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Representation vs Brokering Good brokers can do both, it’s just a matter of being transparent and spelling it out.

Updated: Mar 4



Representation vs Brokering


What is Representation? It means acting in the client’s best interest and negotiating on their behalf. There is a fiduciary responsibility. And, the client makes decisions, real estate professionals give advice. We give our opinion, and the client has the final decision on any move, and we execute their direction. Compared to brokering, representation assumes more of an adversarial role, a zero-sum game approach, between buyer and seller. “We win, they lose”, or, “If they are winning, we must be losing.” (I actually hate that latter attitude, but it is prevalent.) Often, with representation, I have no real relationship with the other side, except for likely the broker. (It’s a small market. We all know each other and have probably done transactions in the past, and we know each other’s tendencies. Or, if it is a new pairing on opposite sides of the table in terms of brokers, then like a lot of relationships in this business, we are building a relationship with the other broker through the narrative of the transaction, which always involves a lot of back and forth. Imagine that, building a relationship while undergoing a fairly adversarial model! It’s part of the fun and mutual respect of the business.)


What is Brokering? It means putting a deal together. Buyer, seller, deal terms, advising both sides to a degree. It usually has some hallmark signs. For instance, I usually have a relationship with both the buyer and the seller. And they trust me and I trust them, and they are reasonable. In other words, they qualify (meaning not everyone does qualify), from a trust and maturity and reasonableness standpoint, to act in a transparent fashion and to work more with the other side to arrive at a transaction that is mutually beneficial to all parties. 


Some clients are stuck on one or the other, usually more on the representation model. My ultimate feeling is that we are in the business of getting results for our clients, per whatever their definition of objectives and results is specifically. So, we have to be adaptable. Each transaction is different. The property, the principals on both sides, the respective brokers, the details and nature of each of those relationships. (It’s really exponential in a lot of ways when one starts thinking of the inter-relationships between each of the parties and the thing being bought and sold.) 


The trouble with the “strictly and only” representation model is that it means that, if set in stone from the get-go, for example if I represent a seller for a kick-ass property, then I can’t really include buying clients in our marketing efforts. Because that is brokering.


I personally never like to eliminate buyers from the buying pool. It really isn’t in our clients’ best interests. Sometimes some of my buying clients are the best buying candidates for a listing client’s offering. 


To navigate this conundrum and to try to get the best of both worlds (representation where necessary, or brokering when appropriate), I usually write my representation contracts, paired with the state representation disclosures, with a clause that says that the client agrees that we are able to market the offering to our buying clients, and the required Alaska  And, each negotiation or pairing is different, and the exact arrangement will be spelled out in a Purchase and Sale Agreement, or a Lease Agreement, and that I will fully inform my clients as to the nature of the relationships as we go along the path from representation agreement, marketing the property and discussing it (really, early-stage negotiations) with interested parties, to getting the thing under contract (more in a buy-sell transaction than a lease negotiation) and then getting it to close.


It’s a tricky business, which is part of the fun. Being straightforward and transparent, and communicating robustly and frequently, really helps. It requires a baseline of honesty and managing expectations.


-Hugh

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