For Real Estate Sales Professionals

August 29, 2005 E-zine

August 29, 2005
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Read by More Than 30,000 Agents

Always be determined to become the
best real estate agent in your territory!

In this Issue:

1. When Your Co-Op Agent Is Your Worst Nightmare

2. Maximizing Your Income on Sale/Leaseback Transactions

1. When Your Co-Op Agent Is Your Worst Nightmare

Years ago I was attending an annual planning meeting for a real estate association that I was President of and a member of its Board of Directors for over ten years. During lunch we had a speaker come in who was a business consultant with an extensive background in psychology, and he began talking to us about the psychological profile of the typical real estate agent. One of the components that he mentioned in this profile was that real estate agents tend to have a "much stronger than average desire to impress others." And I have to say that based upon my years of experience in our industry, I'd have to agree with him on this.

But one of the problems to us as agents who want to to work effectively through other agents is that this desire to look good can sometimes manifest itself in the form of a big and grandiose ego. And I must say in this regard that over the years I've definitely found myself sometimes working through agents who seemed to think that they were the most important part of the transaction, not the transaction itself.

My most difficult experience in this arena came about 20 years ago when I was representing the buyer of an industrial building and I was negotiating through the owner's listing agent. The listing agent's father was a wonderful man and a highly respected agent in our industry, but his son was a completely different story. Whenever I would submit a counter-offer to the son for discussion with his clients, he would immediately tell me that the counter-offer was completely unacceptable to his owners. This was, of course, before he had even submitted the counter-offer to them for their consideration.

His ego was so out of control that he was pretending to be the ultimate decision maker for the property, and of course this attitude was working towards influencing the owners to reject whatever proposals my clients were submitting to them. In addition, he was doing this in a very angry, condescending manner. And I have to tell you that the things my clients were asking for throughout the negotiations were definitely quite reasonable.

I finally realized that I had to work within the framework of this guy's ego to make him have a solid vested interest in making my deal go down successfully...

"Don," I said to him, "I really need your help. You're the only person who has what it takes to make this deal go through. And I need to know I can rely on your skills and abilities to successfully negotiate this transaction and make it close. I'm counting on you, Don, to make this deal happen."

And instantly, Don became my ally in now giving his best to make the deal happen, which of course it did. (Don was not the agent's real name by the way.)

So what did I really do here? Well I recognized that Don's ego was killing my deal, and that Don was more concerned with feeling that he was the most powerful person in the transaction than he was with successfully closing the transaction. So I needed to find a way to keep Don feeling that he was all-powerful, but in new a way that successfully supported achieving the desires of both me and my clients.

Now I'm here to tell you that in all honesty, in the beginning of our negotiations, when Don's ego began running rampant and getting in the way, I was going head-to-head with Don and fighting him. I thought he was being way out of line and my initial reaction was to respond to his ego by giving him a taste of my own right back...and quite strongly! But I quickly began to realize that Don was completely willing to blow this deal as long as he felt he had won the battle of our egos in the process. And this just wasn't acceptable to me.

So I recognized that I had to be willing to sublimate the desires of my own ego to his, and make him feel that he was definitely more powerful than me. For many agents this is not easy to do, but it can really pay off throughout one's career if you're willing to do this to close more transactions when it's appropriate. And in the end in this situation my ego actually felt great because I recognized I did what was necessary to close the deal, rather than let our two egos blow it.

You see, had Don failed to make the transaction close, he would have proven that he did not have the skills and abilities that I said he had when I made the statement to him asking for his help. And there's no way that his ego could have handled that kind of failure...especially when he was so intent on proving his superiority over me throughout our negotiations. So with Don's worst nightmare now having become failing and not closing our transaction, his number one interest became doing whatever it took to make this deal happen, which is exactly what both me and my clients wanted from him.

While this experience with Don was certainly my most difficult case of another agent getting in the way of me closing a transaction, there certainly have been others, too. In fact, there have been times when I've sat down and talked with friends who've had long and successful careers in our industry, and oftentimes we've agreed on the following:

There have been so many times throughout our careers when it would simply have been easier to have removed the other agent from the transaction altogether, and just have sent them their full portion of the commission after the deal closed.

(However, approaching another agent with this suggestion would create an entirely new interaction of agent egos..:)

But I mention this because that's how difficult it can be sometimes when negotiating through another agent in a transaction. Oftentimes agents don't have the negotiating skills to make the deal go smoothly, and sometimes they act as if showing everyone their strength and brilliance is the most important part of the negotiating. And with an attitude like this, one can see how this can all easily lead to a recipe for disaster.

So an important skill to develop throughout your real estate career is that of assessing the capabilities of the cooperating agent you're working through. Once you learn to do this it will help you to compensate for and move through m any of the problems the agent's abilities may create f or you. And when you learn how to do this effectively, you'll now have a very important tool available that will serve you immeasurably in making more money in your real estate career.

