• FlatList breaks down the do’s and don’ts of selecting a real estate broker

By Nithila Talgaswatte and Pravin Jayasinghe  “Strictly no brokers” If you’ve ever glanced at a real estate section of a classifieds newspaper or perused posts on an online property listings website or Facebook group, the chances are you’ve seen properties for sale with the words “strictly no brokers” or “no brokers please” or some variance of that mentioned on the advert.   So what’s with all the hate towards real estate brokers?   While maybe the reluctance to pay a 3% commission and wanting to sell the property directly by yourself is probably the top reason or at least one of the top reasons why some sellers prefer to avoid brokers, it’s also worth looking at the other reasons. While we in no way wish to generalise, a common complaint regarding Sri Lankan real estate brokers appears to be that they are not “professionals”. This might cover all manner of sins, however, the main grouse appears to be with regards to the value a broker adds. There doesn’t appear to be much expertise, knowledge, or guidance offered to sellers but rather at best most brokers rely on the tried and tested “we can get you a better price” tactic or if they feel a seller is a bit more vulnerable, a generous helping of fear-mongering that the sellers’ property is a particularly tough sell in an already difficult market. Misrepresentation is another huge issue with the current broker-client relationship that we see in the Sri Lankan real estate market. Most brokers often rely on a chain of other ‘brokers’ or contacts to source buyers because they often lack a network of prospective buyers. This often results in a seller wasting a lot of time and effort with buyers who are not the right fit for their property due to lack of vetting by the broker. Another tactic that is unfortunately frequently experienced by sellers is that sometimes they will be approached by a party masquerading as a buyer, but who in fact is actually also a broker or an accomplice to a broker. They usually try to undermine the value of the property either because a prospective buyer of theirs is offering well below asking price, or they might say “well this property isn’t what I’m looking for but I can help you sell it”. Again the seller will waste time engaging with these types of individuals.   So what should you expect from your broker?   Let’s start with what you don’t want to settle for. If your broker is just going to take some amateur photos on a smartphone and put a Facebook post saying ‘property for sale’ – usually withholding the price so that random people keep asking “price please” just to give the illusion of interest – or suggesting that you go with a concocted story about an ‘urgent sale due to migration’ so that potential buyers think they might get a good deal, you may not have found the right broker!   Insights on pricing and explaining prevailing market conditions   A broker should ideally provide some guidance on price by giving you a feel of what similar properties in the same area or similar configuration have been sold for and whether the market conditions are conducive to getting the price you have in mind. As mentioned before the tried and tested “we can get you a better price” sales pitch is only as good as their ability to source a buyer willing to pay above-market! What you as a seller don’t want is to have your property so far above market that it just stays there while prospective buyers who have an interest in the area go with other properties.   Helping you showcase your property   Brokers should also be able to provide some input regarding the state of the property, any improvements that might affect pricing and how it should be staged or showcased when buyers arrange a viewing in order to get the best value. Dimly lit interior photos and photos of overgrown bare lands are hardly going to attract interest.   Vetting prospective buyers so that you don’t have to!   In our opinion, however, the most important role of a broker is to act as a gatekeeper to the seller and do the necessary vetting of prospective buyers so that the seller isn’t wasting his or her time! In our experience, a significant number of calls that come through ads placed on classified sections or social media are not genuine buyers but just people trying to gauge pricing or bargain hunters with completely cut-rate bids.   The importance of a broker who has access to a network of buyers   Being able to sell a property is obviously about finding a buyer for that property, so a broker needs to demonstrate that they have an existing network or at least an established contact base to show your property to. While social media has become a boon to showcase property, if that’s the only tool in your broker’s sales strategy it’s definitely a red flag. Depending on the type of property you’re selling, your broker should have a different sales strategy, a Rs. 25 million bare land and a Rs. 250 million container yard are two completely different properties that require completely different strategies. The nuances, insights, and know-how are what you’re paying a 3% commission for. Literally anyone can put a post on social media, but you want your broker to get your property directly in front of genuine buyers and not just attract likes and comments for their social media account.   Why you should consider working exclusively with a broker or give a non-exclusive mandate to several select brokers   Recently, FlatList was given exclusivity on a commercial property which was coming to the market for the first time. We worked with the seller to create marketing content and identified a prospective list of buyers to approach directly and we agreed to avoid advertising the property on social media. However, while researching prices of similar properties in that area on property listing websites, we were surprised to find the same property listed multiple times, by different sellers at different prices. The best part was the seller knew nothing about it. We later discovered that a contact of the seller who had heard the property might be going up for sale had mentioned it to another party and they had preemptively gone and taken photos of the property (from the outside) and posted listings hoping to source buyers! The obvious danger here of this and the tendency of sellers to go with as many brokers as possible when trying to sell, is that generally this ‘spray and pray’ tactic will undermine the value of the property, because prospective buyers see the property being advertised by different parties, interpret this as being a desperate seller and then make bids significantly less than fair value. Another negative we have come across is that some brokers do not actually visit the property or take time to get to know all the salient features. When a prospective buyer calls they may give out inaccurate or incomplete information which might result in a missed opportunity to sell or frustration on the part of the potential buyer and bad word of mouth for the seller.   So you only need a broker if you’re a seller, right?   Well not exactly, this is a common misconception. This view is only further exacerbated by the fact that most brokers only look at property buyers as a means to an end, to close the deal, and to get paid their commission via the seller. We would argue that property buyers need real estate brokers just as much as sellers do. Ideally, brokers should provide guidance, insights, and where possible, data analytics to prospective investors. For example, FlatList works with corporate and high net worth real estate investors to identify their investment criteria and then recommend the types of property investments that are best aligned with the criteria.   Summary   Selecting the right real estate broker is basically the difference between selling your property quickly and relatively smoothly or having your property be on sale for months, possibly years, with a great deal of hassle and frustration during the process. You’re paying 3% for a broker to source a prospective buyer and then get them to your asking price or as reasonably close to your price as market conditions allow. Make sure your broker has the necessary network or contact base to actively offer your property directly to prospective buyers and that they aren’t solely relying on social media or classified ads to source their bids. Real estate continues to be a rising asset class for investment in Sri Lanka. Building a relationship with a broker could potentially mean having access to interesting investment opportunities, so make sure you know what you’re looking for and what you can expect in terms of service from your broker. (The writers are from FlatList (Pvt.) Ltd., a commercial real estate broking company based in Colombo)