In recent years, the real estate business has become increasingly exacting for individuals involved in it, and the need for real estate development consulting firms has never been higher. However, there are many different professions associated with real estate, and we would like to clarify the differences in the real estate broker vs. real estate consultant predicament.
The role of the broker
A real estate broker’s role is deeply involved in real estate transactions, acting as an intermediary in them; they also take part in matching buyers and sellers of properties.
To add context to this role, in the real estate world there is information asymmetry between buyers and sellers, and unlike securities, there are no laws on insider trading. There are a multitude of market segments based on types of buildings or land zoning and properties on the market can be listed privately or publicly. For individuals or companies looking to acquire property for business or investment, it is challenging to parse information on markets they are unfamiliar with. This includes aspects surrounding properties such as tax laws, regulations, and local customs.
Back to explaining the role of a broker. They specialize in researching and ‘keeping a pulse’ on the complicated and constantly changing market. Real estate brokers can sell real estate for you. They can also buy it on your part. They can provide invaluable advice on the transaction process itself, as well as the value of the property you are interested in.
Lastly, and, perhaps, primarily, they negotiate the transaction details to finalize deals to your benefit. They usually specialize in one aspect of the real estate business, e.g. commercial real estate, and become experts in the field.
The role of the consultant
The role of consultants is the less ambiguous part of the real estate broker vs. real estate consultant debate. The name says a great deal, but there are different kinds of consultants in real estate.
We would nevertheless like to use an example of one consultant role in the real estate business: a commercial property inspector.
Imagine the situation where you have your mindset to a property, an old industrial building, for example, with real estate development potential. It suits your needs, both in construction opportunities, size, and location.
However, there are always potential risks when acquiring a property. In many cases, it would be common issues such as deferred maintenance or building features that are near the end-of-life, but there can also be deeper more costly problems not caught by the naked eye. That is why you should consider the services of a real estate consultant.
A consultant performing a property condition assessment will point out any physical deficiencies of the structure and land. Maybe it has asbestos. Or maybe the land surrounding is contaminated, which would make redevelopment difficult.
That is one of the kinds of jobs a real estate consultant can perform. To examine every aspect of the property, inspect it thoroughly, and give you advice on how to proceed, or if to proceed purchasing the property at all.
How they’re paid
Real estate broker vs. real estate consultant is not only a matter of different fields of expertise. The payment methods for their services also differ greatly. This is, in large part, due to the way they perform their service.
Real estate brokers mainly deal with buying and selling. When you’re working with them seeking potential property or buyers, you usually aren’t paying them. They are usually paid a transaction fee upon completing their work. Sometimes, they work on a commission.
Real estate consultants, however, offer their services for a fee. That usually comes in two ways: there is the more frequent option of hourly rates, but there is also the option of paying for deliverable – a report.
Who do you need?
To be honest, it is not a question of who do you need, but rather a question of when you need a real estate broker vs. a real estate consultant. Different real estate business requirements demand different professions involved.
The most frequent situation when you’re in talks to acquisition is that you want the services of the consultant who inspects the commercial or industrial property to get detailed information of every aspect. After that, you may want to leave the rest to your real estate broker. They will negotiate the best deal for you, and then finalize it.
When people consider selling a property, they usually go to a broker and skip the services of a real estate consultant, and they really shouldn’t. A consultant can advise you on strategies to prepare your property and maximize the profit; some consultants can also advise you of the opportune time to make the sale. The rest is up to the broker.
This article was originally published by Xpera Group which is now part of The Vertex Companies, Inc.