A good reason you should work exclusively with one broker is time. Time is valuable and scarce, especially in today’s fast-paced environment. It would be nice if you have a multifamily property you want to sell to give the listing to 10 brokers and see who comes back with the best option. One broker would be happy to win the business and 9 would be upset for wasting their time. Word would also travel fast in the community that you as a seller did this and the likelihood of anyone wanting to work with you in the future would go down.
Similarly on the lending side, if you are using multiple brokers to shop your loan you will likely burn some bridges towards the end. Or you could be up front with them and say you are using multiple brokers. How much time do you think a broker would invest in that deal? I have heard some stories where a lender worked on a deal for 2 months and right before closing the buyer said they were using someone else. How would you feel in that situation?
Prioritization
Most brokers are inundated with requests, and it may be hard to get their attention. You hear about this a lot on multifamily podcasts—tips and tricks on how to get in contact with brokers.
Signing an exclusive agreement with a broker that you will pay them for their services shows commitment. The broker is then committed to you and finding you the best possible terms. Your calls and emails become top priority in a sea of tire kickers. The term tire kicker is a reference to those people who visit car dealerships frequently in search of a new car, kick tires on a few vehicles to indicate their interest, then leave again without ever buying a car.
You also develop relationships that way. On the lending side, banks want to develop relationships more than they want to be transactional. I recently tried to look for a loan on a commercial property in Houston and the bank said if the buyer is from California they will pass on the deal. They want someone from Texas. Many lenders want to develop relationships and do repeat business. Exclusivity shows commitment and builds relationships.
Relationships and Reputation
Knowing the reputation of the brokerage you are going to use is important. Can they attract qualified buyers? Can they close on time? What is their experience? You want a smooth transaction because your reputation is at risk in the marketplace.
At Old Capital, for example, we have closed on over 6,000 apartment loans and have strong relationships. Chances of success at closing a deal go up significantly by using our brand name and reputation in the industry. We are also a relationship-based organization. We meet regularly with brokers and lenders.
If you want to go to the marketplace by yourself, it could be an uphill battle. It takes a lender 4 to 5 hours to size up a deal. The multifamily lenders are so busy they are raising minimum loan amounts to make it worth their time. How much time and effort are they going to spend on looking at your deal when there are many other buyers competing for that business? If you work with someone that has a great relationship and reputation with that lender, then your deal can go to the top of the stack.
Likewise on the selling side, if you work with a brokerage that has great relationships and reputation, chances of success go up. Not every deal is a slam dunk. There are deals that fall through and people that lose earnest money, you just do not hear about them on social media. Shocker, right?
Conclusion
You might be able to save a buck or 25 basis points by leading multiple people on or cutting someone out, but is it worth the savings? How long do you plan to be in business for? While you might be able to boast of how great a deal you got, there is now someone on the other side of that transaction. I am guessing they will not be singing your praises.
