By Ritchie Clapson, CEng MIStructE, Property CEO
For property developers looking for the right property or piece of land for their next project, auction houses, property listings, direct-to-vendor, and commercial estate agents are all great places to find fantastic deals, but which approach produces the best results?
Many new developers opt for an armchair approach. The internet allows easy access to numerous commercial property web portals, and by registering our details and setting up a few searches, every new property which hits the market and meets our selected criteria will automatically be delivered to our inbox. Except that is not the case.
Experienced developers know that he best deals never make it onto the internet. They stay resolutely off-market. If you limit your efforts to what comes up on your laptop screen, you’re not going to catch sight of any of the really good deals.
By off-market I don’t mean that these properties aren’t for sale, nor that commercial agents aren’t involved – quite the opposite. Commercial estate agents are hands-down the best source of opportunities for developers, but you will need to intercept these opportunities after the agent has secured them but before they advertise them to all and sundry.
By default this is the way for an agent to sell a property (whether residential or commercial):
- A client is secured, and instruction taken.
- Someone from the office visits the site, measuring up and taking photos.
- This information is used to create a pdf document.
- This pdf is emailed to the agent’s database, the information is added to the agent’s website as well as to the property portals to try to find a buyer.
The goal is to attract interest from as large a number of potential buyers as possible. Perhaps a couple will decide to make an offer, one of which (after some negotiation) will eventually be accepted, and things will then proceed to the next stage.
This process does work, but it is labour intensive, and it can take a while to come off.
A more attractive approach for many agents is to pull out their little black book of hot buyers and select a few they know will be interested in the property. The conversations will likely include a variation of the line I’m only talking to a handful of my best buyers.
You can see how this can work well for both the agent and the vendor. There’s no measuring up or taking photos, and no marketing other than a handful of phone calls. Only a few viewings are carried out within twenty-four hours, involving people the agent knows are likely to be interested in buying the property. And if they sell it, the agent gets their commission more quickly and incurs fewer costs, plus the vendor gets a good price and a quick sale.
If no hot buyer is interested, the property ends up on the portals where the slipper-clad newbies are gathered. In other words, if you’re looking exclusively online, you only see the deals that the hot buyers didn’t want. So, how do you become a hot buyer?
Like many aspects of property development, the key lies in building personal relationships. An agent will need to view you as a strong potential buyer; you’re not going to get a call just because you asked nicely. This means you’ll need to do the groundwork necessary to prove yourself worthy of being contacted.
There isn’t a clever algorithm telling the agent which hot buyers would be interested in any particular deal. The agent will create their own list of buyers who might be interested. It follows, then, that to be a hot buyer, you need to be at the forefront of their mind and not just sitting on a mailing list.
Many new developers meet with an agent, reflect afterward that it went well; the agent seemed very friendly, said they were confident they would be able to send them lots of deals and promised to stay in touch. The developer gets a steady stream of emails every week, making them aware of new instructions. But they haven’t achieved hot buyer status.
Hot buyers aren’t people that meet an agent once; hot buyers are the ones that regularly call the agent every few weeks to stay in touch and try and build a relationship. They’ll invite the agent out for coffee or lunch and make a point of creating rapport. In short, they’ll make it easy for the agent to remember them when the right deal comes up.
In summary, you need to differentiate yourself from the competition; where other developers might write that agent off as an unlikely source of deals, you should persist and try to earn a place on their list. Of course, you will almost certainly come across some agents who remain frostily impervious to your charms, but that’s ok – there are plenty more fish in the sea; just remember to keep smiling.
