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Divided Loyalties

Companies are starting to look twice at their real estate brokers' business relationships.

Don Durfee, CFO Magazine
December 29, 2005

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Posted by John Scatoloni | April 12, 2006 01:17 am

Show Me The Money

Not only are the author's comments on target, I might add that traditional real estate brokerage compensation based solely on commission does not incentivise the broker to act in the client's best interest. Long leases at higher rates encompassing more space then the client really needs adds up to higher fees for the broker. This to me is the greatest incentive for division of loyalty. How about broker fees based om minimizing the client's lease obligation?

Posted by Michael Whiteman | January 19, 2006 12:27 pm

Divided Loyalties

Don Durfee's article on potential conflicts of interest in commercial leasing is excellent, and any experienced leasing expert should acknowledge that problems are legion. At the same time, one organization has made excellent progress in supporting high professional standards in tenant and buyer representation brokerage services. I wish that Mr. Durfee had contacted the Society of Industrial and Office Realtors. The SIOR designation is the highest professional recognition that a commercial broker can earn, and is based on an audited track record of high productivity over several years, completion of a national exam on core competencies, and, perhaps most importantly, a reputation for and commitment to a rigorous code of ethics. I do think conflicts of interest are a problem in commercial leasing, but I also believe space users are particularly well served by brokers who have earned the SIOR designation. SIOR has been requiring prompt disclosure of possible conflicts of interest for years, and has been strident that the interests of the broker MUST align with the interests of the space user. For example, brokerage fees are almost always paid by property owners rather than space users, largely because of historical practice and certainly not because of logic. Until brokerage fees are paid by space users, we have to deal with the world as it is. Consequently, many SIOR's seek fee structures that are constant for all properties, in order to eliminate one problem, namely significant fee differentials between owners who are desperate to lure a desirable tenant, and some owners who could care less. A variation includes structuring fees "per sq. ft." versus fees based on gross lease value. Prompt fee disclosure by brokers is also mandatory when a broker is representing the best interests of the space user, BUT is being paid by "the opposition". Mr. Durfee's article only touched the tip of the iceberg, and I hope more attention is given to commercial leasing in the future, particularly regarding the important role SIOR plays in promoting high professional standards. Allan White, SIOR ORION COMMERCIAL Licensed Real Estate Brokers Specialists in Tenant/Buyer Representation 9155 South Dadeland Boulevard - 1602 Miami, Florida 305-278-8400 - Office 305-710-8400 - Cell awhite@orionmiami.com

Posted by Allan White | January 09, 2006 09:52 am

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