Brokers, Salespeople, Realtors and Tenant Reps

The sometimes-necessary evils of real estate

By Tony Ozelis

Note: For simplicity’s sake, we will refer to all Brokers, salespeople, Realtors, etc. as “Brokers”in this article.

It’s important to understand at all times that, unless specifically agreed upon and reduced to writing (via, a contract); a real estate broker always works for the owners of the property and not you.

You read that right…

To a broker; all Landlords and/or sellers are called their “Clients” and their relationships are fairly well defined in Real Estate Licensing laws throughout the country. They are supposed to look out for their interests at all times.

You, as someone looking to buy or lease a building, space or piece of property, are known as the “Customer” and the real estate broker is not really under any legal obligation to tell you spit.

Repeat after me: caveat emptor (just in case you skipped that class, it's Latin for "Buyer Beware")

Most brokers have a tendency to be very chatty people and being in an information business, many successful ones have an acute intuition when it comes to smelling a kill. One of the first questions that they’re bound to ask you is; “How much are you looking to spend?

They ask this for two very good reasons… First, because they legitimately want to know what your budget is. It makes sense. They want to be able to focus on potential sites that are within your budget. Since they work on commission, their time is their money.

The second may be a bit more self-serving and dangerous to you…and that’s because they do work on commission.

Remember kids...

There’s real money involved here. On a typical property selling for $750,000 with a commission rate of 5%, their commission could potentially put $37,500 in the broker’s pocket. On a $75,000 per year lease and term of five years, the commission could be $20,250*

*Although commission rates do vary from place to place, in many areas throughout the United States it is not unusual for the broker to receive an amount equal to 7% of each of the first three years rental and 3% of the balance of the primary term.

In the example above; the commission structure would be 7%,7%,7%,3%&3%.

As we’ve said, real money.

Why should you care? Because despite what you may think, even though the landlord (or seller) is usually responsible for paying the commission to the Broker, just guess where it comes from?…right. It comes from the price that you pay.

Simply put, the more you pay to buy or lease a property, the more the broker gets paid.

This, now that I think of it, sounds a lot like feeding your cow milk.

So you can imagine, with that kind of dough on the line, it’s easy to see that a little white lie or a bit of progressive disclosure could go a long way in lining everyone’s pockets…everyone’s but yours, of course.

 

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Why should you work with a Broker?

 

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