The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
To be a successful broker of distressed properties, it takes more than tenacity. The knowledge to really gain an understanding of a property is imperative to convincing both the seller and the buyer to join together on a sale. While it’s easy to determine value on a beautiful and upkept property, a distressed property broker needs to evaluate the potential in that property instead.
Richard Wilson: Thanks for sharing that, that’s helpful to know. What does it take to be a successful commercial real estate broker of distressed properties? It seems like from your answer earlier in this interview that it takes hitting the phones, it takes a lot of reaching out, it takes uncovering opportunities that aren’t listed, obviously, on places by very definition of off-market. It must take a lot of tenacity, so what else is not obvious about that? Is there a negotiation approach? Do you have to show up in person to actually get the contract? Or is it all a big number game to make it all work?
S.L. Van Der Zanden: I would say the most successful broker for distressed properties is going to be someone with a background or a really good understanding of the issues. Why and how is this distressed, and what does that mean to the value. So they can convince the seller of the rationale behind the pricing, and then they can convince the buyer the same way. So it has to be more than words, they have to have some real understanding of what they’re selling because it’s easy enough to have someone drive up and look at an office suite that’s beautiful and done and say “Yeah, I’ll pay $35 a foot for it.” But a distressed thing takes more hand holding and more time to figure it out.
Richard: Right, right.