A common question people ask in the commercial real estate industry is “How do brokers get paid?” Although the payment to a broker is involved with every commercial real estate transaction, it seems many people lack clarity on the subject. Truth be told, the process of getting paid as a broker can get a bit complicated. The fact that commission rates can vary also contributes to the confusion around how brokers get paid. Whether you’re interested in becoming a broker one day or you’re thinking you might want to work with one, this blog post will explain how brokers get paid for their work.
How do CRE Brokers Get Paid?
What many people do understand is that commercial real estate brokers get paid based off commission. The commission is typically paid by the seller of the property, but the buyers of the property may also owe the broker a payment as well. Who pays the commission depends on who the broker is representing in the transaction. When representing both parties, both the seller and buyer will pay the broker a commission fee. If there are two brokers involved with the deal, they will split the commission between each other. However, the amount in which the broker is paid varies due to anti-trust laws.
Due to anti-trust laws, it is illegal to set a commission rate across a market or industry. This means the commercial broker and their client need to negotiate a commission rate before agreeing to work together. Negotiating a price for a commission can be great for both the client and the broker, as the costs of different properties vary greatly. Additionally, some properties are easier to find than others, which changes how difficult the broker’s job is. According to our partners at SVN | Southgate Realty, most commercial brokers get paid between four percent and eight percent of the sale price from the property. However, this may increase or decrease based on the complexity of the deal. So, be sure to consider how hard the broker will need to work when negotiating their commission rate.
How Does Commission Work?
In commercial real estate, a property can be sold or leased. The amount a commercial real estate broker earns is based on the price of the property. So, if the broker and the seller agree on a seven percent commission rate and the property purchased was $1,000,000, the broker would earn $70,000. However, if another broker was involved to represent the buyer of the property, the $70,000 would be split between the two.
For commercial real estate, because leases are typically paid on a monthly basis, there is a different way to calculate the commission of a broker. With leases, the broker is paid based on the length of the lease agreement and the monthly rate. For example, if a property is leased for three years at $15 per square foot, and it is 2,000 square feet, the lease value would be $90,000. We find this from 3 years x ($15 x 2,000 SF). If the seller and broker agreed on a seven percent commission rate, the broker would make $6,300.
Who Pays the Broker?
The person who usually pays the broker(s) involved with commercial real estate transactions is the property owner or landlord. Almost always, the seller or landlord will pay both brokers who are representing clients in the commercial real estate transaction. This is because the landlord wants to get the property off their hands and needs the help of the broker to do so. If you are looking to purchase a property, do not skip out on using a broker because you think you will get a better deal. Brokers are very resourceful, and you typically won’t spend any money on their services when you are buying the property.
Looking for a Commercial Real Estate Broker in Salt Lake City?
We hope this blog post cleared up any confusion you had about how brokers get paid. If you are looking to buy or sell a commercial property in Salt Lake City and need assistance from a broker, please feel free to contact us. Our highly skilled and experienced advisors will help you get an excellent deal and can answer any questions you may have. We always strive to make the transaction process as easy as possible for our clients. So, please feel free to reach out so you can work with one of our advisors today!
Do you have a commercial real estate property you would like to sell? If so, you have a couple different options for selling your property. In this blog post, we discuss your options and explain which one is best for you.
Ways to Sell Your Commercial Real Estate Property
There are two main options for you to sell your commercial real estate property. First, you can do it independently. Second, you can hire a commercial broker to help you do most of the work that comes with selling the property. Below, we explain how to go about these two options and what the processes entail.
Selling Your Commercial Real Estate Property Independently
Many people choose to sell their commercial real estate properties independently to avoid paying the fee of a commercial broker. Although hiring a commercial real estate broker isn’t free, the amount of work you will save yourself may be worth it. Selling commercial real estate is a full-time job within itself. Here are the steps people take when they sell their properties independently:
1. Find a Certified Inspector
Before selling your property, you need to get it inspected. A certified inspector will point out any damage or issues with your property that you need to fix before you sell it. Once you have had an inspector look at your property, you will need to fix any issues with they found. If you do not fix these issues, it will drastically lower the worth of your property, and people will be less likely to purchase it.
2. Find a Qualified Appraiser
When selling your property independently, you may have no idea what to list it for. There are so many factors that go into deciding a fair price for a property. This is where a qualified appraiser is very important. An appraiser is an expert who will evaluate your property and tell you what its market value is. From there, you will have a good idea of how much the property is truly worth.
3. Advertise Your Property
Once you have a set price, it is time for you to advertise that your property is for sale. This is one of the most challenging parts of selling a commercial real estate property independently. You may have to pay for advertising on social media, billboards, or newspapers. Advertising is crucial for people to gain awareness of your property and that it is for sale, so this step should not be skipped.
