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How Exclusive Representation Provides Maximum Value For Clients

January 20th, 2013

Every commercial real estate brokerage professional who has ever interacted with a prospective client has heard it. “Everything sounds great….Just bring me a buyer (or tenant) and I’ll be happy to pay you a commission, but I won’t sign an exclusive representation agreement”. The client feels that entering into an exclusive contractual arrangement with you limits his ability to get other brokers to work on the sale or lease of his property. The client sees the request for an exclusive agreement as something that benefits you, the brokerage professional and in turn creates a disadvantage to her. Something about that word…..Exclusive….seems to imply that everyone else is excluded from working on the deal. The reality is that just the opposite is true. A good commercial real estate brokerage professional understands that exclusively representing our clients is the only way to maximize the CLIENTS’ benefits and achieve what they are asking you to help them achieve. This may seem counterintuitive to the client, so let’s look at where the real value of exclusive representation is for him or her:

  1. Whether the goal is to sell the client’s asset, lease the client’s space or tenant representation, a transaction will only culminate from a negotiation. Without exclusive representation, the client loses the strategic advantage of having an intermediary between her and the party she is negotiating with.
  2. Exclusive representation demonstrates commitment and deliverability. I worked with a very active buyer at one time who lived 200 miles away. I mentioned a property that I knew would be coming to the market soon, which fit his buying criteria. He asked me point blank “Do you have an exclusive listing on it yet?”. I did not and he refused to even discuss it until I did. He said “I’m not going to risk my time to drive 200 miles and start work on a possible acquisition that may not be deliverable”. My client understood that if the Seller entered into an exclusive representation agreement with me, he was truly committed selling the property if price and terms could be agreed upon.
  3. Good commercial real estate brokerage professionals will not risk their time, resources or reputation working on open listings. Clients must understand this. Using the client referenced in number 2 above, what if my client had driven the 200 miles, liked the property, spent time (and possibly money) investigating it, wrote an offer and then the seller decided that they didn’t really want to sell? I indicated to my client that the property was “available” and it ultimately was not. My reputation with my buyer has been damaged, not to mention the time and energy I have wasted. Good commercial real estate brokerage professionals only work on deals where they are assured that the parties they represent will perform. This assurance is obtained through exclusive representation.
  4. Exclusive representation incentivizes the broker/agent to achieve the highest possible results for the client he represents. That means expending their time and resources to proactively market the client’s property or solve the tenant’s space requirements. Why? Because the brokerage professional is obligated to use her best efforts to deliver the results they have been HIRED to achieve for their client. The most capable brokerage professionals utilize their time working on transactions that have the highest probability of closing. The commitment they receive from a client through an exclusive representation agreement maximizes that probability and motivates the brokerage professional to perform. Commitment goes both ways.

We as brokerage professionals owe it to our clients to articulate the value of exclusive representation in terms of benefit to them. Sophisticated sellers, landlords, buyers and tenants recognize this value, which is why most major commercial real estate transactions that you read about acknowledge broker representation for each party.

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