negotiations? Do you negotiate real estate transactions on a regular basis? The professionals do, and you can use their knowledge to save thousands of dollars and costly errors.

Knowledge

The experience and education (knowledge) of the professional you choose is exceedingly important when conducting business transactions involving real estate. It's the kind of knowledge that gives you an edge and assures the transaction will be profitable.

Don't be timid when checking out the credentials of the professional you choose. If you're going to hire a professional, make sure he or she is truly capable of accomplishing the type of transaction you are doing. I find it curious that we take more care in checking the background of the auto mechanic used on the family car than we do in choosing professionals to handle thousands and even millions of dollars in assets.

If you are leasing, look for a broker who knows something about leasing. The broker who primarily sells residential houses is probably not the one to call. You wouldn't hire an auto mechanic to overhaul the engines on your Lear jet, would you? Then don't hire a residential broker to do commercial leasing.

Of course, the exception is the brother-in-law who has a real estate license and is otherwise out of work. You will want to use him just so he can make enough money to move out of your garage.

Find out what specific education the broker you are considering has in commercial or investment real estate. Better yet, ask the broker what the best courses are that are available in investment real estate. Then, ask if he or she has taken them.

I'm reminded of the time my brother broke his neck in a car accident. The operation to correct the injury was very complicated and involved taking bone from his hip and fusing it to his vertebra. We met with a highly recommended neurosurgeon to discuss the operation. The neurosurgeon, a gifted man with a scalpel was trying to convince us that it was not a difficult operation. Part of his presentation was to show us illustrations of the operation and how it would take place. It was obvious that he had the education to perform the task.

As we were leaving the conference I asked him one final question. "Doctor, just how many of these operations have you performed?" In a heavy German accent and with frankness that didn't betray his sense of humor, he replied by pointing at the illustrations and saying, "I never done one before, but gee, don't it look easy!" He was joking, of course. As it turned out he had done many such operations. Wasn't it a reasonable question to ask?

The same question should be asked of the broker you choose to represent you in your commercial or investment real estate. If they answer, "I never done one before, but gee, don't it look easy," consider what it will cost to have someone experiment with you.

Exposure

One of the genuine values real estate professionals bring to the table is the exposure they provide in the marketplace. With the proper credentials, the right professional can reach areas far beyond the local market, thereby drawing interest from a more diverse group and enhancing the value of the property to be sold. We used to just know a lot of people in real estate; now it's called networking.

When representing themselves as buyer's brokers, those professionals have a responsibility to be well connected with their networks. It's at regional and national marketing sessions that the inventory of real estate that never hits the papers is marketed.

This is where the real jewels are found. Ask the questions and listen for the answers. Where does the broker intend to market? How does he or she plan to market? And finally, ask for some success stories.

The professional garners the ability to shortcut the real estate buying and selling process through exposure to networking, attendance at marketing sessions, contacts with key brokers throughout the country, and memberships in professional organizations. Ask what groups the professional belongs to. Who do they know? How are they going to reach the broadest possible marketplace? Where will they find your opportunity? It's when your professional can pick up the phone and make calls to a few key people and find the perfect investment that your time spent choosing a broker has paid off.

Choose a professional to represent you in your business dealings with real estate and he or she can provide you with the security you need to keep from "being taken" or overlooking details that will cost you dearly. If you choose a professional with knowledge, experience and exposure you will not only save money, you will find the right product or buyer to make your commercial or investment real estate transaction profitable beyond your dreams.

In the words of Dr. George Wickman, a noted neurosurgeon, "Gee, don't it look easy!" No, doctor, it doesn't! That's why we use professionals and examine their credentials before we hire.

Copyright © 1996 by Patrick W. Rice