Sell High: Finding the Right Broker

Welcome to SellHigh, the ultimate podcast series for landlords looking to maximize their property's potential and achieve top dollar sales.

Hi, I'm James Nelson, your host and I'm here to help you unlock your property's full potential.

And I'm Anlis Callez, your moderator, guiding you through each insightful episode. Get expert insights on market timing, broker selection, property valuation, marketing, negotiation and closing all in one podcast. Tune in to the Sell High series and unlock the secrets to top dollar sales.

Welcome everyone. Excited that you're joining us for the third installment of this Sell High series. Today we are going to be talking about choosing the right broker, certainly a subject that is near and dear to my heart. With me I have Anneliese Calles, who is founder of Brandora. She is also the one who is running the James Nelson market and helping promote and spread the word on all this great information that we're putting out there. We are here to help you gain the insider's edge to real estate investing. And once again, selling is a very large part of that. So, Annalise, I'm really happy to jump into this conversation with you.

Hi James, thank you again for having me. I'm really excited about this episode. So in the last episode we discussed when it is the right time to sell your building, that commercial real estate market is not seasonal, and that if you can be a patient seller, you could really maximize value and get the highest price. Today, Today we're here to talk about an important topic and to share with you, our listeners, the best way to find the right broker to represent you. First, James, before we dive in, I wanted to discuss the importance of hiring a broker if you're a landlord thinking about selling versus doing it yourself. I've been working in the real estate space for 18 years and I'm often asked, what's the point to even hiring a broker? My friend and mentor, James Kinsey used to tell me that when landlords want to sell, it's because there is smoke, a load getting due, personal issues with the family, a divorce, a death, inheritance, a disagreement between siblings inheriting the property, or a need for the funds, for instance. So when you landlords and owners are dealing with a vulnerable situation, that's really when you want to hire a professional to represent and protect you and be a buffer between you and the buyers and have someone with your best interest in mind to negotiate on your behalf and get you the highest price. Or you could really be leaving money off the table. So now that we understand that your broker can be your Best ally in a very important moment of your life, the sale of your building. In your own words, why do think landlords thinking about selling should get a broker instead of doing it on their own?

Right.

So Annelies, it's a great question. I really happy that, that you brought in some of the words of wisdom for from our friend Jim Kinsey, former partner of mine, who we dedicated this book to. Jim sadly passed away and but he had such incredible knowledge to share and so I'm glad that his memory can live on here. As far as the decision to hire a broker, what I say is that in a hot market, a lot of owners, and we're talking commercial now, residential, I don't, I don't think you see a lot of owners who say, oh, do I need to hire a broker or not, right? They, they understand people are busy, they're not in the business of marketing, showing their property, figuring how to bring it to market. Commercial, it's a little different, right? We're dealing with owners who are investors. They're in the business. They probably know, you know, some of the buyers who might be out there, they're probably getting called all the time, right? And so especially when the market's hot, you'll have buyers that'll call owners and say, listen, will you sell your property? What do you think about this offer? And so it would kind of be natural for an owner to think, well, hey, what do I really need a broker for? I'm going to have to pay them a commission, right? And I already have people calling me, what do I need them for, right? And the answer is, and even in a hot market, right. What I try to tell people is first of all, if you're in the business of running, operating a property, that's your full time job. My full time job as a broker is to go out and market property. And we are in the market so we know who the act most active buyers out there. We know how to position a property, we know how to really maximize price. But selling high, right? And I love this, this series because it's so essential, right? Because it's the most important step, the exit from an investment is to gain the maximum exposure, right? You have to create that marketplace, you have to reach the broadest audience. You also have to be able to position the property in the right way, right? To really give it, put the property in its best light. So those are really important steps and the broker is really your quarterback. They are the ones, as you said, you call them the buffer, right? But they're the ones who are able to bring in all this interest and to distill it and partner with their client to say, look, these are the options. This is what I think you should do. And it gives that little bit of, you know, that the buffer, so you can turn around and then strategize and figure out, okay, how do we drive price here? How do we respond to these offers? Right. So it's really important that you have a broker representing you to do all those things.

And since you're a broker, James, can you share a personal story on how you really helped someone sell his or her building?

For one of our biggest clients, they'll remain nameless for now because they are a reit. And whenever something's, you know, publicly traded, so there's rules over talking about various sales and details. But I will say that this was a retail property, High street, soho. And this was just when we were starting the relationship with this new client. And we saw this property and we knew it had been on the market not once, not twice, but three times.

