CHAPTER 3 A Residential Agent is Not Geared for Commercial Purchases As a business owner or someone in charge of the real estate search, you may know someone who is actually a realtor. But not a commercial realtor. A residential one. I’ve seen companies try and enlist the help of a residential agent for their commercial deal. It makes sense why someone would try that. Each is licensed and each sells property and brokers deals. Negotiations are part of every deal, so you may think this applies here, but these aspects aren’t as similar to each other as you may think. The greatest difference is the terms of the deal and the language in the contracts. Yes, each sale has an escrow period, along with other similar parts, but the language that defines the deals is completely different. There are more moving parts and bigger variables in commercial real estate that a residential realtor isn’t experienced or trained in. Residential agents don’t always and aren’t required to have a college degree, as more commercial agents are. This isn’t a knock on residential agents. Most commercial brokers have to get a degree in business or finance for specific job-related reasons. A broker needs to fully understand the finance terms. Navigating that field can be confusing for someone who wasn’t taught it. There are quite a few terms that are used often in commercial deals and not residential ones. The capitalization rate, internal rate of return, knowing the property tax rate ins and outs, and doing the detailed financial analysis are all aspects that a residential agent isn’t prepared for. 13
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