The Condition of Your Medical Office Space

The last critical factor of this series that is often overlooked by healthcare providers in the attempt to save their practice money by paying lower rent is the condition of their medical office space.

The condition of a medical office space makes a large impact on the overall cost of a deal.

When was the building built or remodeled? When was the HVAC last replaced? Is there sufficient electrical service for your equipment and technology? Is the building up to code and ADA accessible? Has there been any recent roof leaks? What type of deferred maintenance is present? And the list goes on…

Any of these items could cost you thousands of dollars to remedy over the term of your tenancy. Whether the issue needs to be fixed on the front end, like installing new HVAC, or something else that adds up over time, like poor-energy efficiency, the extra costs of leasing an older space or poorly maintained property need to be carefully considered.

Paying a higher rent upfront to avoid the above costs should be thoroughly evaluated prior to committing to a new lease in order to determine potential expenses and liabilities over the long-run. You can make the most informed decision for your practice when all the cards are on the table and no stone is left unturned.

There is a significant amount of money on the line when it comes to your healthcare practice real estate, and the vast majority of it is negotiable. It is vitally important to consider more than just lease rate and length of the term when evaluating your real estate options. Often times, landlords are only willing to move slightly off the lease rate when they would be willing to give significantly more concessions. The best strategy to achieve maximum profitability with your commercial real estate needs is to have professional representation with every transaction you are involved in. One of the best parts is that as a tenant, your representation does not cost you anything as landlords and sellers pay real estate fees in commercial real estate; just like in residential real estate.

Beyond having professional representation, it is equally important you have an agent on your side who only works with healthcare tenants and buyers and does not represent landlords or sellers. You want someone who understands and specializes in healthcare and is only on your side of the transaction. An agent who understands the nuances of healthcare real estate can easily make a six-figure impact in your real estate negotiations. Additionally, having an expert agent who doesn’t have a single listing improves your ability to have a no conflicts of interest approach. Your agent’s specific strategy for maximizing your practices profitability through real estate should take all the guess-work out of the process and bring peace of mind in every commercial real estate transaction you are involved in.

To learn more about why it is so important to have expert representation, click the button below.

To receive a free, no-obligation evaluation of your current terms and/or available options, click the button below. When you do, complete the simple form and an expert broker will contact you right away.

CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money; while ensuring their interests are always first. carrusoldtheme.wpengine.com

Professional Management is a Benefit of Owning an Office Condo for Your Medical Practice

Professional property management can be very cost effective for condo owners when the cost is shared.

Owning an office condo for your healthcare practice can be the best of both worlds: it provides just the right amount of space and at the right price. Additionally, there are other benefits to owing a condo that are important to consider. In part 2 of this series, we look at the benefits of utilizing professional management to help maintain your office condo.

Part 2: Professional Management

Managing a commercial property is often much more time consuming and frustrating than what most Healthcare Providers are interested in. Commercial Property Management is a very large industry for many reasons. Simply put, most property owners don’t have the time or expertise to run properties at the highest level – and medical owners are no exception. That being said, professional property management on a smaller, stand-alone property can be cost prohibitive for a single owner. However, when you have several owners who all contribute to the cost, it becomes much more reasonable, as is the case with many office condos.

There are many categories of vendors required to run a commercial property at its highest level. Additionally, maintaining maximum value is a priority that requires effort. A property manager can help identify, competitively bid-out and ensure the work is being performed at the proper levels in the following areas: landscaping, parking lot maintenance, janitorial service, fire and security monitoring, trash removal, window cleaning, inspections, snow removal, utility providers, general maintenance and upkeep and many more.

Another reason professional management is attractive to healthcare and business owners is that it prevents employees from taking on responsibilities with the property when that staff member’s time is much better suited in building the practice. Even smaller property issues can take hours or even days’ worth of time to resolve. Having a property manager ensures that neither you nor your staff lose your valuable time and expertise trying to run or maintain your property.

Additionally, property managers help ensure an accurate budget and accounting of the property. As a healthcare provider, assuming these responsibilities in addition to running your practice can be overwhelming. Office condos often allow the hiring of a professional property manager, which is affordable if spread over multiple owners. This can save a substantial amount of time and effort and ensure your focus remains on your practice. Having a property manager is a catalyst to staying focused on your practice while maintaining the highest value for your building. Office condos make the cost of professional management much more reasonable compared to owning a stand-alone or larger property by yourself.

