September 27 2022

The Difference Between Residential and Commercial Real Estate

The Difference Between Residential and Commercial Real Estate – There’s a big misconception that you have to obtain a different license for commercial real estate. When you get your real estate license, it allows you to practice in both sectors of the field. This is one of the advantages of having your license. You are not limited to one or the other. You can practice residential or commercial real estate and some people decide to do both.

Differences Between Residential and Commercial Real Estate Agents

While you are still helping people buy and sell real estate, other business-related factors will be different. Let’s compare the actual differences between residential and commercial real estate and what agents deal with.

Different Property Types

With residential real estate, agents focus on selling properties for residential use. Single-family homes, condominiums, and any multi-unit building up to 4 units are common property types. This will also include duplexes or triplexes. Commercial real estate is focused on properties that will have a return on investment for their clients. A typical commercial agent will focus on negotiating properties such as office buildings, entire apartment complexes, strip malls, and retail locations.

Commission Checks

The average price of a home in residential real estate can vary depending on the area and market. The average commission percentage is 3% per side. While the commission percentage is the same, the size of the commission check in commercial real estate is substantially more. That’s because the price point of a commercial building exceeds the price of the average single-family home in comparison.

The Clients

When working in residential, a majority of your business will come from your sphere of influence, or the people you know. Referrals from your past clients will also make up a portion of your client list. Because all people need a place to live, there is no limit to who you can target as a lead. Commercial agents deal with companies and investors as their clients. Commercial clients expect agents to be informed about data such as cap rates and gross rent multipliers. They tend to be less emotional and more data-driven.

Final Thoughts

Each area of real estate will have different methods of lead generation, marketing, and training. Familiarizing yourself with commercial practices will help you close more deals. In terms of marketing, while residential agents might reach out to potential leads through social media and mailers, commercial agents are much more likely to formally present data and numbers to their clients.

Residential transactions have fairly quick closings allowing for more earning potential. As a commercial agent, your commissions may be 10x as large, but they definitely don’t come as frequently. There is typically less of a turnover rate on a commercial sale since investors tend to hold on to their buildings for many times longer than people usually stay in their homes.

Commercial agents need to know the data and how to interpret it. They also need to be patient, confident, and persistent to succeed in the competitive field of commercial real estate. For more information on commercial real estate in Snohomish County, including Everett and surrounding areas please contact us anytime.