How Are Commercial Contracts Executed?

Question

Hey all, so here's my situation.

I'm a fairly new real estate salesperson (coming up on a year in the industry), and things are just starting to pick up for me.  I'm currently nurturing a pipeline of 8-10 solid leads, one of which is an investor interested in multifamily & retail opportunities.

I've asked my teammates, team leader, and broker how to go about writing a commercial offer.  They've all told me to refer the deal to one of the commercial agents under our brokerage, but none of them told me "No, you can't represent a commercial deal."

I've done a decent amount of research, and I can't find any source that says I need a special certification or designation to sell commercial real estate.  I understand that I'm a fairly new agent, but I'm tired of playing follow-the-leader.  This was my lead from the start, and I want to step into the commercial world.  This may be my only shot for years to come.

So... That begs the question.  Where can I familiarize myself with how commercial contracts work?  From my research, it seems there is a longer inspection/contingency period, but is there anything inherently different compared to a residential contract?  How do negotiations differ?

Is the CCIM Designation the gold standard for stepping into commercial deals?  Those classes seem more tailored to investors, rather than agents, but the "Negotiations Training" course seems like it may be the first logical step.

Thank you to any and everyone willing to help out.  Happy 4th of July!

Moises R Cosme · Answer

Justin,

1. In MA you do NOT need a different license to to a commercial deal; it is likely the same in your state.

2. Commercial contracts are available through Zipforms; a subscription will run you $175 per year if you are a Realtor(c)

3. Contingencies vary based on the transaction, not on the transaction type.  If you are selling a 1500 square foot commercial unit, your contingency period is likely to be very similar to selling a house.  If you are selling a 15,000 square foot mansion your contingency period will be long: lots of time to inspect all of the square footage, lots of individual experts needed to evaluate the different components and lots of time needed to complete the mortgage underwrite because of the size of the loan.  Again, contingencies periods are largely based off the transaction, not the transaction type.

4. The best way to familiarize yourself with a contract is to download the P&S from Zipforms and read through it; commercial contracts are actually simpler (in my opinion) than residential contracts.

5. Negotiations:  again, this varies on the transaction, not the transaction type.  Between me and my team we have done several commercial deals, most of them have MUCH simpler than residential sales.  I was privy to the negotiations with a colleague a few years back, it was a $13.2M sale and it was done in a half a dozen emails.  Not to beat a dead horse, but everything as it relates to complexity is based on the transaction itself.

6. What is your goal?  Between me and my partner we have been in the real estate industry for over 25 years and between us we have completed more than 1500 transactions and participated in countless more, we are both strong advocates for specialization.  My experience is the Agents that bounce around in their practice are less productive than Agents that specialize.

As an example my partner rejected Buyers, he would not work with them unless they were interested in listings he represented.  I was on the other end, I seldom worked with Sellers.  Experts get paid - what is your goal?  What area of real estate do you want to focus on?  I recommend picking one specific area and becoming the go to guy in your market.

I hope this helps!!!

Greg Dickerson · Answer

Commercial is a very different animal than residential. Typically you start with an LOI and then the attorneys draft the actual contracts. The entire due diligence process is different for the different types of properties and your lack of expertise can get you into big trouble fast if you advise a client incorrectly. If this is your first commercial transaction you should offer to partner with an experienced commercial agent to walk you through the process or hire a commercial real estate attorney to advise you.

As for the CCIM designation that is more for agents than investors although some investors do take some of the courses and some agents are also investors but the designation is primarily sought after by agents.

Justin Watts · Answer

Hey Moises, thank you very much.  To clarify, I'm an agent in CA.

You know, a few nights ago I was going through a Commercial Purchase Agreement line-by-line, and that was far more efficient than Googling my questions!  This makes sense, as the purchase agreement lays out the terms for the entire transaction (... duh!).

I totally agree with you, a jack of all trades is an expert at none.  That being said, I've been interested in the commercial side of real estate far before I closed my first residential sale.  Although it's going to be exhausting and a learning-process, I feel this is an opportunity I can't pass up.

Thank you again sir, I owe you a beer if we ever cross paths!