Reaching out to commercial Realtors

When putting together the next article for this series, I decided to speak to a small group of commercial real estate agents. I wanted to find out how they interact with mortgage brokers and how they think the relationship could be improved. It made sense to me because commercial Realtors and brokers should be a perfect combination. Both sides are completely aligned, as both want to see deals closed so they can get paid.

The group I spoke with included Vince Macri of Icon1 Realty, Stephanie Peralta from Sotheby’s International Realty Canada, Jared Rogers from Re/Max West Realty and Dave Dulmage from Heritage Realty. While these Realtors are all local to me, I could go anywhere in this country and have very similar conversations in the local commercial market.

What surprised me most was that the one thing these four Realtors had in common was that none had a strong connection to individual mortgage brokers. None of the Realtors regularly worked with a broker to help close deals. Of the four, only Peralta had really used mortgage brokers at all. The reason is certainly not because of the business each Realtor does. One focuses almost exclusively on land deals. Another does infill transactions. The third is almost exclusive to the commercial retail business, and the last one does a great deal of business with a core group of investors along the Burlington, Hamilton and Niagara corridor. All of them, in fact, generate business any commercial mortgage broker would be happy to take on.

So why haven’t they teamed up with a mortgage broker? To paraphrase, the comments I heard ranged from “Few, if any, of the mortgage brokers I meet are very professional. Both my clients and I know more about my client’s business than any of the mortgage brokers I meet” to “My clients have their own sources of funding”  to “I don’t usually refer my clients to mortgage brokers because finance is not part of my business, and I don’t want a failed funding attempt to spoil my relationship with my clients.”

Cultivate specialized knowledge
To Realtors, being professional means knowing your client’s business, not just your own. Strong commercial Realtors tend to find niches and learn everything they can about that market, their clients and the key factors that impact that market.

Take, for example, the Realtor I spoke to who focuses on retail. He can tell you a great deal about retail in the geographic area he deals in: the average retail dollars generated per square foot, the retail trends in his area. He can research a retail operation and make buy or sell recommendations to his clients, or advise if a prospect’s retail business will make them a good rental tenant.

Mortgage brokers don’t tend to cultivate a niche the way their Realtor counterparts do. As a result, when making a pitch to a Realtor, brokers can come across as less knowledgeable and therefore be perceived as less professional. This can be the case even when the broker is really quite knowledgeable about a wide variety of financing structures.

All of the commercial Realtors I spoke to pride themselves not only on their extensive knowledge of their own business, but also on their knowledge of their clients’ businesses. It’s only natural they would expect the same from any mortgage broker who approached them to team up.

In past articles in this series, I’ve talked about the value of niche marketing. This is just another example of why every commercial mortgage broker should consider niche marketing for at least part of their business.

Showcase your financing expertise
The second message that came out of my conversations with Realtors was that they all believed their clients could access adequate sources of financing without the help of a mortgage broker. I expected that response, and rather than try to convince them otherwise, I simply talked about the lending parameters of some of the specialty lenders and the lending programs we have on The Financing Hub. In virtually every case, the Realtor I was speaking to came up with an example where those specialty programs would have helped them close a deal.

All of them wanted to know how their clients could gain access to The Financing Hub. But isn’t the best way to access it through you as their financing advisor?

The point here is that as part of the client team, the Realtor is not the financing expert. As the mortgage broker, it’s your job to explain financing alternatives and show how they add flexibility or other benefits to the deal. In commercial brokering, as I’ve said before, low rates are good, but not as important as conditions that make the deal easier to close.

Clear out your old ideas
When you look to team up with Realtors for new sources of business, it’s important to realize this is a very different sale than you might have made in the residential space. Residential sales and funding are volume businesses, and they rely on common factors that don’t require extensive transaction background knowledge. As a residential broker, you rarely – if ever – needed to know operational details of your clients’ businesses, particularly if that borrower was a salaried employee.

That’s not the case for successful commercial business. When you’re approaching a commercial Realtor, it helps to know their business and something about their client’s business. You should prepare a business proposition that shows them how you can bring knowledge and value to their particular markets.

If you’re approaching a Realtor who specializes in a particular segment of the market – and you should assume that’s every successful commercial Realtor you meet – do some homework. Know some of the current market trends and look up some recent transactions in that niche. Be ready to explain financing options that work in that sector and tell them about the lenders you can bring to the table who are willing to provide those options.

Realtors are just like you – they make money when the deal closes. Make sure they understand exactly how you can help make that happen.

 Paul McGill is president of The Financing Hub, which is dedicated to delivering effective digital solutions for commercial real estate financing.