Why Should I Hire My Broker Exclusively?
Georgia Real Estate Law requires brokerage relationships to be explicitly outlined.
According to the Georgia Code Title 10, Chapter 6A, which deals with brokerage relationships in real estate transactions, there are specific duties and responsibilities outlined for brokers engaged by tenants1. While the code itself does not explicitly state that a tenant must have a written statement of their desire to hire a broker, it does imply that a formal brokerage relationship should be established, which typically involves a written agreement.
If you are a tenant looking for commercial space on your own, you have probably been speaking to the leasing agent who is the broker (or leasing agent) for the seller. The seller’s agent cannot offer any advisement to the tenant and is not obligated to keep any information you share with them confidential. If you engage a tenant rep broker, you are stating that he/she legally represents you and they owe you certain duties. This ensures there is no confusion about who represents whom. This representation includes investigation and negotiation of the commercial property and the neighborhood that you choose, as well as the process for getting you the best deal.
Tenant representation is free to you. The seller pays the tenant rep broker to bring a tenant to them. Typically, landlords have built-in commissions for tenant representatives as well as for landlord representation. If you opt not to engage a tenant rep broker to represent you, the entire budgeted commission goes to the leasing agent negotiating against you. The leasing agent has a fiduciary duty to the owner, not you. You will be required to sign a Letter of Authorization (LOA) or a similar document outlining your brokerage relationship which allows the tenant rep broker to work exclusively for you to find the best commercial space for your business.
Often clients have difficulty articulating exactly what they want for their business.
You may start by telling your broker exactly what type of space you are looking for, but your preferences may actually change as you go around viewing different spaces. As a broker, I listen and watch the reaction each client has to every space I show him/her. I have learned to pay attention to the visceral reactions a client exhibits when viewing a property for the first time. This allows me to get a better sense of what they want and, from there, I can narrow down the search. Going from broker to broker will not allow you to form this type of beneficial relationship which is the glue that holds good brokerage and good decision-making together. Remember, your broker is going to work hard for you because he/she is never paid until you are happily in your new commercial space. Getting your deal closed is a mutual goal.
Your tenant rep broker will also be able to identify any potential timeline issues by communicating with the leasing agent at the start of the transaction. Some issues may include a committee-approval which most business owners may not be aware of. On occasion, the landlord will hire a large leasing agency to represent their interests. The leasing agency may have a board or committee who must come together to vote on final lease structures which could cause a delay due to the number of parties involved. This is just one unforeseen roadblock an exclusive tenant rep broker can prepare you for, but your broker will be aware of many more potential pitfalls.
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