4. Hire a Commercial Real Estate Attorney
Once you have found a buyer, you will need to hire a commercial real estate attorney to write a contract for you. This will ensure the sale is legal and binding. They will also make sure you are protected as the seller throughout the sale process. Hiring an attorney can be expensive, but this is also crucial for selling your property, as your sale must be legal.
Selling Your Property with a Broker
As you can see, selling a commercial real estate property independently still requires you to hire people and pay fees. No matter what option you choose, you will need to hire an inspector to look at your property. When you hire a broker, after the inspection, all you do is give your broker the information they request, and let them do the advertising for you. Your broker will set the price at a competitive rate, ensuring you get the most for your property as possible. They will then show prospects your property for you, list it on their website, and will spread the word about your property. Then, when someone is ready to purchase it, a broker will usually have a contract ready for you. After the sale, you pay the broker for doing their work, and you are done!
Another consideration is that the longer you own the property, the longer you’ll need to pay for property taxes. If your own marketing process isn’t getting leads and finding a qualified buyer, the you could end up spending a lot more money because of waiting, then you would by using a commercial broker. Of course, these are generalizations. But, when you talk to a broker, you can get a better idea of what to expect in terms of costs and savings.
Broker or Independent?
The truth is, deciding between selling your commercial real estate property independently or selling it with the help of a broker depends on the amount of time you have. If you are already a very busy person, it is highly recommended that you hire a broker. This will save you a lot of time, and your property will likely be sold much more quickly. However, if you are experienced and good at selling commercial real estate independently, that may be the best option for you.
If you’re interested in using a commercial real estate broker to sell your property, please feel free to contact us. We help people in the Salt Lake City area buy and sell commercial real estate properties and would be more than happy to help you sell yours. Our goal is to make the process of selling commercial real estate property as easy as possible for our clients. So, feel free to reach out if you would like some assistance.
Buying commercial property can be a bit challenging for those who haven’t already been through the process. In fact, it can be challenging even for a veteran commercial property owner. Luckily, once you have purchased your first commercial property, the process gets easier and you know what to expect. So, to help you with this process, we have put together some tips.
Tips for Buying Commercial Property
There are many considerations to look into before making the decision to buy a commercial real estate property. It is best to be as educated as possible on commercial real estate investing before starting the process. This will help you to make an informed decision that will lead to a successful purchase. So, read the tips below to be one step ahead.
Consider Your Budget
Your budget is one of the most important factors to consider when investing in commercial real estate. The amount you can spend on a property will dictate what properties are available to you. It will also impact the size and location of the property. So, think about how large your budget is before going into the search process. You don’t want to spend too much to where you are making a bad financial situation. On the other hand, you should purchase a property that is large enough and in good shape. Doing this will increase your chances of attracting future tenants.
Know What Type of Property to Look For
There are many different types of commercial real estate properties. From retail, to multifamily, to office space, you can purchase all different types of real estate. Many people already have their minds set on a type of property they would like to purchase. If you are unsure, look to your budget. Also,consider the costs of maintenance and repairs on each type of property, to ensure you can afford to keep it maintained. This will help you get a good idea of what makes the most sense for you and your specific needs.
Choose a Great Location
Location is very, very important in commercial real estate. You want to purchase a space that will get a lot of business for your tenants, and a space that is in an area you can afford. Different zip codes and counties cost more or less for properties, so that is something to keep in mind. Do some market research on the success of commercial real estate and businesses for certain areas. This will likely point you in the direction of a smart business decision. Also, consider whether you need to be in an area with heavy foot traffic, or if being off the beaten path is fine. Will you need road-side signage? These are all location related factors to talk to your commercial broker about.
Get in the Minds of Potential Tenants
If you plan on leasing out your property to tenants, it’s crucial that you put yourself in their shoes. When looking at properties, ask yourself, Would I want to lease this place? If the answer is no, you may want to keep looking. Your property should be professional and comfortable for tenants. They should walk in and see themselves running their business out of your property. Based on the type of property you want to buy, tenant expectations will be a little different. So, think back to when you were in a similar property and what you were impressed by. This will help you get tenants who love the way your property looks and feels.
Another great way to ensure tenants want to lease your space is by making some improvements. Painting the walls, adding new tiles on the floors, and putting up new blinds is a great way to attract people to your space. At the end of the day, if you wouldn’t want to welcome customers into the space, you should probably keep looking.
