Principal side guys - What do you think about brokers?

Sometimes feels like an extortion racket, but at the end of the day - brokers control a disproportionate amount of information and deal flow. Got to pay the toll for that if you're in a principal role. 

As an AM from a leasing standpoint:

I don't know if there is a more frustrating professional to work alongside. So many leasing brokers are simply paper pushers, forwarding proposals to us that are incomplete or simply asinine. You have to press them just to reach out and start renewal discussions with your own tenant, or they lazily respond to inquiries from/outright disniss communication with potential tenants. Then when there's a deal to be made and their commission is in sight, they turn on the pressure for you to make a deal by pinging you 3 times a day until the thing is executed and telling you that the $50K proposed TI is worth shelling out to get the deal done, when they have no idea if the deal pencils for you. Biggest mouthpieces you'll ever meet and you can hardly have a genuine conversation with them - it's all sales all the time. We recently negotiated a lease that netted the broker a $400K commission... you know what the broker's role in the whole thing was? He was the one to receive the unsolicited offer from the tenant interested in our building (i.e. the guy didn't source shit); he passed the proposal to us and played no further role in the 6-month negotiation process - nice! If it's a team of brokers, they often do this funny little trick: one broker on the team will rep us as the LL and another broker on the team will rep the tenant, and they'll negotiate against each other via email as if they're not in the same F'in office sitting right next to each other LOL... and of course the play is to... you guessed it... tee themselves up for the highest probability of getting the most commission! Frequently said and one of the worst things about brokers is that they have no skin in the game, only upside. And it shows. There's very little of the risk-mitigating attitude and a lot of shoddy work fueled by a "GO GO GO" mentality. (The decent brokers will put themselves in the shoes of the owner and take stances and make pointed recommendations that might very well be to the broker's disadvantage.)

The phenomenon of brokerage services is essentially an arms race. They are fundamentally useless, but since they exist and we validate their existence by using them, they're now necessary for success in competition. Hence the "necessary evil" others mentioned. We don't need guns like we don't need brokers, but since we have guns and brokers, we therefore now need the best and most guns (and brokers).

TLDR Brokers suck but I still take weekly calls asking how their children are doing and where they vacation.

If brokers bring me deals and I can afford their cost in my deal I’m always willing to pay. They serve an outsourced function. If I could bring it in house, I would because you can make fee income. Lots of NYC office developers made tons of money via promote - but they made more money from the leasing commissions. 

Working with brokers as a buyer is 1) almost always frustrating and 2) very much colored by the space you are in (i.e. a broker who makes his money selling duplexes, a retail leasing broker, and a CBRE sale-leaseback structuring specialist will all deliver different experiences to their counterparty). On top of that, the spectrum of broker quality goes from diligent, responsive, and insightful at one end of the spectrum, and downright useless and at times fraudulent on the other, and I would posit that the spectrum is weighted toward the latter. 

That said: 

• It was mentioned above that brokers are often an impediment to direct discourse with the seller. This is quite literally the purpose they are meant to serve in many circumstances. I think someone called them the seller's gopher above in the thread - yes, that's exactly it. There isn't someone at, say, Greystar that has the capacity to field 40+ inbound chains of communication on a multifamily dispo. There job (at least from an inbound perspective) is literally to be just organized, provide information, operate the funnel, etc. without wasting the seller's time. What is frustrating for the buyer is often purposeful for the seller. 
• The idea that they serve no value is incredulous - it's a billion dollar industry many times over hired by the vast majority of sophisticated investors. There is literally nothing baring a principal from skipping the broker altogether (and more power to those that do), and many brokers probably aren't worth shit, but a personal annoyance with them is not analogous to a value-less industry. 

As with everything, 20% are rockstars and 80% aren't worth much. A great broker is an incredible resource, especially if you are able to cut through the "salesy" facade. It can be a mutually beneficial partnership, with the right people. Bad brokers can massive timewasters and you must be protective of that. Painful learning lessons earlier in my career with brokers who weren't very good. 

at a multi-family developer:

On the land side some of those guys have fantastic hustle.  Have no idea what they're talking about it when it comes to the specifics of the site (entitlements, utilities, rents, how many units can actually be built) but that's my job.  Their job is getting me in front of the right land owners.

On the dispo side: Feel like all the institutional teams are more or less interchangeable.  You're selling a new construction, fully leased, Class A apartment to one of the 8 or so groups that buy that kind of asset.  They come in handy when I need information (recent sales, if a new mixed use development is moving forward or not, how buyers underwrite various opex items, who is active in xyz submarket). 

I used to work in institutional REPE and thought brokers were useless. My bosses also generally thought so. They wanted us in office editing a 50 page deal memo rather than building relationships with brokers. We had terrible deal flow.

Then I went into middle market brokerage and have done $80M of sales. Every deal has been a sh*t show. Every client has been a challenge (their personalities, their stories, their needs). It's a tough business but now I see the value in brokers.