To learn more about CARR, click here.

To see more finished spaces, click here.

For a free lease or purchase evaluation, click here.

To see testimonials from hundreds of satisfied clients, click here.

What Does ‘Cold Grey Shell’ Mean?

There is no shortage of interesting terminology in Commercial Real Estate that many who are unfamiliar with the industry do not properly understand. One specific area of interest is found in the description of how raw or unoccupied spaces can be delivered to new tenants prior to the space being built out for its specific use. This topic is especially important as the differences of how a space is delivered can affect the cost of a transaction by tens of thousands to over a hundred thousand dollars for the tenant. With this much at stake, understanding the various definitions of how a space is delivered is worth learning.

While there are multiple synonyms for how spaces are delivered, an unoccupied or new space is often described as being a ‘Shell’ space. Next, two of the most commons types of unoccupied spaces or ‘Shells’ come with the terminology of either a ‘Cold Grey Shell’ or a ‘Warm Vanilla Shell’. Let’s take a further look.

What is Shell Space?

Shell Space denotes the interior condition of a specific space that does not have substantial interior improvements or finishes. With a new development or new construction, most spaces are typically delivered in a Shell condition; which means the space is essentially four perimeter walls with a primarily open floor plan. The tenant then builds out the space to their specific parameters which makes it no longer a shell, but a finished or built out space.

Additionally, a landlord or tenant may choose to demolish the interior finishes of an already built out space if the specific finishes are not beneficial or needed by the next tenant. This is considered returning a space to a Shell Condition and is often required prior to performing a new build out on a second-generation space.

Shell construction typically denotes the floor, perimeter walls and roof of an enclosed premises and may include some HVAC, electrical or plumbing improvements, but not internal walls, interior space partitioning, individualized tenant finishes or fixtures.

Essentially, a Shell Space is an open box that is ready for a tenant to build out or install their unique fixtures in. However, the difference of the ‘type of shell’ is where the details can make a significant impact on the cost for a tenant. Let’s take a look at the differences between a Cold Grey Shell and a Warm Vanilla Shell.

What is a Cold Grey Shell?

A Cold Grey Shell is most often defined through understanding the two main descriptor words before the word shell:

Cold: typically means the space does not have HVAC (heating, ventilation and air conditioning) available or installed in the space; and hence, the space cannot be heated (or cooled) prior to the HVAC being installed. In this instance, an HVAC unit or units will need to be installed or supplied into the space in order to bring heating, ventilation and air conditioning to the space. Hence, the space is cold.
Grey: typically means the space has no other improvements to it such as the walls being finished with drywall and painted, a drop ceiling grid and tiles or a drywall ceiling, appropriate lighting installed, flooring, or any other standard improvements such as a restroom, built out offices, etc. The word grey speaks to the fact the floor and any exterior walls are often the color grey because of the untreated concrete floor or walls.

A Cold Grey shell is essentially a space with no HVAC or finishes of any real substance. Many times landlords will also leave a portion of the floor or even the entire floor in dirt condition without pouring any concrete, if they assume the future tenant will need to install heavy plumbing.

For additional commercial real estate terminology, visit our glossary page.

For additional information, visit our other blog series or contact an expert agent representing healthcare practices in your area who can further explain these and other terms to you at CARR.US

COVID-19 and My Healthcare Real Estate Lease

A doctor’s lease is typically the 2nd highest expense in any practice, but fortunately it’s highly negotiable. COVID-19 is providing for much uneasiness in the market, and it’s crucial for doctors to seek guidance from experts who have a fiduciary responsibility to protect their interests.

We have the privilege of representing thousands of healthcare providers each year with their commercial real estate decisions. One of the ways we are currently helping the healthcare community is by answering questions about what healthcare providers can currently do to get beyond this difficult time in regards to their lease.

We are also providing FREE EVALUATIONS so that healthcare providers can get accurate answers to the following questions:

How do my lease terms compare to the
current market?
When is the ideal time to start my next transaction?
How will COVID-19 affect the commercial real
estate market?
Is now the best time to renegotiate my lease?
How can I capitalize on my next transaction?
- Startup
- Relocation or Additional Location
- Building purchase
- Practice acquisition

The uncertainty in the market might provide some much-needed leverage in your impending lease renewal or next transaction. Conversely, a misstep could have unforeseen consequences now and in the future. It’s imperative that you seek expert advice before contacting your landlord.