Hire a Commercial Broker
The best piece of advice you can receive when trying to purchase a commercial property is to hire a commercial real estate broker. In Salt Lake City, there are many different types of commercial real estate properties. If you’re only interested in general commercial real estate investing, it can be difficult to decide which type of property to purchase. Additionally, there are different areas of Salt Lake City that are better for certain commercial real estate properties. A broker will be able to give you advice on these two important factors. They will also help you make decisions based on your specific circumstances.
If you are looking to buy a commercial property and would like help from a broker, please feel free to contact us. We have experienced commercial real estate brokers in the Salt Lake City area who would love to help you. Your broker will help you find a property in a great location that you can afford.
FOR IMMEDIATE RELEASE
UDOT to auction off mixed-use properties in growing region of Salt Lake City County
Surplus land between SR 111 and Mountain View Corridor
to go on sale in final UDOT online auction of 2019
Salt Lake City, UT (October 28, 2019) – The Utah Department of Transportation (UDOT) will hold an online auction of prime, mixed-use development land in Salt Lake City County, Utah. The 50.7 acres of surplus property is off a major highway in a rapidly developing area of the county.
UDOT will auction the property via an online platform created and managed by SVN Auction Services. The auction, the largest so far and the last one for 2019, is scheduled to run from Oct. 31 through Nov. 7.
The acreage on SR 111 is the largest of 16 properties up for auction during that period, and has a starting bid of $4.5 million. The starting bids for all 16 properties total more than $9.3 million.
“The SR 111 property is highly versatile: The zoning permits both residential and commercial use,” said Louis B. Fisher, III, national director of SVN Auction Services. “It’s situated between two busy roadways, and the average income of the surrounding neighborhood is higher than the state average.”
The property is split into two parcels. One contains about 38 acres that sits along SR 111. The smaller, about 12 acres, will connect to SR 111 from a bridge scheduled for construction. The busy Mountain View Corridor lies to the east of the property.
“This whole area will be getting some major improvements in transportation and infrastructure in the near future,” Fisher said. “This is highly desirable property and an excellent opportunity, whether the buyer wants to develop it for retail, commercial or residential.”
The other properties up for auction are in the Utah cities of Riverton, West Valley City, Clinton, Roy, West Haven and Syracuse.
The auction website at www.UDOTauctions.Utah.gov provides continuous access to UDOT property information. Qualified buyers can bid from the website in real time. The auctions comply with the state’s recently established process for the sale of surplus property.
UDOT’s online auction in March included 89 approved bidders from four states. Entities working with UDOT on this project include the SVN Auction Services team of Fisher and Dave Gilmore, and Chet Barber and Tia Shim of SVN Alta Commercial in Salt Lake City.
Darek Sagers, UDOT’s deputy director of rights-of-way, said UDOT has been pleased with the online auction process so far. “We’ve been very glad to see things go so smoothly,” Sagers said. “The buyers are receptive to the convenience of the platform. It’s been a win for both sides as we continue to market this surplus property.”
More information on the auction is available at www.udotauctions.utah.gov/auctions.
Louis B. Fisher, III, CAI, National Director, SVN Auction Services / 954-931-0592 / fisherL@svn.com
Ken Zeszutko, Z Corp. PR / 321-213-1818 / firstname.lastname@example.org
FOR IMMEDIATE RELEASE
UDOT surplus properties auction set for June 5-12
Following the successful inaugural auction using its new online platform, UDOT will conduct next auction of 15 surplus properties June 5- 12
Salt Lake City, UT (May 15, 2019) – The Utah Department of Transportation (UDOT) is conducting an online auction of 15 surplus properties June 5 -12. For more information on the properties, visit www.UDOTauctions.Utah.gov.
UDOT launched and successfully auctioned off its first series of surplus properties using its new, innovative online auction platform in March. With nearly 90 approved bidders from four states, the online auction was an overwhelming success.
“We are extremely pleased with the results of our first online auction event and very encouraged with the buyer market receptivity to our newly created platform and program designed for UDOT,” said Rod McDaniels, UDOT’s deputy director of right-of-way. “It allows us to sell surplus parcels with wide market exposure and more efficiencies at scale.”
The upcoming online auction June 5-12 includes commercial lots, residential development and land. Register to bid at https://udotauctions.bidwrangler.com/accounts/sign_in
The UDOT auction website provides round-the-clock access to UDOT property slated for auction and allows qualified buyers an opportunity to bid in real time. The auctions comply with state law and accompanying administrative rule R907-80.
“This new platform is very user-friendly for the bidders,” said Louis B. Fisher, III, national director of SVN Auction Services, which worked closely with UDOT in launching the auction platform. “UDOT established a framework and we worked in concert with them within that framework. It’s been a tremendous relationship. Based on the response to the first auction, it’s the right solution–the right platform.”
