Ep 60: Should I hire a buy-side agent in commercial real estate?

Should you use a buy-side broker to help you find a self-storage deal, or any other commercial real estate property? My short answer is no.

Buy-side brokers are not common in small-scale commercial real estate, and frankly, no selling agent will want to work with one. You need to find your own deals or find a listing agent list, all of our purchases so far have been a blend of off-market deals and deals sourced by listing agents.

So who represents the buyer? In commercial real estate, it’s typically the attorney. They’ll help you draft your letter of intent (LOI) and establish a purchase agreement. The LOI will be a few pages that lay out the details of the deal like deposit, contingency, loan terms, timeline, etc. and it typically takes 7-10 days to go from LOI to contract.

This ties into how I think about buying a house in a hot market, and the best way to do that is to fire the buyer’s agent and work directly with the seller’s agent yourself. When we look around town at different houses I go directly to the listing agent every time. This requires an attorney and some general research and knowledge beforehand but gives you a massive edge in the housing search.

Usually, for every home sale, the buyer’s agent receives 3% and the seller’s agent receives 3% of the sale price. That means if you make an offer on the house without a buyer’s agent, there’s a 3% incentive for the seller to work with you. At our last purchase, we gave 2% credit to the seller and an additional 1% to the seller’s agent, and that made them motivated to work in our favor. Showing up to buy houses without a buy-side agent is a massive advantage, the agents will talk the seller into taking your deal, and everybody wins.

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I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.