As commercial real estate agents, our assignments are
memorialized through agreements - either agency
or representation. In the former, an owner engages us to procure a buyer or
tenant for her vacant building or sell an occupied one - referred to as a
leased investment sale. The latter tasks us with finding a location for an
occupant to rent or purchase.
Owner representations are also known as a listings. This
contract underlies virtually all of the signs you see advertising a property
and certainly any in the commercial multiple listing services such as AIR or
CoStar. If a broker is involved - it’s imperative that such an understanding
exists and outline the duties and responsibilities of each party - broker and
owner. In real estate transactions, a listing agreement is a contract between a
real estate broker and a property owner. This agreement gives the broker the
authority to act as the owner's agent in the sale or lease of the property. The
term "exclusive" means that the owner agrees to work solely with the
broker for a specified period of time to try and sell or lease the property.
There are typically three types of exclusive agreements: exclusive right to sell or lease, exclusive agency, and open listing - by the way all referred to an agencies.
Exclusive Agency: In an exclusive agency agreement, the listing broker has the exclusive right to represent the property owner. However, the owner retains the right to sell or lease the property themselves without obligation to pay a commission, unless the broker brings a buyer or tenant.
Open Listing: Though not exclusive, an open listing agreement is a non-exclusive contract, meaning the owner can hire as many brokers as they like. The commission is earned only by the broker who brings a buyer or tenant.
Much like listing agreements, tenant or buyer representation agreements typically specify the broker's responsibilities, the duration of the agreement, the geographic area covered by the agreement, the compensation that the broker will receive, and other terms and conditions of the relationship. In these types of arrangements, it's especially important for the broker to fully understand the needs of the client. For instance, a manufacturing firm may have very specific power requirements, zoning regulations, and more.
Costs: Even though the broker's fee is usually paid by the owner or landlord, the cost may still be reflected indirectly in the lease or purchase price.
Confidentiality: Some companies might prefer to keep their property searches and moves confidential until they are final, which can be easier to manage without involving external parties.
Complexity: Some businesses may have very specific or complex needs that they believe they can manage better internally.
Past Experiences: A company may have had a negative past experience with a broker and may choose to handle the process internally as a result.
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