How To Interview Your Commercial Real Estate Broker
Why you should interview your real estate broker
A few weeks ago, I wrote about the most common mistakes I see people make when choosing a commercial real estate broker. In case you missed it, you can find that article here.
Today, I want to focus on what I believe is the most critical step in the selection process; the broker interview. I've said before that most brokers can handle themselves during an introductory consultation. That's great, and it's the first step in getting a feel for their personality. But a formal interview should be a deliberate process, with a series of calculated questions aimed at assessing their ability to add value to your transaction.
Ultimately, a broker needs to display competence before being hired, and understanding their niche and skillset will better inform your decision.
Here's my advice. Interview three brokers before you decide anything. You should interview at least three brokers even if you choose to sell the property yourself. Think about dealing with them for 3-months, 6-months, or even up to a year. Can they add value?
Below, I’ve outlined several questions you should ask in every broker interview:
Have you ever done it with your own money?
This shouldn't be a deal-breaker by any means, but it is telling. A broker investing their own money represents a level of commitment to a process and a commitment to real estate as an asset class that can't be replicated. Real estate ownership is expensive, and the financial barriers to entry weed out those who offer just lip service.
If they are active investors, ask about lessons learned. Not every real estate investment is a home run; even the best-laid plans go awry. But how a broker responded to and learned from those mistakes can offer some insight into how they assess future deals.
What is your specialty?
It’s an innocent question, but it’s probably the most important thing you can ask during a broker interview. Not all commercial real estate professionals are built the same.
Are they leasing brokers? Do they specialize in investment sales and capital markets? Finding a broker with a focus will help to unlock the most value for your investment. As a real estate investor, your team of advisors will largely determine your success. Hiring a leasing broker to handle your portfolio recapitalization or multi-tenant investment property divestment will probably lead to disappointing results.
Understand your strategy as a buyer or seller and find a broker who can adeptly facilitate your needs.
How do you find the best deals?
There are wrong answers to this question. If you hear something like, "I am the first to find new opportunities as they hit the market," run. You should demand a broker who is active in digging up and creating prospective investments. You can find my article on the keys to finding a great deal here, but I have distilled successful deal acquisition into four key criteria:
- Market saturation
- Access to capital
- Boutique/local ties
- Process-driven brokerage
Now, I am not saying there aren't a couple of right answers. But you should be confident that your broker has a systematic approach to actively creating opportunities.
What product types or tenant profiles do you suggest seeking for investment?
You need to ensure your broker has an understanding of the current market environment. Real estate is localized, but macro-economic trends play a large role in local prices and local tendencies. Your real estate broker should articulate how the two are interconnected and the potential impact on your investment.
Certain product types provide a safer hedge against inflation. Specific tenant profiles are less susceptible to market shocks and disruptions. Successful investment hinges on finding a broker who can help you navigate these fluid variables.
Asking the tough questions early can help avoid an unsatisfactory transaction. Give me a call if you would like a copy of my proprietary broker interview form or need help navigating the interview and selection process in the Raleigh or Triangle markets.