Three.

Three different brokers had attempted to market this property.

Right.

And this was also in a declining market.

Right.

Things were getting challenging. Interest rates were going up. And they said, look, we love your enthusiasm, but we don't think there's any way. I mean, we've already tried this three times. What are you going to do that's different?

Right.

And how are you so confident that you can achieve this pricing?

Right.

Well, we tried to explain is, you know, we just talked about the importance of a broker, but not all brokers are the same, not all approaches are the same. And I'd love to get into that with you, but what I said was, look, we think that what's been done so far is a really a traditional marketing campaign. And we think that maybe you went to the logical buyers. You know, hopefully someone called up and down, you know, the avenue. These are typical things that a broker would do. Maybe some cooperation with the brokerage community. But, you know, knowing kind of the history of this, we hadn't seen it out there publicly. And we said, look, we think we can help expose this property, really give it broad exposure and reach an audience that hasn't seen this. And sure, when we launched the property, three quarters of the buyers, you know, because we're still making those first calls, those logical calls to buyers in the area. Yep, I've already seen it three times. Overpriced, not going to buy it. Sure enough, six to eight weeks later, we had amassed a dozen offers. Some of them had had made bids before, but one was a foreign buyer for Korea. And this completely hit their criteria and they were unaware of this. And if, if we had not posted this, and in this case this was through our social media efforts where they had seen a post that we had done that had driven them to our website and make that acquisition, we were actually able to achieve pricing higher than what the previous broker was even asking in what I believe was a declining market. So I just, I feel like that was a success story because again, sometimes when we're the second broker in, third broker in, you know, for us, it's an opportunity to show that, you know, maybe not all marketing campaigns are the same and that we can add additional value and ultimately a higher sales price.

It's super interesting. I mean, as you know, I'm a marketer and I really believe in getting maximum exposure for your listings. And that's really how you can access, like, different type of buyers. James, There are over 2 million real estate agents in the US and 100,000 just in New York City alone. Now, can you tell our audience how do you find the right broker? What are the key qualities that landlords should be looking for when selecting a broker to sell their building?

I think this is all a business about specializing. And so you need. And I think that's both by asset class and by geography as well. So knowing that that sales broker has transacted in your market, your geography, New York City, that could be Manhattan, but that could be as specific as a neighborhood like Chelsea of the Village that they've actually sold in that area. It's also understanding the asset class multifamily is very different, for example, than from industrial or retail. Do they understand all the nuances of the property? As a broker, I believe that you want to be able to tell buyers the good, the bad, the ugly. You want to really uncover the issues. So does your broker actually have an understanding of the asset? Can they get to the bottom of it? Because what that does is that really avoids any false starts.

Right?

So, yes, it's really important to try to unlock the property's value. Let's talk about all the potential. Maybe it's a way to add additional air rights. Maybe it's to convert, create more apartments, maybe it's to take advantage of some tax abatement program. But I think it's also in the same breath, talking about some of the challenges of the property and getting that information out there. So I think that's really important. Again, to go back to your question of finding that broker who's knowledgeable enough, who knows the area, knows the geography and the asset class and all the nuances.

Right.

And has that track record to demonstrate that they've successfully closed in that, that area.

So basically the track record, understanding the asset very well and geography. That's really interesting. And James, another question for you. Would you be able to walk us through the typical process of finding and selecting a broker for selling a property?

Sure. When someone's looking to sell a property, I think it is a good idea to get at least two or three opinions. And that means calling brokers up who you see are active in the market and asking them to provide a broker's opinion of value. So they're going to ask you for information on the property. I think it is important and this is where kind of the trust factor plays in, which is important. And I would think that most brokers are trustworthy and if you provide information like that, you would keep it confidential. But I think it is important or a good step to say, to provide a confidentiality form to say, look, I'm providing you this information to give evaluation, but it goes no further. Because I have heard horror stories before where an owner gives a rent roll to a broker and then they blast it out to the whole world.

Right.

Without permission. I mean, to me that's kind of crazy and short sighted. But let's assume you've got three brokers who you provided the information with under the right guidelines. And then they're going to prepare a broker's opinion of value. So they're going to tell you what they think the property is worth and they should go about it from a couple different perspectives. They're going to look at comparable sales, they're going to look at the investment numbers. If there's development potential, you know, maybe there's a premium that a user would pay and deliver that broker's opinion of value. And along with that, a marketing proposal to explain how they would go about selling your property.