Click here for downloadable E-books and live audio interviews with top-producing real estate agents. These interviews are with industry experts who show you exactly what they do to continually make hundreds of thousands to millions of dollars a year.

2. Maximizing Your Income on Sale/Leaseback Transactions

If you've successfully sold and leased commercial buildings over the years, you probably understand the basic mechanics of a sale/leaseback transaction. This is a transaction where a company owns a building, sells it to an investor, and then leases the building from the investor for a specified period of time. Oftentimes transactions like these can be utilized for companies to generate more cash for themselves while continually occupying the property and conducting business as usual.

Typically when an agent is involved in one of these transactions, they only get paid a commission on the sale of the property, and receive no commission on the leasing portion of the transaction. But these are two separate and distinct transactions that would normally each call for a commission to be paid if they were consummated weeks or months apart from each other. However, normally in a sale/leaseback transaction, the agent never even discusses the idea of getting paid a leasing commission for successfully negotiating the lease. Oftentimes the agent is so focused on selling the building that they never even consider the possibility of getting paid a leasing commission on the transaction.

But your ability to earn and get paid a leasing commission along with the sale commission may really depend completely on the timing of when you approach your prospective buyer to discuss this subject...

Let's say, for example, that you've uncovered a sale/leaseback opportunity. You've located a company that owns a building they'd like to sell to raise some additional operating capital, and they'd like to remain in the building for another ten years. But they don't want to list the property because they don't want their neighbors and the people they do business with to know that they need some additional money.

So you, being someone who's been in the business for a number of years, make a list of potential investors you know who you think could be interested in purchasing the building and signing a lease with the company that owns it. And with this in mind, here's what you'll want to say when presenting the property to your first prospective buyer:

Agent:

"Hi John, this is Bob Richards with ABC Commercial Real Estate. I've located a building downtown near other properties you already own that I think could be a good investment for you."

Prospect:

"Tell me about the deal, Bob."

Agent:

"It's a nice 50,000 square foot building, the owners are interested in selling it for a reasonable price, and they're willing to lease the building back from you for 10 years."

Prospect:

"That sounds interesting."

Agent:

"Now John, I have to ask you something. This is a deal where I have a number of people who I believe would be interested in buying it, but I'm presenting it to you first. And I need to know that in presenting it to you that you'll pay me a commission for the 10-year lease portion of the deal if we successfully negotiate and close the transaction for you."

Now if John is an active real estate investor, the thought of never finding out the exact location of the property, touring it, and having the opportunity to negotiate with the owners will most likely drive him crazy. Add to this the fact that he knows you'll be calling his competitors if he says, "No" to your request for the leasing commission, and you'll probably recognize that you now have great leverage in this situation. The last thing John wants to think about is someone else potentially negotiating to buy this facility at a great price, and then hearing about the great deal he could have purchased himself afterwards.

So there is a very good probability that John will say, "Yes" to your request for the leasing commission so he can continue moving forward and learn more about the opportunity. And at that moment, you've just set the stage to get paid maybe 40-60% more commission for the overall transaction if you're successful in making it happen.

The timing of approaching your prospect with this idea is what's all important here. So many active investors continually live to hear about the wonderful new deal they might be able to purchase, and this is where you have your leverage.

Compare this instead with what you're likely to hear if you bring up the subject of getting paid a leasing commission after you've already shown your prospect the property:

Agent:

"John, as you know investment opportunities like this one are hard to find. And I hope you appreciate the fact that I brought the deal to you first. With this in mind, I'd like to receive a commission for the leasing portion of the transaction also."

Prospect:

"Bob, Bob, let's not get greedy. You and I are going to be doing business for a long time together, and you're going to earn and get paid a lot of money on the many other deals we'll be closing together. The commission you'll be receiving for the sale of this property is already a lot of money and I'm not going to pay you a dime more than that."

So you see how much one's perspective can change when they now know all the details, have seen the property, like the investment opportunity, and know how to contact the owners directly if they now feel they need to.

(And of course, we both know that all the money John told you you'd be making in future transactions with him will probably never happen...at least not to the degree that he's indicated to you.)

So with this, and with all the downward pressure on commissions nowadays, it's helpful to earn and get paid what you're worth whenever the opportunity to do so arises. When you solidify your position to get paid a leasing commission on a sale/leaseback transaction, and your buyer moves forward and closes the transaction accordingly, clearly the buyer felt it was definitely worth it to pay you the leasing commission in the transaction. Otherwise the buyer would simply have passed on buying the property.

In summary, there's never any shortage of buyers for good investment real estate. When you find the great deal, buyers will literally line up to buy the property you've located for them. Let's just make sure you get paid what you're worth every single time whenever you have the opportunity to do so.

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"In the six months that I've been working with Jim my real estate commissions have tripled."

Tim House
Sperry Van Ness

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