Ultimately, a seller wants 120% of value. A buyer wants 80% of value. You talk to a potential buyer about a run of the mill value add deal and they tell you they want to buy at a 7% cap. And then you ask them about a crappy building they own and they want a 4% cap... and they are basically the same deals.

You learn that people are ridiculous and flawed. The same people who complain that brokers lie then beat you up for underwriting more conservative expenses. They want to go to market at a price that means you have to present the "most optimistic" story and underwriting.

Brokers get paid to get beat up all day as the punching bag. But its the client (usually) guiding brokers. After all, are you willing to sell me one of your deals at 70 cents? No? That's what I thought.

Building relationships is really hard. Getting in the door is tough. And getting access to the right people is difficult. That's why the job can pay well if you can find success.

They’re both useless and valuable at the same time. Everyone hates them and they know it. Sellers resent the fees and buyers think they’re dumb and lazy. The job isn’t underwriting deals, it’s massaging massive egos and taking shit from absolutely everyone in the deal. 

Brokers are like women. Can’t live with them. Can’t live without them.

Can be useful at times, but when a transaction starts going sideways and you need to get valid points across to an owner through their broker, it can be almost impossible.

Going through it right now and it’s maddening.

I think they're hot.

Some maybe good some maybe shit

The negatives have been thoroughly covered, so I'll throw in a few details about what makes the (small) subset of brokers I consider to be top-tier. This is in order of the actual value added to a principal; excluding the nuances of actually managing a transaction process:

1. Presenting me with a "off-market deal"(*) because my capital is a great match for the property (I can't understate the value some people bring to the table here)

2 - 58. Nothing in between, just need to create a realistic gap....

59. Having the current/former leasing agent on hand to discuss when marketing a vacant asset

60. Remembering at least some semblance of my deal criteria and learning from any additional feedback I provide

61. Presenting me with a "direct or off-market deal"(*) just because I'm institutional capital that can execute and it helps you look good with your client, and/or to make a market via name drop of my involvement to the actual likely buyer (I'll take the ego boost and a beer next time I'm in town)

*Off-Market Deal [noun] - Broker-speak for a potential investment opportunity he/she/they will also be showing to ~2-10+ other extremely competitive groups with institutional capital that are natural fits for the transaction 

Some are good some are bad just like any profession. They have their place depending on the transaction. True value comes if they have actual true relationships with the top decision makers. If your firm doesn’t have relationships to go source debt or the contacts to solicit interest in buying your asset, then a good broker is 100% worth it. Especially on the debt side.

I work at an institutional shop where we have in house capital markets. We still hire brokers for probably 50% or so of our deals. For the life of me, I have no idea why. To go pay $300K or so to a broker to go blast OMs to 100 lenders when we can easily call up our own contacts at the GS, JPM, WF, Debt Funds, etc of the world, makes no sense to me.

Curious if any of you salary snowflakes complaining would last a week in brokerage. I think not. 

We have to handhold you emotional owners through every disposition. You're indecisive as fuck and need a broker to baby you.

Multifamily developer:

Most of the negatives have been covered but as long as they can bring me good sites that meet our criteria (this comes down to long-term relationship understanding goals) then it can be a help.

The only irk I have is when sellers' brokers prep listings/OMs with misleading information or try to downplay certain development aspects. I get it - they are trying to sell the land, but you shouldn't market EVERY piece of empty land as "multifamily land" or "mixed-use" like it isn't an incorrectly zoned plot of land in BFE without proper utility access. While it will end up being my responsibility to verify zoning and feasibility, it takes 1 minute to plop the address into the city GIS map and give me the actual zoning rather than saying that it has strong "potential" to upzone when in reality it will be shot down by council in a heartbeat or, like some brokers do, don't even list the zoning in their OM but call it MF/MU land.

Also, wish they would stop with the marketing words like "value-add" or "redevelopment" potential to describe a piece of land with 1,000 issues that will hold up the timeline only for the seller to want to do a 30-day look 30-day close sale. We mainly work with the same few brokers to source sites because if we didn't it would be too much of a hassle to deal with the light misinformation and 75% of the time I end up searching for land and calling on sellers directly for stuff that works beyond what people list in their pretty OMs.

From the retail development side -
I really don’t care about your proforma. I know rent and costs in my market. But the relationships and live data a good broker has is invaluable. I can be really good at my job if I know how the real estate committee of good tenants are thinking about growth. Which submarkets are they trying to break into, is there a certain intersection or trade area, which stores are performing well, what’s the latest sales data, etc. What boiler plate lease terms has the real estate committee approved lately? Can you connect me with franchisors who are in a position to grow quickly? The most valuable brokers are the ones that shower with actionable information

I like Brokers...they buy me nice dinners. 

Brokers are your best friends, whether in sourcing or disposition roles.  Wet the beak and reap the rewards of a mutually-beneficial relationship.