And I'm curious as to why would brokers share so freely the rent roll. What's, what's in it for them?

Well, I think a lot of them who maybe think that they don't have the chance to get an assignment or if they know they're competing with other brokers, they might want to just try to send it out and try to preempt the process. I think there's, I think it's also to kind of understand the different types of brokers out there. There's brokers who work on the sell side of the equation where they're working exclusively to represent the owners to maximize price. There's a lot of brokers out there that work off market deals. They work with buyers and look not to say that's not the wrong way of do it. I mean, certainly taking a listing without permission and you know, blasting out is probably not what, what you know, someone wants to do. But you know, it's not uncommon that a broker working with a buyer will just approach an owner and say, hey, I've got someone interested. Would you listen to an offer?

Right.

And there's a lot of brokers who are successful doing that. I think you have to kind of choose what side of the table you want to be on. So if you're out working with buyers, you know, and just you're really representing them as opposed to the seller, as opposed to seller rep brokers who are going to stand by their owner, they're going to do the work, prepare the marketing materials, bring it out the market. And their goal really should be to sell high.

And as we're talking about that and approaching this subject, why do you think, what do you think are the benefits of hiring an exclusive broker instead of working with like so many, you know, open listing, I mean, on open listings.

Yeah, no, it's a, it's a, it's a great question because. And we get that from owners saying, well, you know, I'm already working with a bunch of brokers, right? But that goes back to my point of, okay, well, who's really has your interest, who's really looking out for you? Because that's broker who calls you with the buyer. They're not representing your best interest, they're representing the buyer's best interest. They're trying to get the buyer the best deal.

Right?

So I know we talk about the insider's edge to real estate investing and when you're going to look out and buy, you know, we look for those broker mismatches, we look for those opportunities. But when you're looking to sell, you want someone in your corner, right. Who's going to quarterback this and run a process. And that doesn't mean a good exclusive broker is, is not just keeping the listing to themselves to share with their buyers. They're actually cooperating with other brokers. So they should be reaching out to the buyer brokers and saying, listen, I heard you have a buyer who has interest in the property. Can we work on this together?

Right?

And that's where again, you could see co broke situations, fees being shared in ways to hopefully incentivize everybody to bring offers to the table.

I definitely believe that this is a misconception that landlords have working with an exclusive broker versus, you know, multiple brokers. So I'm glad you were able to clarify that. And what are some common mistakes landlord mistakes landlord make when choosing a broker? And how can they avoid them?

Yeah, another good question. I think that you need to work with a broker who has your best interests, interests at heart.

Right.

And they really put themselves in your shoes. And I think some, sometimes, you know, you see this with some of the newer brokers too and they, you know, they're, they're eager, they, they mean well, but you know, they're looking to make their quick sale, they've got an offer. And sometimes the more experienced brokers are able to take more of a step back, look at the big picture, to really play out the situation and see that you're maximizing price. So, you know, if you're ever working with a broker and they, you see them pushing one offer, trying to rush a process. You know, when I get, when we bring a property to market and we get an offer right off the bat, a preemptive offer, right. Of course I submit that to my client, but I say, look, here's an early offer. We think it's a good offer. We don't know if it's going to be the highest offer because we haven't done our full marketing campaign. But the choice is yours depending on what you're looking to do. And so I think that kind of approach where, you know, the broker's job is to put the options on the table, but not make the decisions for the client. So I think it's really important that you know that you have a broker who has your best interests at heart.

Sounds, it sounds crucial actually, for, for selling high. And in your experience, what are the most effective strategies for landlords to find a reputable broker?

Yeah, so when you go to, when you kind of survey what's on the market, right? Because I think you should know not only the comparable sales, but what's in the marketplace.

Right.

