These are the hard questions that any and all individuals and companies with real estate needs should be asking of their real estate professionals.
1. The R-Factor
Credit here to Dan Sullivan and his “Strategic Coach” method of training entrepreneurs; our first question is adapted from one of Dan’s core methods for teaching people to set goals and be effective in their lives.To test whether a firm’s foals are aligned with yours and how seriously it is listening to your goals and objectives, ask this question:
Assume that is it a year from now, and you and I are meeting and looking back at the progress made on this transaction, what will have to have happen for you to feel good?
If the broker’s answer doesn’t encompass the goals and objectives you have outlined for your transaction, you’re talking to the wrong person. At Cardinal, we have asked the question hundreds of times. We take the responses our clients give and make them a part of our Key Performance Indicators by which we are graded at the end of the deal.
2. Driven by Process, or Instinct?
Ask for samples of deliverables from past transactions that you would hope to see during your transaction — things like market reports, financial projections and spreadsheets, analyses of terms. Ask to see due diligence checklists for leases, purchases and sale negotiations. If a broker can’t provide basic process documents, you’re likely dealing with a hipshooter who believes real estate is still a “gut” business. Ask to see their “playbook”; and if they do not have one, ask for examples of best practices.
If you’re being offered a team to work on your transaction, ask exactly what each member’s area of expertise and responsibilities are. The team should be a well-rounded mix of aptitudes that makes sense to you. If the transaction involves real estate outside the local market, ask how the firm will handle out-of-market resources. Does the broker ever refer deals outside of their company or network? If not, why? You want the top team working on your transaction, regardless of whose business cards they carry.
4. Real Results
How does your potential broker measure results? Ask this as an open-ended question and note carefully whether “client satisfaction” is mentioned. If you ask the potential broker how he or she will measure results in your transaction, is there any reference to your goals and objectives?
Next, drill down: What is the broker’s plan for achieving your goals? How are they going to help you determine how much space you need? How will they find the buyer for your challenging asset? Will they just shop you around to the usual suspects, or do they have some creative ideas about how to achieve your goals that come from outside the normal playbook?
5. Doing the Details
Ask detailed questions that demand specific answers. Something like, “How can you help us reduce facility expenses?” should yield a set of specific answers and (even better) examples of how the broker has helped past clients achieve this goal. Their answer will give you a good idea of whether the potential broker regards details as things that get in the way of the deal or critical steps that must be worked through regardless of the time it takes.
6. Negotiation 101
Drill in on negotiating tactics, skills and experience. Ask for an example of a situation where the broker’s negotiating skills reversed a deal that was going down the tubes and turned it into a win. What are their goals in a negotiation?
7. Listen & Learn
As we saw during the real estate executive focus group, not being listened to is a top complaint of clients. Ask your potential broker if they survey their clients. How often? What are the results?
After you’re done with the interview, think back on the time the potential broker took with you and how respectful they were of your objectives and agenda for the meeting. If they weren’t paying close attention, there’s less than zero reason to think that will change once you’re signed as a client.
8. Pay for Performance?
Finally, we come to the bottom line: Is the firm willing to put its fee on the line for your satisfaction? Ask about the “pig in the poke” and get “the elephant out of the room” – the reality that the brokerage’s interests aren’t necessarily aligned with yours. Will they acknowledge that fact and discuss it without becoming defensive? Tell the potential broker that you expect some portion of their fee to be put at risk until you’ve met your objectives at the end of the transaction.
Anticipate pushback on this demand; national brokerage firms generally reserve this mechanism for their largest clients. But stick to your guns. To see a list of suggested mechanisms for linking fees to objectives both quantifiable and soft, visit the Cardinal Partners resources page on our website: www.cardinal-partners.com. And watch closely how your potential broker acts when you open this avenue of negotiation; see what their behavior says about Point 6 above.