Reasons To Review Your Lease

My lease expires in the next 18 months. Your expiring lease offers an opportunity to potentially renegotiate significantly more favorable terms that provide immediate relief now and in the future. What you do today will greatly affect your ability to negotiate future terms. Do not make the mistake of giving away your leverage by asking your landlord for rent relief. A specific posture must be used in order to achieve optimal results.

I have more than 18 months on my lease and cannot pay my current rent. Not paying your rent may trigger negative clauses in your lease that can be a burden in the future. It’s important to document any rent relief agreements with clear acknowledgment of the terms. Your financial advisor might recommend a refinance of current debt or relief utilizing available programs.

Why is my landlord asking for my updated financials? There are several reasons your landlord might be asking for financials and it’s important to understand why. For example, a tenant’s financials are sometimes required for the landlord’s bank loans. The financial strength of the tenant could sway underwriting and we can use this in your favor. On the other hand, landlords are trying to maximize their return on investement and could be trying to increase your rent.

My landlord wants to change the terms of my lease. Be careful that you do not give up the negotiated terms of your lease. This might greatly affect your ability to maintain your space or sell your practice in the future.

Should I Pay Someone To Negotiate My Lease?

Tenants should always be afforded representation and should never pay a so-called ‘negotiator’ to do what an expert, local real estate specialist will do for you. Additionally, any party representing you in a transaction should be able to clearly define how they can use posture or leverage to positively effect change. Simply asking the landlord for better terms is not a negotiation strategy that produces results at the highest level. Posture and leverage are key. It’s advisable to always seek legal advice from an attorney but be cautious of anyone charging a fee up front to make changes to a lease, or when an attorney tries to act as a real estate agent without the needed local market experience.

Right now, every state and every market is being affected differently by the situation and each healthcare provider’s specific lease impacts the answers to these questions.

CARR only represents healthcare tenants and buyers. We would be honored to speak with you and answer any questions you may have and offer our insight into how you can best position your practice to get through this situation, as well as prepare to thrive once we get past this.

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Three Pitfalls Of Calling On Properties Without Representation

Finding a new location for your medical or healthcare practice can be exciting. The prospect of a newly designed office in a better part of town with the anticipation of growing your practice is an enticing adventure for many doctors. It’s fun to imagine and dream of what’s possible. This process can even start early as you drive past vacant properties with a ‘For Lease’ sign in front of the building. Your natural instinct is to ask the owner or listing agent “How much?” So, you make a call to inquire about the property. It seems harmless, right?

Believe it or not, doing just that without representation can cost you up to six figures.

As a reader, you might be saying, “Really? That seems like an exaggerated claim. After all, I’m a great negotiator. How hard can it be to work out a good lease deal?” You’re right. Great negotiation skills are not exclusive to real estate agents—many people are great negotiators instinctively, and the skillset can be acquired with knowledge and experience.

However, negotiation skills alone won’t ensure that a medical tenant or buyer receives the best possible terms on their office lease or purchase. For that, tenant representation by an experienced agent is crucial. In completing thousands of transactions annually across the country, here are common pitfalls we’ve identified when tenants call on properties without representation:

1. Losing Money On The First Phone Call

On the very first phone call about a property, the listing agent or seller/landlord is evaluating the posture of the prospect. Tone, interest level, experience level and options all come into play. Any perceived weakness or inexperience will be used against the perspective tenant as the deal unfolds to gain an upper hand.

Lacking real estate market knowledge is the foundation of a weak posture. In a negotiation with six to seven figures at stake, being able to decipher fact from fiction is essential to getting the best possible terms.

For example, listing agents routinely claim that certain concessions are rarely, if ever, offered by landlords. By doing so, listing agents can convince uneducated tenants to accept deals that do not include common landlord concessions such as tenant improvement allowance, free rent and more.

The reality is most landlords will offer attractive concessions, especially to long-term tenants who are properly represented. Landlords routinely provide a free rent period during construction, as well as an additional free rent period after the tenant opens for business in the space. They also typically contribute toward construction costs in the form of tenant improvement allowance or even a turnkey space. Knowing how much of these concessions to request requires market knowledge and experience. Landlords don’t provide these types of benefits if they don’t believe they are competing against other landlords and spaces, or if the tenant doesn’t know better.