And there's places you can go, whether it's Costar, LoopNet, Crexi, those are listing platforms, you can start to see who's listing what. Right now that doesn't meant. Mean that just because someone's listing something that they're actually successful at selling it, right. You want to ultimately get a sense of their tracker, but you can at least see who's active in the market. Also, you know, for you experienced owners out there, you know, the brokers are calling you typically day in, day out. In New York, for example, owner's information is public record. So you're going to have brokers who are calling you, hopefully providing you with market information, things that they're working on and then when it's time to sell, and that's how you know our listing opportunities, our clients, you know, we've been talking to them for most part for years. Right. Where we've cultivated that relationship. And they know that there's a lot of brokers who just, you know, they cold call up and down the block and they say, are you selling? No hang up. Are you selling? No, hang up. And if you make a thousand of those calls, you'll probably find someone who says yes.

Right.

But that broker is probably not thinking about cultivating a relationship, maybe not putting themselves in the owner's shoes. So we spend a lot of time educating owners on the market and things that they need to know about.

Right.

And so that's the way you form a relationship. So I think in a lot of cases, and if you're an experienced owner, again, you probably already know the top two or three active brokers because they've already been reaching out to you. But assuming that you're, let's say you just inherited a property and you don't even know where to start or who's active, I think going to those listing platforms to just see who's active, at least can. Can start pointing you in the right direction. One last piece of advice on that, I think also references are. And referrals are really important. So if you, and we talk about, in the book about the team that you need. So if you have a good real estate attorney who specializes in transactional real estate, they, I'm sure they have some recommendations for you as well.

And talking about working with the broker, I think an important topic that could interest our audience. Could you share, could you share tips for negotiating terms and fee with a broker when selling a building?

Yeah. So the first thing is that there are. You have to figure out what is the value proposition.

Right.

So not all brokerage campaigns are the same. That's why it's really important. When you get that broker's opinion of value, it's not just what they say the property's worth.

Right.

But it's also what are they doing to go out to market. And the broker who can maximize the exposure, get the greatest reach and the highest price.

Right.

Their fee will be paid for many times over.

Right.

So because at the end of the day as a seller. I mean, sure, you're thinking about your transactional costs and what the fee is, but you're really trying to figure out, how am I going to net the most money, Right? So a broker who, who is the cheapest.

Right.

Offers you the lowest fee, but they don't have a track record or much of a marketing campaign. And they'll probably make five or 10 calls and try to push you to take the first offer they bring to the table. You might say, you know, hey, I saved a big brokerage fee. That might be pennywise and pound foolish.

Right?

You might have saved a couple percent on a fee, but you gave up millions of dollars on a sale. And we've seen that happen before. In fact, we flipped properties before where a buyer calls us up and says, hey, James, we bought. I think I got a really good deal on this property. Can you go flip the contract? And we, we've done that. In fact, one of the stories that we talk about in the book is with Matt Blesso, who we've had on the show, and he delivered, like very early on my career, he delivered a contract that a broker had sold him for a million nine. And within two weeks, I had offers a two and a half million dollars. So whoever was selling that property initially, okay, so maybe, maybe he got a discount fee, but he left over a half a million dollars on the table.

Right.

So that's really important to understand what you are getting. Okay, that being said, you know, look, the, the fees, you know, after you've met with a couple brokers, you get a sense of kind of what the asking fees are in the rent range, and they are, of course, negotiable, but you also want to incentivize the broker. You don't want to feel like you're, you know, whittling it down so much that they're not motivated. Some of our clients like to work with incentive fees. I mean, we always try when we go out to market, we want to maximize price. Right. You don't need to pay me extra to do that. But like some sellers like to say, hey, James, after you hit your reconciled value, I want to pay you, you know, a big bonus once you go above. And look, we're, we're, you know, always up for the challenge. So that's another way you can structure things.

Interesting. And so what role does communication play in the relationship between a landlord and their chosen broker throughout the selling process?

Yeah, communication is so important because you are really partnering with that broker. And communication is a big Part of it, you don't want to just show up and say, hey, this is a great offer. Take it.

Right.

I mean, the idea is that you've done your work with the valuation, you've sent it out, you've gotten a lot of market feedback, you've been reporting, you've been showing offers. What you're really doing is educating the client, educating the seller to understand where the market is. And once you've done that, they can make an informed decision where you're making it together.

Right.

So that's. Communication is really important. The other thing, and maybe for some of the newer. I know, I'm sure we've got brokers who watch this show as well. And, you know, advice starting out, sometimes you don't want to deliver bad news.

Right.

So a buyer retrades an offer. They're not real.

Right.

