First, I would like to say that I am new to commercial real estate.

I have a client who is leasing a small building he would like to buy. The lease has time remaining on it. He has the financial wherewithal to purchase the building. I have a few questions/need advice.

Should I have an agreement to be paid commission from my client before approaching the owner?

If so, is there a standard agreement with commission amounts?

It may be a deal between attorneys. Although I understand the basic terms needed I have not been part of this process before. Are any of the standard residential forms used for small buildings?

I was going to contact the owner telling him I have a client interested and does not mind an existing lease. If there is interest in selling at what point do I disclose who the potential buyer is?

I have been reading about commissions for commercial property on this forum. Many have said 10%. I assume that is to split between the buyer representative and the seller representative. However, in the scenario above, what is the typical commission rate and at what point to I talk to the building owner about it? Should he sign off on an agreement that the buyer signs?

Are there any other issues I should be aware of?

Sorry this is so long. Any help would be greatly appreciated.

Thank you.

Have you performed an analysis on the property?How old is the property,there could be asbestos problems there and require epa cleanup.What is the daily traffic count of the property and the vacancy rate.What is the debt service and the cap rate for the property?



Definitely NEVER trust any verbals on your commission.Get that agreement signed by the buyer or seller BEFORE starting the process.

Before going through all of this trouble I would talk to the owner first.Usually you call and say I would like to set up a meeting and will only take 10 to 15 minutes of you time.Then when you ask what day they will say something like Tuesday you then say is 2:00 or 4:00 p.m. better for you.This way it makes them harder to say that time won't work for me,you are trying to pin them down to an appointment.

See if the seller is wanting to sale.Sometimes they say "I am not interested in selling!" to which I always say so you are not interested in selling at any price??

If they respond postively which they usually do because of greed then it's a simple matter of terms and price and if the deal can be acceptable to the buyer and make the seller happy.

If what the seller wants is not realistic then you need to look at other properties for your buyer to purchase.

There are many issues when selling a building and it is NOT like residential.

Usually the seller has great cash flow and likes the monthly money.So the seller would have to find a property they like,in a location they like,with the same cash flow.Then they will probably want to do a 1031 exchange to avoid any taxes.

You really need to talk with your broker and maybe give another commercial agent a cut of the commission and have them walk you through this.Unlike residential in commercial the business owners all know each other and some own 30to 50 properties or more.You could be starting long term relationships int he commercial arena where your buyer over years time will purchase and sell many commercial properties through you.Reputation is everything in commercial and if you screw this deal up it can really hurt the startup of your real estate career,

good luck and no legal advice

Thank you super realtor.

I appreciate that commercial and residential are different animals. The location for the tenant has proved to be very good for his business and development is planned in the nearby area in the next few years. He is the sole tenant and is kicking himself for not trying to buy the building in the first place. He is a friend of friend and wanted me in particular to approach the building owner. There is a commercial agent I would like to speak with, but he is out of town for a few days and thought I could try to get some info on this while I wait. A little knowledge and advice is a good thing. I read a lot of this forum last night and think it is a wonderful community.

In the last few weeks, I have had a few referals interested in small commercial space to purchase. They are wary of commercial brokers and have approached me since I have a business background and guide my clients to approach residentail real estate as an investment and to consider aspects other than emotional.

There is a lot of development in various stages and it appears that many locals want to either start businesses and purchase small buildings or buy a building for their existing business.

I am considering taking some commercial real estate classes so I can help these small businesses. I am not looking to get into leasing, raw land, or mid to large size buildings.

Here I go again with the long message - I am really trying to shorten these thoughts so I may be leaving out important concepts. I just value the input of this forum's members.

Thanks again.

There is always a big question in my mind why some companies prefer to lease as opposed to purchase, but the end result is always due to cash flow. And this will depend the business cycle the company is currently experiencing.

For big companies the reason is sometimes the seller WON'T SELL!

For instance when you are developing the four corners of an intersection one corner might be a waffle house,publix,outback steakhouse etc.The land owner will make a killing leasing the land and won't have to worry about turnover with big companies with long term leases.The big companies agree to the lease because the traffic counts and growth along the intersection is insane.

Wiht small companies most are a fledgling business started at home on the table and 90 percent of those fail in the first year.For every one success story there are a thousand that fail.So most can't afford or get financing to buy the building and they want an out in case the business fails.In that case you can have a lease for say 2 to 3 years then an option in the contract to purchase at a predetermined price.This way if the business does well and you get the money you can eventually purchase instead of renting forever.

Another reason why most rent like say a dominos pizza is they know after about 10 years that new shopping center is looking old and less people are going to it.The new shopping cente ris opening down the street and everyone wants to go to it.By moving your business to the NEW,FRESH location you will get increased sales and traffic.

For these buyers the op is working with find out the cap,price they want to pay,etc.Usually if development is ongoing the seller is not stupid and will want full market for the property.The key is to know about projects 2 to 3 years in advance before everyone knows and start locking up the properties.