2. Misunderstanding The Role Of Listing Agents

Here’s a hypothetical question: In an ideal world, would you go to court and defend yourself without an attorney? Obviously, No. No one does this unless they have simply run out of resources and can no longer afford legal counsel.

Listing agents have fiduciary responsibility to their client that is equal to that of an attorney. This fiduciary is to maximize the returns of the landlord or seller, and it’s critical to understand that a listing agent must do everything possible to protect their client’s best interests. As a healthcare provider who is on the other side of the table against them, your best interests are not in their consideration. Putting your interests on par with their client’s would violate real estate law.

When a tenant speaks directly to a listing agent without representation of their own, they are the customer of the listing agent, not the client. That’s an important differentiation. However, a good listing agent can make you feel like a client without violating their fiduciary to their true client, the landlord or seller. After all, they spend their days fielding phone calls from prospective tenants and perfecting the art of selling a space.

Why Does This Matter?

The listing agent has no loyalty to the customer, the prospective tenant or buyer. As noted above, a listing agent can propose terms to a tenant that may seem to be factual, when in reality they’re simply opinions or a perceived reality that heavily favors the landlord and/or the listing agent’s way of doing business. This doesn’t inherently make the listing agent a bad person or unethical. It just means they have a biased interpretation of the market that favors their client and leads to a loss of money and concessions for the tenant.

3. Sacrificing Expertise

As a medical tenant or buyer, you have the right have an expert agent represent you despite what your landlord might say.

So What Does It Really Cost You To Be Unrepresented?

Maybe you love real estate and you’re convinced you want to fully handle your next purchase or lease negotiation. Do you have anything to lose in doing so? Below are just a few things you might want to consider when it comes to having an expert agent represent you:

Non-Billable Hours: Dozens of hours are spent on a typical deal, hours that would otherwise cost the doctor and his or her staff. But it’s not just the non-billable hours that are costly to a practice, it’s the distraction: hundreds of emails and phone calls, online research, physical evaluation of the market, project file organization, communication records, financial evaluation of offers, coordination and administration of vendor relationships, and the list goes on.

Process & Resource Efficiency: You know the saying: to become an expert at anything requires 10,000+ hours of practice. With experience comes efficiency and nuance. What takes a healthcare real estate expert a few hours might take a person representing themselves 3-4 times as long. The process, technology and industry tools and resources allow agents to streamline the activity necessary to complete any transaction and ensure that critical issues are not overlooked.

Vendor Relationships: Assembling a strong team is a pillar of success in real estate. Attorneys, CPAs, architects, contractors, engineers, designers, practice consultants, equipment suppliers and brokers all work together to make a project a success. By using a broker who transacts on thousands of healthcare deals around the country each year, you save time vetting national and local vendors.

Free Services: Remember, a tenant or buyer agent’s fees are paid by the landlord or seller in any transaction. Sellers and landlords have already factored commissions into their cost of doing business. Not having an agent represent you doesn’t mean you’ll somehow save those commissions either. In fact, most unrepresented tenants and buyers end up paying more due to a lack of market knowledge, strategy, and experience.

Conclusion

Going it alone on any real estate transaction as a tenant or buyer without representation is costly. Whether you’re renewing a lease or starting your first practice, be sure to get someone on your side of the transaction who is a proven advocate for your practice type and specialty—and all at the cost of the landlord or seller.

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Not The Time To Learn From Mistakes

The makeup of your transition team is critically important to the success or failure of selling your healthcare practice. As the adage goes, you are only as good as your team. The ability to simplify a complex transaction and successfully see it across the finish line is no small task. Hiring professionals who recognize the importance of staying within their area of expertise will unquestionably aid in a smooth and successful transition.

In part 1 of this 2-part series, we will review two specific scenarios we highly recommend avoiding when selling your real estate during a practice transition.