I think it's really important to address that up front. Do not hide bad news. You have to deliver it. And that also includes when you make a mistake, when you did something wrong in the process, maybe you put in the wrong materials. Mistakes happen. Look, I think it's really important to own up to the those things. And so that's also important in the communications is it's not just sharing the good news, but it's also when there's disappointments and working through them and speaking.

About mistakes, what red flags should landlords watch out for when vetting potential brokers to sell their building?

Yeah, I, I think the whole kind of the pushy brokers. And sometimes when you understand, and this goes back to what I was saying is you want a broker, broker who is really putting themselves in your shoes, thinking about the best execution and not for themselves. I think the minute that you kind of sense that for them, maybe this is just a great listing for them to have.

Right.

We call that sometimes buying the listing when someone's, you know, gives a huge valuation that they can't support, like they're trying to buy the listing.

Right.

But maybe the broker is just doing that so they can have some listing to put on their website. And whether they sell or not, you know, they're not the ones who are, you know, the holder of this, this asset.

Right.

And I think it also tarnishes something when you have a failed campaign. And yes, I told you a story earlier how we were the fourth broker on, on the sale. You know, look, if we'd done it right the first time, probably could have brought a lot more of the buyers to table and competition as opposed to letting the asset drag out there. So, you know, I think you do want to make sure you pick the broker who doesn't just tell you the highest price. They have to substantiate the value and have a real plan on how they're going to go and drive value for you.

And so how can landlords ensure they maintain a good working relationship with their broker from listing to closing?

Yeah, I think owners also, just like I said, the broker needs to transparent. I think it's really important that the owner knows that you're on the same team.

Right.

And sometimes I think the owner doesn't want to give up bad news either because they figure, well, if I share this information, then I'm going to get less of a price. Right. Or I'll scare away buyers. So sometimes there's sellers who do not give us the information that we need. And guess what, we run a whole process. We get bids based on the, the information that's out there. And then when they dig in and they find and they diligence it and their attorney jumps in, then what happens? The buyer says, look, you know what, I just found this out. I'm not paying the same price. Worse. They question like, what else is the seller hiding from me?

Right.

And then that completely disrupts the whole sales process. Right. So you, you think, oh, I'm gonna just try to, you know, get a fast one. And again, this happens very rarely. I will say that most of our clients are upfront. They get it. Let's get everything out in the air up front so we don't have to deal with in the past. But yeah, I mean, I think the owner's part of this is, I think, to be transparent with their broker, their objectives, and be a good partner in the sale.

Thank you, James. Thank you so much for today and sharing so much wisdom with our listeners. And in your own words, what would be the three things you would want our people to remember? What are the three main takeaways?

Great. So I think first of all, we talked about specialization. So important. So that is the right geography, asset class, really understanding of the product, that knowledge. And I think along with that, that certainly comes track record. So I would put that all together. That experience. Right. Number two is again, not all brokerage marketing campaigns are the same. Like, you really need to know that this broker is going to maximize the exposure with qualified buyers, but they're going to get this out to a broad audience.

Right.

And run a process where they deliver multiple offers to the table in a competitive timeline, create real leverage for you to maximize price And I think last but not least or certainly, we talk so much about having that broker putting themselves in your shoes, looking out for your interest, right? Making sure that no stone is unturned, making sure that you really do sell high as opposed to just doing what's in the best interest of that broker.

Thank you, James. That was really interesting. And for you listeners, let's recap how we can pick the right broker to represent you. So first, find a specialist with a track record. Find someone who will get the maximum exposure for your property. And at least, but mostly important, find someone with your best interest at heart and with big picture thinking. Thank you again, James, for sharing your incredible wisdom and for our listeners. Stay tuned. In next week's episode, we're going to discuss how to find what your property is worth. You're not going to want to miss that. Thank you again for listening to the Insider's Edge and the Sell High series. And remember, you all maximize your property's potential. Sell High.

Thank you so much, Anneliese. This was fantastic. Thank you everyone for joining. As always, you can go to james nelson.com that's where you can find out the show notes for this episode. But that's also where we provide a lot of helpful information with you. White papers, video series and sign up for the newsletter. So every month we take all the content that we're pulling together and presenting it to you to make it super easy. We're also very active at James Nelson NYC, whether it's LinkedIn, Twitter as well as Instagram. And so again, we are here to help you gain the advantage. You can outperform the market. Thank you as always for joining.

Until next week, maximize your property's potential. Sell High.