Brokers generally work in two capacities, as listing agents or as tenant reps. Some, if not most, do both, meaning that they have property listings and they also work as a tenant rep.
If you are working directly with the property’s listing agent, that broker has a fiduciary duty toward the property owner, their boss. If you hire a tenant rep that also has listings, then you need to have a very good understanding of what listings they have and what conflicts, if any, that creates.
For example, in addition to the fiduciary issues that come with representing both parties in a transaction, the agent will most likely make more money if you lease a space at his listing. Instead of having to split the commission, he collects both sides.
Since the costs of a tenant rep are covered by the landlord, it can be in the best interest of a prospective tenant to have one. Going without a tenant rep might work with smaller and shorter leases, but with larger moves, it’s advisable to have a broker on your side. Of course, every situation is unique and you have to look at what the leasing agent is offering. We will look at some different scenarios that can affect the costs associated with using a broker in the next question.
As mentioned before, it’s important to know to whom the broker owes a fiduciary duty. It’s also important to know that your access to a tenant rep has value, and should not be given away for free. A listing agent may offer a prospective tenant a reduced rate in return for dual representation, but their ultimate allegiance remains with the landlord. In this scenario, the tenant rep broker is not around to negotiate on the tenant’s behalf.
Negotiating a lease agreement involves a considerable amount of paperwork and logistics which brokers can assist with. Though many listing agents are capable of handling both sides of the deal, many prospective tenants appreciate the benefits of having their own broker. Having a dedicated broker can help simplify the process and increase negotiating power for the tenant.
In general, the listing broker works for the landlord and the tenant rep broker works for the tenant. A listing broker who wants to also represent a prospective tenant has to have the best interests of both parties in mind, in order for a fair leasing process to take place. It’s up to the discretion of the tenant to consider offers of dual-representation from listing agents.