Louis B. Fisher, III, CAI, National Director, SVN Auction Services, 954-931-0592 / fisherL@svn.com
Ken Zeszutko, Z Corp. PR / 321-213-1818 / email@example.com
FOR IMMEDIATE RELEASE
SVN Auction Services awarded contract to support UDOT to meet mandate to sell surplus real property
SVN Auction Services builds electronic online auction platform to enable the Utah Department of Transportation to accelerate and close sales of surplus real property as mandated by Utah state legislature
Salt Lake City, UT (February 20, 2019) – SVN Auction Services has been awarded a five-year contract with the Utah Department of Transportation (UDOT) to create and manage an electronic online auction platform and clearinghouse to streamline sales of surplus real property owned by UDOT.
The UDOT SVN-managed online auction platform accelerates surplus real property sales for UDOT. The service and website address at www.UDOTauctions.Utah.gov delivers 24/7 access to UDOT auction-related information allowing interested parties to register for opt-in email notifications. It also allows real-time mobile platform bidding for qualified buyers.
“Based on our extensive national online auction experience, we have created an online solution to maximize value for UDOT,” said Louis B. Fisher III, national director of SVN Auction Services. “This allows the department to more efficiently direct all sales-related proceeds back into the Transportation Fund to offset future transportation developments costs.”
The website is currently live. The first online auction starts advertising in February and goes live March 13-20, with nine surplus properties to be sold.
Working in full collaboration with the national SVN Auction Services team, SVN Alta Commercial, the SVN Salt Lake City office provides local brokerage activities for the auctions.
“This partnership is exactly what we need to assist us in creating a new process and platform to meet our department’s goals and initiatives,” said Rod McDaniels, UDOT’s deputy director of right of way.
The surplus land auctioning process is governed by Utah Administrative Code R907-80 (Disposition of Surplus Land), establishing the process required for UDOT to dispose of real property declared as surplus to the state’s needs.
Louis B. Fisher III CAI, National Director, SVN Auction Services, LLC, 954-931-0592 / fisherL@svn.com
Ken Zeszutko, Z Corp. PR / 321-213-1818 / firstname.lastname@example.org
Last year the top investors in Utah’s commercial real estate market were from California.
Given the economy and amount of capital in California it shouldn’t come as a surprise that investment dollars spill over into Utah. What is surprising is the profound number of Californian investors – double that of the next closest state, which happens to be Utah. California represents 37% of the top 100 investors while Utah comes in second at 18%. The remaining 48 states don’t really show up in any significance, with the exception of Washington – 8%.
By comparing the cap rates, which measures the rate of return on investments in Utah to that of the largest three markets in California, it is easy to see why investors place their money here. It is only part of the story however. After all, there are markets with better cap rates. But, investing in Utah over California is a sound practice. In 2017, the average cap rate in Los Angeles and San Francisco was 4.6%, in San Diego it was 5.3%. For the same time period, the average cap rate in Utah was 7.3%. That is a difference of over 200 basis points.
Investors feel safe making an investment in the top three California markets, which is easy to understand. An enormous economy and an equally large population mean that apartment buildings, office towers, retail centers and industrial warehouses will rarely be vacant. But, the same is true in Salt Lake City, where low vacancies tend to rival those of California.
Salt Lake City survived the Great Recession in good form, in some metrics better than California. Vacancy rates climbed to just below 7%. That rate is on par with Los Angeles and lower than San Francisco at 9% and San Diego at just over 10%. Meaning, Salt Lake City fared better than two of the three big California markets at retaining tenants. The only metric where the three California markets beat Salt Lake City was in the way that rents rebounded. The Salt Lake City commercial real estate market took longer to bounce back to pre-recession values. It wasn’t until 2016 that rents in Utah reached the levels where they were in 2008. Whereas, rents in Los Angeles and San Diego rebounded in 2014 and in San Francisco rents never lost momentum, but were able to climb to new heights within two years of the recession.
All of the fundamental metrics are good reasons for investment in Utah.
However, the biggest factor which attracts investment in commercial real estate is the increasingly familiar news of international corporations moving to the state. As companies like Adobe, Amazon, Overstock.com and Goldman Sachs locate here, the big money in real estate follows. And, it makes perfect sense. For an investor looking to purchase a building where a large corporation is a tenant, the return is much higher in Utah than California, yet the chances that the corporate tenant vacates the space, is equal. Thus with the same amount of risk, an investment might yield up to 200 basis points more in Salt Lake City than it would in San Francisco.