1. Do not allow an attorney or consultant to negotiate or determine the value of your commercial real estate.

One of the top mistakes practice owners make during a practice transition occurs when valuing the real estate. This happens often when practice owners allow an attorney or consultant to determine or even negotiate the purchase price, lease rates and terms of the deal. While it is often overlooked, this scenario can actually be considered malpractice. The definition of malpractice according to Merriam Webster’s dictionary is:

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“a dereliction of professional duty or a failure to exercise an ordinary degree of professional skill or learning by one (such

as an attorney) rendering professional services which results in injury, loss, or damage”

For example, it is very common for consultants, accountants, attorneys, and practice brokers to inquire with others about what “healthcare real estate” values are on a per square foot basis in a specific market. However, this is quite a loaded question as the range of value can be astounding! There is no quick answer to a question that contains a half-dozen variables or more. The bottom line is that when it comes to real estate values in any given market, it is truly a case by case analysis. When a professional gives generic advice to a doctor based on general real estate information, it can expose the seller to a number of problems. If the deal is overpriced, this places the buyer at risk of getting cold feet and experiencing an appraisal shortfall which could kill the deal. An Improper evaluation could also result in dramatically undervaluing the real estate for the Seller, causing them to unknowingly leave tens to hundreds of thousands of dollars of hard-earned retirement money on the table.

2. Do not allow a practice broker who is not a real estate specialist to negotiate or determine the value of your real estate.

Another common mistake is utilizing a practice broker for the real estate component of the transition who is not a trained real estate specialist. It’s important to note that just because a practice broker has a real estate license or tells you they can handle the process does not ensure they are even remotely qualified to do so. It’s imperative that whoever is handling the real estate valuation has the ability to successfully create a detailed valuation report. These reports are a fantastic value add for both the Seller and Buyer that help mitigate risk for appraisal shortfalls and can ensure both parties understand and respect the valuation. If there is already an existing appraisal on the building, it is critical to have someone who understands how to comb through the appraisal to verify if it is too high, below market, or within reason. The vast majority of practice brokers should look to engage an expert healthcare real estate agent to assist in the real estate valuation instead of guessing their way through the process, as there is simply too much on the line.

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BUILD THE RIGHT TEAM

Every professional has a specific skillset they bring to the table. Allowing a professional to operate outside their scope of expertise can be a very costly mistake for both buyers and sellers. Too commonly these mistakes cost tens to hundreds of thousands of dollars on both sides of the table. Assembling the right team for each unique transaction is paramount to achieving the fairest values, highest efficiencies, and best experience, while also mitigating risk and assuring peace of mind. This concept applies whether you are pursuing a practice transition, start-up, relocation, lease renewal, land or building purchase, or expanding into additional locations.

For example, a litigation or corporate attorney may not necessarily be the right person for the job to handle the legal aspect of your practice transition or acquisition any more than having a residential real estate agent negotiate your commercial real estate lease. Working with the most proficient person for the job, who fully comprehends the specialized components and players, will increase your ability to achieve the most favorable results. There are excellent attorneys who specialize in transitions, sales, mergers, and acquisitions specific to your industry who know exactly what to look for regarding liability, risk and deal structures to assure you are protected. The best of the best do this while making sure they do not lose sight of practicality for the other side to get the deal completed.

CONCLUSION

It can be unnerving for a younger doctor to purchase a practice for the first time, or venture into the market to open their very first start-up. Similarly, at the final stages of a doctor’s career, it can be unnerving knowing that a single hiring mistake, when it comes to the transition team you select, could cost you tens or hundreds of thousands of dollars. Most doctors sell their practice(s) only one time in their career, which is why it is so important not to learn through making your own mistakes in the midst of your transition. Prepare in advance by learning from the best practices and mistakes of others.

Finally, having the most competent team working exclusively in their area of expertise will result in the best experience for everyone while providing lasting peace of mind for both sellers and buyers. It is essential to surround yourself with trusted advisors when entering uncharted waters for healthcare professionals involved in any practice transition. The practice’s real estate is often worth a higher price than the practice itself. With this much at stake, it’s imperative to ensure you protect your interests and bank account by hiring a specialized healthcare specific real estate agent. Whether you are buying or selling, transition success has everything to do with the team you surround yourself with.

