The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
Brokers that are willing to put some of their own equity in on a deal is a very promising sign that they’re willing to align with you more. They’re willing to not just think like an owner, but to act like an owner, really getting on the same level as the owners they’re working with. While a broker that does not invest shouldn’t be an automatic deal breaker, it does show something special when a broker is willing to learn by experience.
Richard: And what is a commercial real estate broker model that would actually align them with you more? Is there a way that if things go well they get paid out a double fee and if the deal is not good or doesn’t work out they get paid almost nothing, just enough to cover their paperwork? That really they get paid very very little if it turned out to be a bad deal. Have you found a way to do that or have you custom structured something with brokers to align them with you in some way?
Ben Marks: You know, that’s an interesting question. We’ve tried doing that and interestingly most of the push back we’ve gotten is actually from the brokers. And I think the other sort of filter that we like to use, we don’t use it all the time but on occasion where deals are marginal or we’re bridging a gap, we’ll look to them and say “Why don’t you guys put in some of your equity on the deal? Would you be willing to do that?” And it’s one thing, I don’t expect everyone to put equity on every deal, but if they’ve never done that, and they don’t own any commercial real estate, and again it’s not an automatic disqualifier, but it certainly gives me confidence to know that A) they’re able to think like an owner and B) they are going to think like an owner. And again I have a group of brokers that I’ve worked with exclusively and I know that when they call me, they’re not going to waste my time, they’re not going to, I’m not going to shoot a bunch of holes in it in thirty seconds, because they’ve learned to think like an owner. And I have to say, it’s a lot easier to think like an owner once you’re an owner and you have the benefit of experience, and the mistakes, and the baptism by fire. Learning from others’ mistakes is a very very difficult skill, and only very few brokers I’ve seen have been able to master it. I don’t think I could do it to be quite honest, without the benefit of that experience so that’s why I’d recommend it.
Richard: Right, good point. Okay, great.