Let’s say it’s time to craft a formal representation agreement. Congratulations! You’ve done a ton of work to get to this point. Now comes the fun part—negotiating terms of the contract.
There are many things to work through when figuring out what works best for you and your client. From exclusivity and terms to fees, cancellation rights and dual representation, it can be a headache to keep track of everything and get on the same page with your client.
The key? Track everything in a centralized database. Here’s why.
Broker fees are obviously one of the hardest things to negotiate. You have a number in mind that seems totally reasonable, but your client might not agree.
Fortunately, you can control the narrative by presenting yourself as an expert advisor, not a service provider. Show your client how working with you is an investment, not a cost. Use your database to show past successes you’ve had and similar deals you’ve done. Pull up properties you sold and money you made for other clients.
By having concrete examples of value you’ve already provided, you’re better positioned to justify your fee.
This point is a big one, and a lot of brokers miss it. Don’t leave money on the table.
When negotiating the representation agreement, use a prospect registration clause that includes specific types of engagement activities that you can prove to your client by taking impeccable notes in your database. Document your communication with different players carefully and thoroughly.
That way, if your deal expires and you haven’t found a tenant or buyer—but your client does so so shortly after and that buyer or tenant is someone you engaged—you are entitled to your fee.
Again, you do this by taking diligent notes and staying organized.
Deals don’t always close, but you have a set period of time to try and get it done. Again, this seems simple, but things can get messy quick.
Many brokers don’t document the negotiated term carefully. If you’re not clear on when you began working or if you don’t keep track of key deadlines, you introduce a level of confusion that you can’t afford when dealing with such large transactions. Any item in the agreement that has the potential to introduce ambiguity or emotion should be well recorded and easily referenceable.