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Maximize Your Profitability Through Real Estate

Let’s start with some basics:

Unless you own a mobile clinic, you will need an office space to see patients
A practice’s office lease or mortgage is typically it’s second-highest expense
In today’s economy, maximizing profitability is not only a desire, but it’s also essential for most practices to stay in business

Now let’s dig in further. If you own a practice, you most likely have an office. That office carries with it many expenses: the most obvious is the monthly rent or mortgage. With an office space also comes staff and payroll as well. These two items are not only needed to have a practice, but are also the two highest expenses for most practices. That being the case, only one of them is really negotiable. You may decide to cut staff, but when it comes to payroll, you either pay people what they are valued at, or they go somewhere that will pay them.

Real estate however, is 100% negotiable. You can decide if you want to be in an office building, retail center or medical office building. You can decide if you lease or own. You can determine the size, location, and amenities your space will offer. You can choose to be in a stand-alone or multi-tenant building. You can determine the length of lease, concessions you ask for, economic terms, business terms, etc.

So if real estate is your second highest expense behind payroll, and if there are so many options and choices to make when it comes to your office space, how can you maximize the opportunity?

To start, you need to understand how the game is played. As a healthcare professional, the playing field is not level. You are a healthcare professional who might engage in 2 to 6 commercial transactions in your career; whereas most landlords and sellers negotiate professionally for a living. You specialize in your field; they specialize in their field. If the outcome was based upon understanding medicine or providing a health related service, you would probably win.

However, the process and outcome are instead based upon comprehensive real estate market knowledge,authoritative posturing, and negotiation expertise. Winning requires having more options, understanding the correct timing, posture and negotiation tactics that landlords use, and in many cases, being able to withstand the stress and conflict that many landlords and sellers use to exploit unsophisticated tenants and buyers.

Let’s focus on a few of these concepts. If you start the transaction at the wrong time, you lose leverage and posture. If you don’t know the market, you are simply begging or bluffing. If you can’t handle conflict, you will most likely receive even more pressure and stress from the landlord or seller to make you uncomfortable and force you into making a decision that you will regret.

And even if you could overcome all of these, without professional representation you are going to be viewed as a novice and are not going to receive the respect that is necessary to achieve the most favorable terms available to you.

Nearly all landlords and sellers hire or consult with professional commercial real estate brokers to give them even more leverage so they can win. Why? Because they understand what is really on the table when it comes to each negotiation. For them, if they give up unnecessary concessions or go lower on rates than they need to, it costs them tens to hundreds of thousands of dollars of profit per lease. The reality is, those are the same items you are trying to maximize and capitalize on.

Large national tenants and buyers understand this concept as well. If you polled fortune 500 companies, you would find they either hire professional representation on every transaction, or they have a team of in-house professionals who are trained and equipped to maximize the opportunity. They understand the potential upside or downside involved in every transaction, and they are committed to getting the best possible terms in every transaction.

Most doctors and administrators don’t understand that commissions in commercial real estate are typically paid the same as they are in residential real estate: by the seller or landlord. This means representation does not cost the practice more money. Fees are set aside in advance and are either used to provide each party with representation, or the landlord or seller keeps that money or gives their broker a double commission.

If you are looking to maximize profitability, start by understanding how much is on the line with your lease or mortgage. Then, make the choice to hire representation. Select a commercial real estate broker that understands healthcare, only works for you as the tenant or buyer, can help you find the most options, has the strongest game plan, and who can take and absorb the conflict and confrontation that is inherent in every negotiation that involves a lot of money. In doing so you are positioning yourself to win.

The bottom line is there are tens to hundreds of thousands of dollars available to either be won or lost in every commercial real estate transaction; especially with healthcare real estate. Your profitability affects your patients, your staff, your family, and many others. Maximize every commercial real estate opportunity by taking advantage of the best resources available to you. Winning on your next commercial real estate transaction can transform your practice!

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What 2 out of 3 People Don’t Know About Commercial Real Estate

There’s a staggering statistic with regards to real estate transactions that was published by the Consumer Federation of America. This statistic reveals a misconception that can lead to a number of pitfalls in any real estate transaction, most importantly, a potential loss in tens to hundreds of thousands of dollars in a single transaction.

Given that 65% of the market has this misconception, it is important that you understand this article as if it were a check made out to you with several figures before the decimal point.

What’s the statistic?

“65% of consumers believe the agent on the other side of the deal is always or almost always required to represent their best interests, simply because they are working on the transaction.”

What Role Does The Listing Agent Really Play?

