Can A Residential Real Estate Agent Sell Commercial Property

Definition of "can a residential real estate agent sell commercial property"

Sandy McGrath real estate agent

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Coldwell Banker Smith Homes Realtors

To understand what a real estate agent can or can’t sell, it’s essential to understand the key differences between the two property types: residential and commercial real estate. The real estate agent's role is the same with both kinds of properties: to sell. Still, the two types of transactions are radically different and require different kinds of knowledge to do both commercial and residential real estate. Some of the most essential-to-know differences between the two are the following.

Their scope of use

The first and foremost difference between commercial and residential real estate is their purpose of use. Residential real estate is used as living spaces. Those properties are homes and apartments meant for families and individuals to use as dwellings. Commercial real estate, on the other hand, is targeted for business purposes. Those include establishments like retail stores, offices, hospitality establishments, or industrial facilities. Their scope is to generate income through the activities they provide the space for.

Type of income

Residential real estate can be used by the owner of the property, or it can be rented out. Those can be a source of income for their owner if rented, or they can be sold. In distinction with commercial properties, selling or renting also happens for residential purposes. Commercial properties are different because renting happens with the scope of generating income through commercial activities. As such, this type of realestate is rented to businesses or organizations. 

 

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Leasing 

There’s a distinction in the lease structure too: residential leases are usually standardized and apply for a relatively short period of time. This can mean anything from months to a year, and renewal is required after they expire. Commercial leases are typically longer-term, sometimes applying from years to - in some cases - decades. Those can be customized most of the time to the needs of the businesses doing commercial activity in the building. Commercial use also has some specifics in opposition to residential leases. Those can include provisions for rent escalations and other special terms. 

Methods of valuation

The valuation of residential real estate depends on the current market dynamics and similar sales in a specific area. In the case of commercial properties, income potential, and cash flow are some of the main criteria the evaluation of the property is based on. The method frequently used for the valuation of these properties is the income approach. 

Market Fluctuations

The most common drivers behind the residential real estate market dynamics are factors like affordability, demand, and population growth. For commercial real estate, location attractiveness for specific kinds of businesses or the current market conditions are among the main factors. Economic conditions also have an impact on the pricing of commercial real estate. 

Opportunities of investment

When it comes to investment, different rules apply to residential and commercial properties. Individuals have easier access to residential investment possibilities with the help of simple traditional mortgages. Transactions with commercial real estate on the other hand might require more complicated structures of financing. Typically targeted toward investors and businesses, these can take the form of commercial loans, partnership collaborations, or syndication. 

What an agent can and can’t do

Because of the many differences between the rules and possibilities linked to the two types of real estate, there is also a difference between commercial and residential real estate license in some states. Local regulations and specifics of the market can be more complex in the case of commercial real estate than residential real estate. 

 

There are also differences in the education required to be a real estate agent, which can vary in each state. Still, in most states, residential real estate agents have the possibility to do commercial sales too. Agents have the opportunity to change or broaden their specialization at any time. Given that they possess the knowledge required to handle more complex transactions confidently, they have the possibility to sell multiple types of properties. The jurisdiction can vary from state to state, though, so it’s important to do individual research on the requirements in the specific state of interest.    

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