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Inman News, February 17, 2015: Real Estate Consulting UPDATE

As is true with sale commissions, there is no fixed rate on consulting fees. Commissions and consulting fees are negotiable and differ per industry, level of specialization and region of the country. To understand how real estate consulting works, it is significant to differentiate between consulting and the commission sales model. A salesperson "tells and sells" as opposed to a consultant who "guides but does not decide." Today, consumers and investors want someone who is on their side and who is hired to represent their interests -- a trusted real estate advisor/fiduciary.  

Today’s clients also often prefer to research real estate online. But, when searching for boutique hotels that are not just real estate but also “business opportunities” holding conditional use permits, consulting with a “specialized” and "trusted resource" capable of professional in-depth, niche market research and analysis offers a more safe, smart strategy.  Only an experienced, specialized niche market consultant is able to fully compile, de-code and supply key comprehensive data essential to quality decision-making. For boutique hospitality sellers, buyers and investors, a commercial hospitality broker who specializes in boutique hotels will be able to provide the most useful and time-sensitive market data and advice.

Although most agents spend too much time providing “free” service, it is true that a good residential real estate agent is worth between $100-$200/hour while a highly-specialized commercial real estate broker is worth between $350-$450/hour.  

Agents and brokers who also provide real estate consulting have a strong understanding of how much their time is worth, and providing real estate consulting can be an important part of any professional real estate practice. Real estate consulting opens up new avenues to negotiate on behalf of clients as well as to troubleshoot – and/or avoid -- problems for a fee.  Broker/consultants who advise serious real estate investors are worth “their fees in gold” since they can, and often do, save clients from costly real estate missteps and huge financial losses. And, there is no conflict with agents and brokers charging sale commissions; brokers who also serve as consultants have the option of working with both models. 

It is important to distinguish between two types of real estate activity. "Functionary" activities include those that technology can handle, such as providing information and statistics about local areas. It also includes activities such as showing property, a function that does not require a high level of expertise but does take up valuable time. In contrast, technology cannot replace "fiduciary" activities that include counseling, negotiating, creating professional Broker Price Opinions, serving as Expert Witness -- these require knowledge and experience as opposed to mere dissemination of information. For example, a client might go online to view comparable boutique hotel sales for a given area but, without having toured the sold hotels or reviewed their business financials, he/she will have a hard time establishing fair market price for a hotel that he/she may wish to purchase and, therefore, will not be equipped to present a reasonable offer.  However, a specialist broker/consultant can perform a comprehensive evaluation of the subject boutique hotel and its hospitality market.  Only a specialist consultant is able to add this level of “analytical value” by providing “fiduciary” rather than “functional” service to clients. 

Commercial hospitality real estate consultants bill for “fiduciary” activities at twice the rate of “functional” activities. For example, negotiating terms of an offer and managing an escrow transaction might be $450/hour while meeting with an appraiser at a property might be $350/hour. Many commercial broker consultants allow their clients to credit real estate consulting fees towards listing or selling commissions if they later decide to use the traditional commission model.

 For further information, contact:

BoutiqueHospitality@hotmail.com / 925.708.4505

 

 

 

 

 

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