BEST BUSINESS PRACTICES SERIES 4

BEST BUSINESS PRACTICES SERIES 42

REALTORS / CHANNEL PARTNERS / BROKERS

Every human need opens the door for research innovation which translates into product design. The product design moves from drawing board to a workshop where it takes real shape as a tangible usable product.

Every manufacturer needs a marketeer – salesman to broadcast about the utility of the product and finally sell it to generate revenue for the manufacturer

In Real Estate: The developer evaluates the need in the region and then designs a product(with the help of consultants: Architect, Structural, MEP, Landscaping etc…) which he can sell.

The Developer is the Manufacturer

To sell the product the developer needs help from marketeers and sales agents – Realtors / Channel Partners / Brokers.

I ) ROLE OF REALTORS / CHANNEL PARTNERS / BROKERS:-  Brokers or Facilitators are a conduit between the Seller (Developer) and the Buyer(Consumer) . The broker on one side deals with the builder where he understands the product , payment plan , facilities and amenities , features of the project and also he negotiates the fees – brokerage – commission , marketing expenses , payout to him for making a sale and on other hand he deals with the buyer in need to whom he explains the project-product , locational advantages , credibility of the developer : he also conducts a site visit with the buyer and introduces the buyer to the company staff for additional information and final negotiation In under-construction project the broker gets brokerage only from the developer which ranges from a minimum of 2 % to a high of 5 % , however, these days we often hear of high brokerage payout to the tune of 15 %

In a re-sale transaction, the buyer and seller essentially pay 1 % each

To help in finding a rented residential accommodation the broker charges 15 days to 30-day rent as his fees and in rented commercial space a fee of 1-month to 3-month rent is the norm in the market

Beyond explaining the project to conducting a site visit and helping close the sale the broker also facilitates making payment to the developer followed by getting the BBA – Builder Buyer Agreement made.

The Good Brokers maintain database of all the transactions they do and keep sending project construction status from time to time

Brokers also work as investment advisors for the HNIs

RERA has also set up the need for the broker to get himself registered by paying a small fee . A Broker cannot sell an under-construction project till the time he is registered under RERA and his name is not listed on the RERA website of the developer for whom he is doing sales. After RERA broker is also required to keep a record of all project details on which he is working

Brokers also help the buyer in settling disputes between the developer and the buyer and assist the buyer in case the dispute cannot be settled

The Role of the broker in real estate is of paramount importance

CURRENT PRACTICES OF BROKERS :

There is no entry barrier to be a broker be it education or experience or knowledge – free entry for all. Today anybody can choose to be a real estate broker. You don’t need an office, you don’t need investment – you don’t need staff you don’t need a degree . On this the payout to a broker is high and hence many get tempted to be a broker On account of the above people have started believing “ BROKER is a CHEATER – A FRAUD “ . He misguides simply to make money and is least concerned about the outcome of the transaction for the buyer .

People choose to be a Broker not only because the payout is BIG but also because the timing is flexible.

Today to be a BROKER you need to register under RERA and then ensure that your name is on the website of the developer whose project you are marketing.

The brokerage fees of 2-5 % is a big amount provided we do not discount our brokerage by giving a discount to a customer by virtue of Credit Note or by taking a lower brokerage from the developer.

 Brokers work like Freelancers, In a group under the banner of a company where they get Salary + Incentive or share in P&L, or under big corporate firms like ANAROCK , PROP TIGER , SQUARE YARDS, etc

 Since the play from freelancers to a corporate broker is big there is a lot of disputes in the sales process as the freelancer has no investment no liability and is happy with a couple of thousand rupees whereas the company or the corporate brokers by virtue of their establishment cost and maintenance need at least 2-5 % to run the business

The worst thing in brokerage is the undercutting of one broker with the other where the broker discounts his brokerage to undercut the offering of the other broker. Both are losers.

Giving credit note in today’s market has become a norm where the broker gives a credit note to the customer which implies that he will share his brokerage with the customer which ultimately translates into a discount for the customer . At times the broker doesn’t honor the credit note and then there is a lot of hue and cry from the customers’ side. Many cases exist as of today

Taking an exclusive Mandate from a developer – Certain corporate or large brokers take exclusive rights from the developer and then keep sub-brokers to help sell the project. The corporate broker typically is administrator in this case and he keeps a share of brokerage from the one negotiated with the developer and rest is distributed to the sub-broker. The corporate broker gets his share of fee on each and every sale

The broker does the mammoth job of marketing, lead generation, maintaining data of several projects, visiting the customer – conducting site visits so as to close a sale. however, the customer at times uses the services of one broker and buys through others because the second broker gives some extra discount. This leaves the first broker frustrated and shattered.

BEST BUSINESS PRACTICES: BROKER:-

Be it a freelancer or an employee of a corporate broker house it is mandatory to do a small course or attend some training seminars and undertake marketing and sales experience before you become a broker

Must consider brokerage as a full-time service and not a part-time job . Must undertake some communication skill development programs. The broker must drill in his mind that his fee is just a small portion (2-5%) of the total value of the transaction the bigger money is put by the customer and hence he should not misguide or mislead him

All BROKERS must register under RERA. No pre-launch sale should be made which risks the customers’ money

The broker should handhold – consult the buyer with his extensive knowledge of the project. He should not force or chase a customer to complete a transaction. Explain – site visit – additional information and then give time to the customer

The broker is a service provider to both developer and customer – hence he should maintain warm relations with both. His loyalty towards customers and developers should be at par. No cheating, please .

The broker must not give false information about any project or developer to fulfill his interest

The broker should at all times maintain data of all projects, their construction status, and financial status and the infrastructure around the project which he is marketing. The same should be shared with the customer

 No undercutting, please. Register your customer with the developer’s office staff so that you get the full brokerage of your efforts. You can also get mandate signed from the customer that you will be his agent and he will not deal with any second broker

Brokers under any circumstance should not issue credit notes or promise discounts in kind to the customer . Ultimately you lose revenue.

 The broker must rationalize his fee structure. charging very high brokerage (10 – 15 %) bleeds the developer and then he defaults on the payout. The developer under tough market conditions do fall for brokers and agree to pay high brokerage but later fail to make a payout. Then the developer starts a barter system – bartering the brokerage with inventory, which is of no use to broker.

 The broker must be very clear, transparent and accurate in his marketing activities. No false information.

Broker community by virtue of its operational process and practice must bring credibility to the brokerage business

Real Estate Brokerage is a huge opportunity in India. It is getting institutionalized and there is consolidation happening at this time Brokers who have a long vision will set up a corporate structure to run the business and the developers will also want to work only with established corporate broker houses.

Please share your query directly to the author and get expert advice free of charge.

Sanjeev Kathuria is an entrepreneur and accomplished expert in a variety of areas pertaining to Real Estate such as land buying, liasoning, marketing, sales, construction and development. His chief interests lie in strategic sales and marketing as well as business development. Over the last decade, he has sold inventory worth Rs. 13,000 crores. Sanjeev’s strong value system and his integrity and commitment to his customers has been appreciated by everybody he has worked with. His new initiative of delivering quality content about real estate has been lauded by numerous industrialists and industry leaders.

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