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Time and Money - The Downside of Doing Commercial Real Estate Yourself

 

Written by: Carr Healthcare Realty

Find a Medical or Healthcare Real Estate Broker Near You | CARR

Are you one of the rare healthcare providers or administrators who understands how much is at stake in commercial real estate negotiations? If so, then you probably know that commercial real estate is the highest negotiable expense for your healthcare practice. Consequently, most healthcare providers fall into the statistic that tells us that 80% of healthcare practices still take a ‘DIY: do-it-yourself’ approach to these crucial negotiations and site selection process.

Let’s review a couple reasons why doing commercial real estate without representation will likely cost you a significant amount of time and money.

Time

The average commercial real estate transaction takes dozens of hours to complete. When you calculate the hours of research, driving the market, communicating with listing agents, touring properties, negotiating letters of intent (LOI’s), negotiating lease contract terms, printing, signing, mailing documents, and the dozens of other miscellaneous tasks you encounter in almost every commercial real estate deal, you can easily spend 30-40 hours or more on a single transaction. That equates to an entire week of work!

Given the fact you have a full-time job already, you have two options as to where you will find those hours:

  1. During normal business hours (when you could otherwise be generating revenue) or
  2. During your valuable time off that would normally be spent with your family, relaxing, taking care of personal errands or making memories with those you love.

Neither option is a good one, especially when you consider how much money you could be making per hour if you invested that time into your practice. Since time is a commodity you cannot get back, it’s important to invest it where it will yield you the highest return.

Money

The ‘do-it-yourself’ approach can cost the average healthcare practice tens of thousands of dollars.

The vast majority of commercial real estate transactions have a listing agent assigned to the opposing side of you in the transaction. That agent has a fiduciary responsibility (legal and financial obligation) to the landlord to ensure they get the best possible deal and that their interests are protected and paramount over any other party in the transaction – meaning you!

The listing agent is also the person who collects a commission on the transaction. The commission amount is set aside before the property is even listed, and it will either be paid to the listing agent or split between the listing agent and the agent you hire to represent your needs. Often times if there is no agent representing the buyer/tenant (you), the listing agent gets paid the full commission, rather than splitting with the agent who should be representing you. This means the listing agent is receiving a ‘double commission’.

If you take the ‘do-it-yourself’ approach, someone else is making the money for doing the job you did yourself. The craziest part is, the person making money is opposing you in the transaction! And, you just helped that person collect twice as much as they would have if you would have hired an expert agent to represent your needs and protect your interests! This could be because you don’t fully understand everyone’s role within a deal. After all, when you called the name on the sign, they told you they wanted to help you get into the space!

The problem is, to them you are just a customer. The landlord is their only client in the deal. That might not sound like a big difference but it has a HUGE impact on the outcome of the terms that each party receives. The listing agent has a legal obligation (called a fiduciary) to ensure the landlord gets the best possible deal within your transaction. They have no such obligation to you, since you are not their client.

Without representation that looks out for your best interests, you are almost guaranteed to leave a significant amount of money on the table during negotiations.

To contact an expert agent near you to maximize your time and financial savings:

Find a Medical or Healthcare Real Estate Broker Near You | CARR

 
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Reed Tinsley, CPA
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21175 Tomball Parkway #194, Houston, TX 77070
P. 281-379-5988 | F. 281-605-5701
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My firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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