Here’s the plain and simple truth: A listing agent does not (and cannot) represent your best interests as a tenant or buyer. In fact, they are required to do the opposite and represent the party with opposing desires in the transaction.

This is an important distinction, because in any negotiation, all parties want to get a good deal. And a great listing agent can make a tenant/buyer feel like they’re being represented and receiving a great deal from the property owner, when in fact, they may not be. To the contrary, they may be leaving hundreds of thousands of dollars on the table.

Real estate agents are regulated and licensed by their state and have fiduciary responsibility to their clients, equal to that of a what an attorney has with their client.
Unless explicitly communicated, a tenant or buyer is a ‘customer’ of a listing agent, not a client, and the listing agent does not have loyalty to the customer.
A listing agent’s client on the other hand is the property owner, and they must make every effort to achieve their client’s agenda and maximize their returns as directed by them, in spite of what it may cost the tenant/buyer (the customer).
The only exception to this rule is if the listing agent discloses their fiduciary responsibility to you as the tenant, and you then ask for them to represent both you and the landlord within the transaction. This would be akin to being the defense in a court of law, and asking for the prosecuting attorney to represent you (which does not happen). Not only would this be a terrible approach, but it is also illegal in the vast majority of states.
Many states require disclosure of agency on every transaction because many cases brought in front of real estate commissions across the country are a matter of uneducated buyers or tenants not understanding the listing agent had a fiduciary requirement with the opposing party until it was too late. Despite this requirement, this disclosure does not happen in many transactions.

Understanding fiduciary roles and the distinction between a customer and a client in a real estate transaction is paramount. Even though a listing agent might make you “feel” like a client, it is a violation of real estate law for them to put your interests as a tenant/buyer on par with or above their client’s interests (when those interests are in opposition). It’s a violation of their fiduciary duties that could result in penalties, disciplinary action, or even a loss of their real estate license.

What Obligations Does A Buyer‘s or Tenant’s Agent Have?

When you hire an agent as a tenant or buyer, that agent is obligated by the same laws that a listing agent is obligated to when representing the landlord or seller, which includes a full range of real estate services (i.e. fiduciary duties). As a client, not a customer, they must provide you with a high level of service and care in helping to achieve the best possible outcome. The role of an agent is a weighty endeavor.

In most states, any agent that represents you as a client in the transaction must:

Treat you honestly and fairly
Obey you and following instructions, as long as it is lawful, during the transaction
Remain loyal to your interests above the property owner’s, and even their own interests
Disclose known material defects relevant to the property
Disclose any other information that would further your interests
Diligently and competently handle all research, communication, documents, funds, etc.
Keep sensitive information confidential, both during and after the sale or lease
Account for all funds received and disbursed
Comply with all state and federal laws

A good and reputable buyer’s agent takes these roles very seriously. Not doing so could otherwise lead to harm for their client and substantial penalties for the agent or brokerage.

What Benefits Are There To Hiring A Buyer‘s or Tenant’s Agent?

There are many benefits to hiring an agent to represent you in a purchase, a new lease, and even a lease renewal. Below are just a few.

It Saves (And Doesn’t Cost) The Buyer or Tenant Money: In residential and commercial real estate alike, sellers and landlords have agreements with listing agents to pay commissions for both parties in the transaction. The property owner has already factored this into the deal. Not having an agent represent you doesn’t mean you’ll somehow save money equal to those commissions either. In fact, in the vast majority of transactions, the unrepresented tenant or buyer ends up costing themselves more in the deal due to a lack of market knowledge, strategy, and experience.

It Ensures You Have A Solid Game Plan: If you have a property you are looking to lease or sell, you want someone who has finalized dozens or even hundreds of listing contracts. This ensures you have someone you trust who has seen as many hurdles as possible, and can help you effectively navigate this type of transaction. Conversely, if you are seeking to lease or purchase a space as a tenant or buyer, you want someone who has a game plan specific to your transaction and can deliver you the highest amount of concessions at the lowest possible rate.

It Unlocks Lease Concessions Otherwise Unknown: Without fail, when given the chance to review a lease that was negotiated without the assistance of an agent, you will find there was significant room for improvement in the business and economic points of the lease. With effective strategies, posture, and thousands of hours of experience negotiating commercial deals, a tenant’s agent can help you realize significant monetary concessions that wouldn’t be offered otherwise.

