6 Major Differences Between Residential and Commercial Real Estate Firms

Differences Between Residential and Commercial Real Estate Firms

A vast majority of people – home buyers and sellers – have always used the following terms interchangeably – residential and commercial real estate firms. Well, they are not the same. The reason why people use the terms above interchangeably is that they have dealt more with residential real estate agents. We can all agree that both professions are the same but they do have subtle differences.

Here are 6 major differences between residential and commercial real estate companies.

Property type

Residential real estate agents deal with residential property listings only. Not only do they help home buyers find the perfect home but they help home sellers sell their homes for a profit. This tells you that residential property listings are their bread and butter. Types of houses that residential real estate agents deal with include condos, duplex, triplex and single-family units.

Commercial real estate agents help business owners and investors to locate commercial properties. For this to be possible, they are required to provide market demographics, conduct environmental research and financial analysis on behalf of their clients. Additionally, they are required to know area statistics and data, especially where the listing is located.

Education

According to the US Bureau of Labor, the minimum requirements one must have in order to qualify for real estate training- residential and commercial – are:

. High school diploma or equivalent

. Completion of real estate training program or college courses in real estate

. Bachelor’s Degree in Real estate

. 1 to 3 years real estate agent experience

. Possession of a real estate agent license

Even though both residential and commercial realtors undertake the same course, during their studies one is required to specialize in either residential or commercial. Once the course is over, licensing is the next step. To earn a license, you must have real estate sales experience. This can only be acquired by working with an experienced real estate agent. If you are aspiring to be a residential realtor, work with an established residential real estate firm and if you aspire to be a commercial realtor, work with an experienced commercial real estate firm.

Remember, every state has its own licensing commission. So, it’s best to contact them for up to date information on licensing.

Commission

According to the National Association of Realtors, residential real estate agents can earn a commission of 5% to 6%. The seller is supposed to pay the commission for instance if a home worth $300,000 is sold and the agent charges 6% commission, the seller will part with $18,000. In a transaction, two parties are involved – agent and broker. This means the commission will be split between agent and broker.

When it comes to commercial real estate agents, they work with high-income buyers and investors. Although they are entitled to a 5% to 6% commission, they deal with multi-million dollar deals. As a result, the commission paid is usually higher and allows them to take fewer deals within the year.

Data Driven

Residential real estate agents can rely on posting a property listing on platforms like Zillow, Trulia, and Realtor.com. In the details section, all they need to provide is pictures or a 3D virtual tour of the home together with its features and value.

When it comes to commercial real estate agents, they are data-driven. In a transaction, they are required to present data and numbers to their clients’ not just pictures of the property. Agents need to present gross rent multipliers and cap rates among others. They also employ statistical analysis like break-even analysis in order to provide the client with the best choice.

Selling vs. leasing

Residential realtors focus on selling homes to clients. Among their property listings, you will find condos, duplex, triplex and single-family homes. The hardest part for residential realtors is finding a suitable home for a client and ensuring that they get to fall in love with it.

When it comes to commercial real estate dealings, clients are concerned more about market demographics, financial analysis, and environmental analysis. This is the hardest part for a commercial realtor. What you need to know is that they mainly deal with the leasing of commercial property.

Flexible working hours

If you are trying to sell, buy or lease residential property, the right expert to consult is a residential real estate agent. Not only will they provide access to your desired property listing but they will help you navigate through the intricacies of negotiations and other steps. To ensure that they are able to meet their transaction goals, residential realtors are always on standby which means they are never really off the job.

Commercial realtors work 40 business hours or so every week. As a result, they have flexible working hours than residential realtors.

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