What Exactly is the Difference between Commercial and Residential Real Estate Agents?
Residential agents sell houses.
Commercial agents sell hotels, office buildings, retail properties, warehouses, medical centers, hotels, malls, shopping centers, commercial and farm land, multifamily housing units and industrial properties.
A Residential Real Estate Agent’s primary focus is on mastering the world of single family homes. They learn the fair market value of homes in their area. They target families with their advertising and marketing strategies. They understand things like home warranties, whole house inspections, curb appeal and residential appraisals. They build relationships with lenders specializing in single family, primary residence lending.
While a residential Realtor can obviously sell a home which will then be rented to a tenant (an income-producing property) that type of sale is not considered commercial real estate.
The Residential Real Estate Agent’s specialty, however, is not retail, office, industrial or income-producing properties.
Commercial Real Estate Agents, on the other hand, deal exclusively with commercial and investment properties. They work with investors, small business owners, national chain executives and entrepreneurs. They build relationships with Commercial Real Estate lenders. They target their advertising and marketing to a business and investment clientele.
Most Commercial Real Estate companies will have a compilation of contacts in enormous data bases. CRE companies have signage that is larger and easier to see. They understand things like Broker Opinion of Value, Commercial Due Diligence, Profit and Loss Statements, ROI, Cap Rates, Modified Gross versus Triple Net Leases, Vacancy Rates and 1031 Exchanges. They are also aware of Traffic Counts, Zoning and Building Codes and are able to assist with the myriad of complex details that a commercial client will have to consider.
Not all Commercial Real Estate practitioners are the same. When selecting a commercial Realtor one should look for an agent with knowledge, experience and reputation in their local market. The ultimate qualifier for this is the CCIM designation (Certified Commercial Investment Member). CCIM Designees are equipped with the knowledge and resources to advise you on a fair market value and to successfully market your property.
A Commercial Real Estate transaction will usually be on a significantly larger scale, require much more time, energy and knowledge, and it will generally pay a higher commission. To illustrate this point, there is much more involved in building a Corner Strip Mall than a Single Family Home.
Should you list your Commercial property with a Residential Realtor? While it is not fair to say that there are not any Residential Real Estate Agents who are qualified to handle a commercial listing, it is realistic to state that a Commercial Real Estate Company, with their unique contact base, skill and experience, will be able to market to a pre-qualified base of people which a Residential Realtor’s may not necessarily have access to. CRE Agents are aware of investors and buyers who are continually seeking commercial opportunities. In fact, they will usually have Buyer Agreements in place with clients looking for CRE. And finally, a Commercial Real Estate Specialist will be better equipped to lead you (and the buyer) through the various stages of analysis, proposals and offers and are more likely to bring a qualified buyer to the closing table.
If you are shopping for Commercial Real Estate should you go to a Residential Realtor? Residential Realtors are most experienced with asking how many bedrooms and bathrooms a family needs and whether or not they want a pool in the back yard.
Commercial Agents, however, are going to know which questions to ask to find out exactly what you require for your business or investment needs: Are you looking to start or move a business? If so, what type of business? How many square feet do you need for the public versus how many for office or storage? Do you require high vehicle traffic or a high foot traffic location? Do you anticipate expansion? Will you need a specific ceiling height? How many parking spaces will you need? And, if you seeking income producing properties what cap rates are you looking for?
What about Agents who deal with both commercial and residential? There is something to be said for the initiative an Agent shows with the endeavor to handle both residential and commercial real estate. However, it is very challenging to be completely effective in either if you are attempting to handle both. Companies who handle commercial and residential will usually have Agents who specialize in either one or the other. The demand of being a 24/7 realtor to a residential clientele along with the extraordinary skill set required for the demanding commercial client would require super-human strength. Working the collection of residential prospects along with the compilation of commercial and investment opportunities would certainly overwhelm any one person.
It is our recommendation that anyone seeking to buy or sell commercial or investment property should seek out a specialist in the CRE industry. McCoy Wright is an exclusively Commercial Real Estate Company and it may seem that we are bias in making this statement, however, having established long-term relationships with Residential Realtors who regularly refer CRE business to us, we know that it is not just our opinion in this matter.
Just as we would not accept a client who is seeking to purchase a home (solely because we are not qualified) most Residential Realtor’s realize the same thing about Commercial Real Estate.