There’re signs when a client is not a fit for you in commercial real estate
"The best deal they did was the one they never did," someone said. They were saying that sometimes there isn't a deal to be made and that it could be best to move on rather than wasting time attempting to make the deal happen.
This also holds true for potential clients. It can be tempting to follow up on every lead that comes your way in the competitive field of commercial real estate brokerage, particularly if you are just starting out. Experienced brokers are aware, nevertheless, that not every prospective customer is worth your time and energy. Thoroughly screening and certifying your clients can help you avoid future problems and is essential for long-term success.
Why Client Screening Matters
Working with people and companies who are serious about their real estate needs, have the financial means to follow through, and share your professional standards is made possible by conducting thorough client screening. This procedure is necessary for:
Keeping your resources and time safe
Keeping up your reputation in the workplace
Making sure that transactions are successful
Creating enduring, mutually beneficial partnerships
Key Aspects of Client Screening
Financial Stability
One of the first things to examine is the client's financial situation. Request financial reports (preferably the last two years of P&Ls, and a current balance sheet) and credit reports to ensure they have solid financial backing. For tenants, this helps determine if they can afford the rent for the duration of the lease. For buyers, it indicates their ability to secure financing or make cash purchases.
Business History and Viability
Investigate the client's business history, including:
Their skills, past experience, and current business plan
Understanding the type of products/services they are offering as certain properties may not allow their specific use.
Previous dealings with landlords or property owners
Reasons for any past bankruptcies or evictions
For tenants, analyze their business viability to ensure they're likely to succeed in the proposed location
For sublease listings, determine why they are either looking to end the lease sooner, and most importantly, confirm that they are not in default of the lease, as this may negate their ability to sublease, and you can be working for nothing.
Decision-Making Authority
Determine who has the ultimate authority to make decisions, especially when dealing with larger companies. This knowledge is crucial for efficient negotiations and closing deals.
Motivation and Needs
Understanding a client's motivation is key to serving them effectively. Ask questions like:
Why are they looking to buy, sell, or lease at this time?
What are their specific real estate needs and preferences?
What is their timeline for making a decision?
Is there anything, or anyone, that needs to approve the decision other than you?
Red Flags to Watch
Impractical Expectations
Clients with irrational demands or expectations that don't correspond with the realities of the market should be avoided.
Ineffective Communication
In real estate deals, communication that works is essential. Long-term issues could arise from clients who are persistently unresponsive or evasive about their demands. Delays will also result from clients who are unclear about what they want.
Insufficient Preparation
Serious clients arrive with the required paperwork and a well-defined understanding of their requirements. Unprepared people could squander your time and money.
Location
You might want to think about directing a customer who is seeking for homes or locations outside of your market region to someone in the market they are looking for.
Benefits of Thorough Client Screening
Risk Mitigation
By vetting clients upfront, you can identify potential issues early and take appropriate measures to protect your interests and those of your other clients
The potential client may end up being a good client down the road but are not ready just yet, by giving them guidance and assistance you may very well end up with a great client in the future
Improved Efficiency
Working with qualified, serious clients allows you to focus your energy on deals that are more likely to close successfully
Enhanced Reputation
Consistently working with reputable clients and closing successful deals can boost your standing in the industry, leading to more referrals and opportunities.
Conclusion
Remember, in commercial real estate brokerage, quality trumps quantity when it comes to clients. By implementing a thorough screening process, you'll build stronger, more profitable relationships and establish yourself as a trusted professional in the industry. Don't be afraid to turn down potential clients if they don't meet your standards – your future success depends on it.
