How Much Money Are You Leaving on the Table by Not Hiring A Broker?

By Kiser Group

A wise old broker once told me, “If you cannot provide value to a client beyond what they can do themselves, you have no right being there.”  As a commercial real estate broker, our primary responsibility is to guide and serve our clients’ interests in a fiduciary capacity.  All too often, the importance of our role is over-looked.

To the owner that thinks “brokers take money out of my pocket,” I’d like to offer a perspective to consider.

A broker’s function is to provide value to a client; if this function is fulfilled, a broker is your strongest asset. Providing value is too often associated only with a monetary objective, but it also encompasses connecting buyers and sellers, providing opinions of value, educating owners about market trends, acting as a facilitator or mediator, guiding attorneys, lenders, appraisers, inspectors, environmental and everyone else through the escrow process, and much more.

I’ll be the first to admit, not every real estate transaction is in need of a broker, although we often think otherwise. In some situations, a property owner is well in-tune with the market and can achieve an excellent sale price.  Yet, this is rarely the case. The average owner, when approached with an offer, is leaving money on the table.  Recently, there have been a few similar instances that have absolutely perplexed me.

An example is a recent transaction that took place on a 40-unit courtyard building in my primary region of expertise.  Having conversed multiple times with the 30-year owner of the building, I heard much about his business, from painstaking maintenance to incoherent tenants. Over time, I learned the details of his property most pertinent to conducting an opinion of value.  Call after call, I would offer him this, but was told he had no intention of selling.

A month after our last conversation I find out that his courtyard is under contract at $80,000/unit.  In most cases, I would feel happy for the seller, but this beautiful building was under contract for $30,000/unit below market.  After a few attempts to reach the seller, I was able to ask, “What happened, I thought you were holding on to your building forever?”  And I was told a buyer approached him with an offer he couldn’t refuse.  I wasn’t going to ruin his day and tell him otherwise, but I did ask why he didn’t use a broker.  He told me, “I didn’t want to pay for something I don’t need.”

If a broker is doing their job well, an owner should not look at a commission as “paying,” rather maximizing profits.  In the case above, a potential $1.2 million (37%) was left on the table to avoid giving up a comparatively miniscule commission.

As a Chicagoland owner, let Kiser Group prepare a sales analysis on the next property you want to sell. We add significantly more value than the cost of our fee.