Co-Brokering – Why Not?

DISCLAIMER: Please note that this is one subject that really gets under my skin. As a result, the following may step on some toes, may get under your skin, and hopefully will encourage the one thing that can help you make more money!

On our most recent survey – available now – 52 percent of respondents said that co-brokered deals represented only 15 percent or less of their deals. Actually, 38 percent reported that co-brokered deals represented less than 5 percent of their deals.

When asked why they didn’t co-broke, the most frequent response was “no need” followed by “confidentiality,” “legal concerns,” unsuccessful in the past,” “incompetent brokers,” and “trust/control issues.” Over the years, we have received the same responses in almost the same order.

#1: “No Need”?!?

I am delighted that such a high number of today’s business brokers see no need to co-broke – that business is so good that the need for more sales is not necessary. I admit I’m also puzzled that there is no need for new business when I keep hearing “sob” stories about how bad business is (although business is picking up). So, why isn’t there any need to co-broke? I can almost guarantee that co-brokering will increase one’s business by 25 percent.

#2 & #3: Confidentiality & Legal Concerns

(OK, here comes the toe-stomping part.) I keep reading the responses and I can lump them all in one word – which really doesn’t fit the brokers I know – and that is arrogance. As I just mentioned, the biggest reason brokers do not co-broke is they don’t see a need. Confidentiality and legal concerns were next in line. My personal opinion? Both confidentiality and legal concerns are the usual cop-outs. Co-brokering doesn’t mean the listing agent walks away. The listing agent still has responsibility to represent the seller and should be involved in any issue where the seller is concerned. And, confidentiality is the most over-used word in business brokerage. There is no such guarantee. Once you show the business or tell a prospective buyer the name of the business, you can no longer guarantee confidentiality.

#5 & #6: Incompetent Brokers & Trust and Control Issues

“Incompetent brokers” is another cop-out. There are three brokers in one small city. They each have completed our survey and when they saw the question asking why they don’t co-broke, they each responded with “incompetent brokers”. I suspect this has happened more than once. “Trust and control issues” was the fifth reason for not co-brokering. This is a polite way of saying incompetent brokers.

What I find interesting is that real estate brokers and agents have been co-brokering very successfully for many years and one could say the same thing about many of them, but in the end they have accomplished what their job was – selling the property. Co-brokering is not even an issue – unless you direct your real estate otherwise, it will be listed on the multiple listing service. In fact, it is one of the major selling points when listing with a Realtor.

My feeling is that by not co-brokering you are doing a huge disservice to the seller (to say nothing of yourself). You have been retained by the seller for one thing – and one thing only – to sell his or her business. It seems to me that you have the responsibility to use any reasonable means possible. And, you can’t hide behind the above-mentioned reasons! They all go away as long as you stay involved in the deal. What’s wrong with sending copies of your listings to the brokers across town and splitting the fee 50/50? If they get a buyer – you become instantly involved.

Back in the 70s (no comments), I was president of United Business Investments. We had 26 offices in California and they all co-broked. In the beginning, we ranked the offices by their sales. I decided to change the way we ranked the offices. We gave the selling office credit for the sale and we gave the listing office credit as well. The rankings changed dramatically. Several of the offices that were ranked initially at the bottom zoomed to the top. Other offices were selling their listings. We faced the same issues then that today’s brokers complain about. We couldn’t control confidentiality, etc. – and many of our brokers thought the other guy was incompetent. But, co-brokering increased our sales by at least 26%. That’s one-quarter of our total income – that’s significant.

What is the main reason business brokers don’t co-broker? Quite frankly, I can only come up with one thing – greed. I know that listings are the key to success and I also know that they are difficult to get, especially the really good ones (whatever that means), and so who wants to share them? But industry veterans know that many times the good ones don’t sell – instead it’s the one you didn’t think would sell. The job is to sell your client’s business and he or she couldn’t care less who makes the sale. All of the reasons stated in the beginning of this article are “hide-behinds” – nothing more than excuses.

Three questions to consider:

1. Do you want to increase your sales and your income by 25 percent?

2. What will a seller’s response be when you ask him or her if they want to put their business in the multiple listing system if it will increase the chances of selling by 25 percent?

3. Don’t you have a responsibility to increase the seller’s chance of selling by 25 percent?

If I stepped on your toes, know that I wouldn’t have taken the time to write all this if I didn’t care about your success. I don’t enjoy the sob stories, because I know they are from real people, many I know personally, with families to feed and mortgages to pay. I enjoy them even less when I know there is something that can be done to turn the sob stories into success stories and yet that something is being cast aside. Give co-broking a shot and stay involved. What do you really have to lose?

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