It Saves Valuable Time & Resources: Dozens of hours are spent on a typical transaction, hours that would otherwise cost the business owner and their staff. What takes an expert agent a few hours might take a person representing himself or herself 3-4 times as long. Process flow, technology, and industry tools and resources provide a service that allows clients to avoid wasting non-billable hours on work that’s a distraction to them and their staff’s daily routine.

In summary, the most successful approach to achieving the best possible terms in any commercial real estate transaction is to hire a tenant/buyer’s agent that’s an expert in the market and can competitively advise you while procuring terms from multiple properties, giving you the client several options to choose from and make an informed decision on.

It is costly to believe that the agent on the other side of the deal is “always” or “almost always” required to represent your best interests, or equally to take a do-it-yourself approach in a specialized industry like healthcare real estate. Whether you’re renewing a lease, buying a property, or leasing a new office, make sure your practice’s next real estate transaction is handled at the highest level.

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Unawareness of Less-Common Business Points in a Lease | Pitfall #2 to Avoid

For most practices, the cost of leasing office space is typically their second-highest expense after payroll. With this much at stake, it is imperative to achieve the best possible lease concessions and terms during new-lease or lease-renewal negotiations to maximize profitability.

Most healthcare professionals are familiar with the lease rate, length of term and build-out allowance provided by the landlord. What they may not know is there are many other important concessions available, such as:

Free or reduced rent periods; both during and after build-out
The right to transfer the lease to another practice owner in the future (Assignability)
Options to renew the lease after the original term expires
Death and disability termination options
Exclusive use protection
And many more…

Equally as important to know, there are landlord-focused clauses that can impair your practice’s ability to operate. Those clauses include relocation provisions, capital expense pass-throughs, electrical or mechanical requirements designed for general, non-healthcare uses and more.

While most healthcare providers are accustomed to helping others for a living and treating people very fairly, landlords typically stick to the letter of the law, as defined by the lease contract. If many of the important concessions are not properly negotiated or outlined, it can severely compromise the practice’s rights and quickly reduce profitability.

In addition to finding a desirable location and space, the greatest impact an agent can deliver to their client should be outlined in the fine print details of the contract. An effective agent should ensure no money was left on the table during negotiations and that their client was properly educated on additional considerations and landlord-focused clauses commonly found in commercial leases.

An expert healthcare real estate agent will not only save you time and money but will help you avoid missed opportunities and costly mistakes.
For more information about how you can maximize your profitability through your next real estate transaction, visit our FAQ page or click the following link to start a conversation with an expert agent representing healthcare providers in your area: Find an Agent

Lack of Market Knowledge | Pitfall #1 to Avoid

Over 80% of healthcare practices lease their office space. The location, economics and impression their office makes on patients are significant factors in patient referrals and return visits, especially in a competitive market. Several aspects of a lease can even impact patient care and staff morale. Avoiding pitfalls in your office lease doesn’t happen by chance. It takes an intentional game plan executed by a savvy agent who can position you for success with the correct market knowledge.

To achieve the best possible terms, you must be familiar with all options that exist in your area. This market knowledge includes available vacancies, recently completed transactions and spaces coming available soon. This is critical information that a local commercial real estate professional can provide to you at no charge. It would be extremely difficult for a healthcare provider, attorney or an out-of-town “lease negotiator” to know this information as it is not public record, as many completed transactions or “comps” are not listed in online databases. Having this market knowledge will help you find the best space and ensure you are not over-paying when evaluating your property options.

As a healthcare tenant or buyer, there are many layers of due-diligence needed to evaluate property options that are not required by traditional office or retail tenants. This creates a greater need to ensure you hire a healthcare specific real estate agent that fully understands your industry and specialty.

The average commercial broker may perform one or two healthcare transactions in their entire career. When considering that the difference between a properly and poorly negotiated transaction can benefit or cost a healthcare practice several hundred thousand dollars over a ten-year period, hiring an agent that only represents healthcare professionals as tenants or buyers becomes even more clear.

Hiring the most qualified representation will allow you to obtain the most accurate market knowledge needed to capitalize on the best terms possible.

For more information about how you can maximize your profitability through your next real estate transaction, visit our FAQ page or click the following link to start a conversation with an expert agent representing healthcare providers in your area: Find an Agent