The bidding war: I’m ready to change the way we think about the real estate leasing business


By Howard Ecker

I’d like to change the game. Change how tenants and how brokers think about the real estate leasing business. Actually, how the world thinks about the real estate leasing business. My plan? I’d like to propose a bidding process for potential clients, and then let the best person, combined with the best bid, win.

Imagine being a real estate broker, going to work every day to recommend something that everyone needs to buy, but they don’t understand how complicated the actual process can be. And because it’s so complicated, it can be incredibly frustrating for some. And this, coupled with the fact that even though many companies say this service is free, it’s an outright lie. They’re actually paying for it through rent for the duration of the lease.

Or imagine being a major company, looking for office or factory space to lease, and being on the hook, although indirectly, for multi-million dollar commissions.

Plus, the general culture in our industry is not good, and I believe the customer service in real estate has, in general, gotten poorer and poorer of late.

Think about it: Unlike a law firm, where the most experienced attorneys charge the highest hourly rates, in real estate you can have the most experienced and the least experienced brokers charging the same thing. In what other line of work does this happen? Certainly not for electricians, psychiatrists, artists, surgeons, etc. So why real estate?

It’s important to realize a large leasing company’s not representing you… the individual you hire is. And you deserve to know their background and experience level.

So my recommendation for a solution is to move from leasing commissions imbedded in rent to a straight bidding process. It’s not that complicated, really. And it can work.

The tenant will then know what services he’s getting for what he is paying. And that’s the whole point, isn’t it?

“Think about it: Unlike a law firm, where the most experienced attorneys charge the highest hourly rates, in real estate you can have the most experienced and the least experienced brokers charging the same thing. In what other line of work does this happen?”

The way the setup is now, you have brokers being paid monster commissions for securing a company’s lease, often long before the tenant occupies the space. During this interim period, are all the services that were promised to the tenant being provided as part of the broker’s services, or does the tenant find out after the lease is signed that they’re being charged additional fees for things?

As bothersome issues arise regarding the lease during the run up to occupancy or right after, is your broker there to work with you? Or does his service end when the pen hits the paper? Don’t you think you ought to know the answer to that question before you make a decision?

The real concern for the tenant is that commissions can be quite high, and since the tenant is indirectly paying that commission, is he or she getting the quality service they deserve on a continuing basis? Are they getting all the services the broker offered included in that?

Rarely, if ever, is that the case.

People need to ask vital questions before retaining a broker:

**What specific services do you provide pre-lease and post-lease?
**Are there additional fees for these services?
**Are you hedging my building, business and market risk?
**Am I going to have to pay you an additional commission if I sublease any extra space I don’t need?

As long as you’re paying your broker a fee, an alternative might be to have an open competition to secure the best broker for your particular requirement at a fee that reflects the exact services you need.

Rather than just handing over a big commission for minimal work, why not bid out the job to qualified realtors? You can get a number of bids, all with details on exactly what services they’re offering — from the start of the process all the way through the signing of the lease and beyond — and then make an informed decision on what fits your budget and which realtor provides the services, support and experience you need most.

I believe utilizing an experienced realtor bidding process will actually attract the suitable broker for the particular requirement. In other words, you’ll receive the services you expect through this process and not be surprised after the fact.

Not only will the bidding generally make the market a more competitive one, but one that works smoothly for all parties and eliminates the leasing inefficiencies that run rampant these days.

Basically it boils down to this scenario: Here is who we are and our qualifications. Here is our proposed real estate fee for finding your company the space it needs. And this is what we’re willing to do it for. Now let’s discuss.

Simple, right? Not to mention the right thing to do.

Speaking of discussing it, drop me a line and let me know your thoughts.