6 minutes
Key considerations for choosing the best agent for your next real estate effort
Recent volatility notwithstanding, the economy is hot, driving credit union growth and increased real estate activity in branch network evolution and headquarters occupancy strategies. Commercial realtors are a key partner in these exciting, expensive and risk-laden endeavors.
Like all consultants, realtors can be an extremely valuable partner. At the other end of the scale, they can cost you millions in poor advice and negative impact on branch and headquarters productivity.
Be sure to vet realtors before you engage their services. Once, when I was helping a credit union in Nevada develop a strategic 10- and 20-year headquarters occupancy strategy, I asked a realtor to provide a list of eight to 10 buildings that would support our long-range plan. He came back with only four, all at the top of the market. My own researched showed many more options. When I asked if he or his associates were involved in any of the properties or if he represented them on the sales side, I learned that he represented all four—one was owned by his brother, he was a partner in two and his boss owned the fourth. We found a new realtor.
I recently asked Dan Stutz, SVP of CBRE, Los Angeles, to weigh in on the topic, sharing his 30-plus years of experience.
Stutz suggests finding out if your broker has a reputation for hard work and quick response, both at the first engagement and over the long term.
“A broker must immerse himself into his client’s business objectives and strategies for success, to understand how he can add value,” shares Stutz. Brokers must be more than order-takers. They must offer critical advice to help steer the real estate team in the right direction and make tangible connections between real estate solutions and a client’s goals.
Stutz believes that “a broker must be creative, as there is no textbook or roadmap that fits all situations.” They cannot be afraid to help clients think outside the box, challenge assumptions and drive thoughtful and pragmatic solutions.
Also, “a focus on economics during analysis and acquisition is vital to project success and enhancing a client’s bottom line,” adds Stutz.
Stutz has worked with a number of brokers on all sides of the deal. “Collaboration, team-building and communication must be near perfect,” he says. A great broker will help lead the effort to gain important input from key stakeholders prior to going to market.
Your realtor must also be a “street fighter.” Even in a big city, the real estate industry is small, and all active realtors run into all other major brokers over time. Your broker must be able to hold his/her ground to your benefit. This is about big dollars and long-term operations, and this person must be able to build trust at all levels.
An important criterion in selecting a realtor is to understand his experience with your unique real estate goals. For example: A residential broker should not be representing a credit union’s commercial needs, as most lack awareness of retail and headquarters properties. Most brokers I work with have been involved in the branch network optimization process or strategic occupancy planning, so they have a deep understanding of the requirements and have formed a trusted relationship with the team.
Fees are another significant consideration. It may seem that real estate fees are fixed by the industry. In reality, there are fee norms, but they are not fixed. A few years ago, I was brought into a project after the realtor was selected to help purchase a new large headquarters building. The fee for the credit union broker’s side of the deal was more than double the norm, which cost the credit union a six-figure loss on an $18 million deal. Going forward, we asked three very competent brokers to provide competitive proposals for ongoing work. We ended up paying 50 percent less—the best price for the best quality.
When asked, “What can clients can do to get the most out of their broker relationships?” Stutz’s first response was: “Ensure the broker is accountable at every step of the process. Constantly ask questions and challenge assumptions. Make certain that all recommendations are tangible in support of your goals.”
A good client is totally honest with his broker, sharing all issues, good and bad. The strategic plan is shared in full. All financial issues are on the table. And, the client provides constant feedback throughout the process.
A successful client will ask the broker for feedback about how the credit union is doing in return. Is the broker getting the information he needs? Are staff being responsive? Are any board members getting too involved in the process?
A second recommendation: “A credit union should ask to meet the entire team when the broker is being evaluated to ensure they understand who takes over if there is a health issue mid-negotiations,” says Stutz. “Who else will be visible to the market as a representative of the credit union, and who is ultimately in charge at the firm?”
The credit union must also clearly understand the fee arrangement at the time of purchase. Who is paying the fee? Has any discount been offered during real estate negotiations? Is there a fee if we want to put on hold or stop the process? What if we are brought a piece of property from another source? How long are we obligated to pay the fee after we terminate the relationship? Clients are sometimes surprised to find that when they take a five-year lease option after 10 years, their original broker receives a fee that becomes part of the ongoing lease rate. Stutz warns that all fee agreements must be in writing and reviewed by each side’s attorney.
Clients often wonder, “Should we hire a national or international firm, or a smaller, local boutique?” Stutz’s experience suggests “the real answer is in the team sitting across from you at the table.” What do you need? Local or multi-market analysis, rightsizing your branch network and selling off branches or leasing space for expansion? On large and complicated projects, you may want short-range assistance in the form of construction and project management or long-term support with asset management services.
Buying, selling, renovating and creating a visceral brand experience for members and staff is exciting stuff. But it comes with significant risks in terms of financial cost and impact of efficiency, productivity and brand image. There are many horrors stories about bad real estate partners and deals. Fortunately, there are many more success stories about the right team of credit union leaders, strategic planners and savvy real estate brokers working together for success.
Paul Seibert, CMC, is an independent facilities and real estate consultant under Paul Seibert Consulting, Seattle.
