In simple terms, residential real estate is all single and family type buildings created solely for the purpose of living; commercial real estate is an umbrella term that includes retail, office, and industrial properties. Commercial properties come in all shapes and sizes, including apartment buildings, daycare centers, condominiums, hotels, movie theaters, parking lots and warehouses.
On the residential side, buying a house is an emotional decision – choosing a place to live is about comfort and ambiance; while on the commercial side, buying a commercial property is a more objective decision. Investment in residential and commercial real estate comes with a different set of challenges and opportunities, with fewer complications on the residential side.
Role of a Residential Real Estate Agent
Residential real estate agents work on behalf of their clients and perform a range duties that include scheduling open houses and showings, responding to client and potential buyer questions, staging homes, arranging home inspections, completing paperwork, researching local listings, and staying current on market trends and industry news.
In most cases, a residential real estate agent’s success is dependent on the fluctuating housing market; overall, however, residential properties are easier to sell and in more demand than commercial properties. In addition, there are various adjacent titles and jobs that have their own particular responsibilities and limitations, including realtor, listing agent, buyer’s agent and rental agent.
Role of a Commercial Real Estate Agent
Commercial real estate agents work with people who are interested in selling, buying, renting or leasing retail spaces, warehouse, multi-unit buildings, mobile park developments, etc. These transactions tend to be more time-consuming and complex than buying and selling homes, and commercial agents often represent both the buyer and seller through “open listing agreement” contracts, which residential agents cannot do. Because commercial properties are more complex and regulated than residential properties, commercial real estate agents have special additional training and expertise.
Open Listings vs Other Real Estate Listings – Big Difference
Regarding commercial real estate agents – an open listing agreement contract establishes the listing broker as a non-agency representative of the seller, meaning that they do not have a fiduciary responsibility to the seller or the buyer.
Regarding residential real estate agents – their listing agreements include:
- Exclusive right-to-sell listing: An exclusive right-to-sell agreement gives the broker or real estate agent exclusive rights to earn a commission for the sale of a property. It is the most commonly-used agreement used when selling and listing a home. Unlike an open listing agreement which allows a seller to work with multiple brokers, an exclusive right-to-sell agreement obligates the seller to work with one agent. The agent or broker collects a commission on the sale, even if the homeowner finds their own buyer. Exclusive agency listings are often better for sellers who want more support from their agent and don’t require as much control in the sale of their house.
- Exclusive agency listing: An exclusive agency listing is an exclusive contract that limits a homeowner to working with one broker. However, the seller in this type of agreement is not obligated to pay their broker a commission if they find the final buyer themselves, similar to the agreement in an open listing. Exclusive agency listings also usually offer a bit more hands-on support than open listings, because the broker or agent has more of a stake in the sale.
- Net listing: In a net listing, the broker reserves the right to keep the difference between what the homeowner wanted to sell the home for and the actual price the house sells for. This is a risk for the broker who may not receive any commission if the home sells below the asking price. This arrangement is less of a listing agreement and more of a method of assigning an amount of commission. In most open listings, the seller will pay the agent who sells their home a commission based on the final selling price of the home.
- Multiple listing: A multiple listing agreement is an agreement in which an owner’s home appears on a multiple listing service (MLS), which is a digital database where brokers and buyers can find homes that are currently for sale. MLS listings usually require the seller to work with an agent or broker to list their home on an MLS. If a seller is not working with a broker, they can pay a fee to have their home listed on an MLS.
Bottom Line: While it’s been said that residential real estate and commercial real estate are two sides of the same coin, meaning certain principles hold true for both –they offer tax benefits, cash flow and location is important, they differ vastly from each other. Knowing the difference is key when making real estate investment decisions and when choosing an agent.
Related Links:
Commercial Vs Residential Real Estate Investing
Real Estate Regulation – State of Florida
St. Petersburg Communities
Photo Courtesy of Historic Kenwood Neighborhood | Captured during Historic Ken… | Flickr
St. Petersburg, FL: Pinellas County
If you’re interested in any of these of communities or live in one of them and are thinking of selling, call Estelia today!
Allendale Terrace
Bahama Shores
Bayway Isles
Coquina Key
Crescent Heights
Crescent Lake
Downtown
Greater Pinellas Point
Historic Kenwood
Historic Old Northeast
Historic Roser Park
Historic Uptown
Isla del Sol
Leave a Reply