Why use an investment sales broker?
My question is not intended as a criticism toward or devaluing of brokers. It is simply a curios question.
Why do investment sales brokers exist (or exist with so much prestige)? I am a recent graduate at a small development firm, so I have extremely limited knowledge and experience. Nevertheless, all of the acquisitions and dispositions at our firm are privately negotiated between our execs and the other firm's execs. The deals we get come privately through our senior networks. Why would we need an investment sales broker?
I understand that investment sales brokers may be valuable for newer shops, unprofessional landlords/purchasers, and non-local players - all of whom have limited networks - but why would institutional and well-connected groups use an investment sales broker? Given the prevalence and prestige of investment sales in the brokerage world, they must have a relatively high value, but I am hoping someone can deconstruct the rationale behind that value.
General Perspective - Because the sales process is long and arduous and most Real Estate Firms do not have the time to allocate to running a full marketing process.
Seller's Perspective - On average (barring extenuating circumstances), sellers have a fiduciary duty to sell for the highest and best offer. That offer is usually best realized in a fully marketed sales process. As good of rolodexes that some executives have, they likely pale in comparison to the Roy March, Kevin Shannon, Adam Spies of the world, who spend 60+ hours a week interfacing with every major real estate shop in the word and have a pulse on exactly what they are looking for at any particular time.
tl;dr- (1) Investment Sales Brokers usually can get the best price, (2) the sales process takes a lot of time and effort that individual shops are unwilling to take.
Generally, the brokerage shops have a larger pool of buyers/investors that they can reach than your average exec on the principal side, so relationships are #1 reason. 2nd reason is that because the brokers see a large volume of deals in their market/coverage specialty, they can generally give good advice/guidance on pricing, timing, strategy for dispo, etc. (if it's a good broker).... 3rd, they usually have larger resources (read: headcount) devoted to marketing/bringing things to the market, so using them frees up the employees at the firm internally to not burn time going back and forth on the specific deal execution minutiae.
not sure where you got the "prestige" part. Investment Sales is the often the go to for folks trying to enter the business if they cannot enter REPE, development or lending. There is a lower barrier of entry. But that being said, a small group of them (more leasing than investment sales brokers) do make a lot of money, I would guess 10 percent in every market. After elite REPE and development, the 10 percent or so of leasing brokers make the most money in real estate in my opinion. And speaking of prestige even though the top 10 percent of brokers make a lot of money, they still dont get the credit and respect as their peers in REPE and development.
I hope you realize that there are plenty of people who work in investment sales or D&E placement that are very well capable of but have zero interest in working in REPE, development or lending.
If you're in the top percentile of the advisory world you will have no problem finding work on the other side of the fence.
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