For a non-profit organization with a clear development plan, a professional real estate broker can be of great assistance in finding an appropriate development site and discussing the potential sale of a property to a community organization with the landowner. Ideally, a community organization will approach a broker with a project concept, acquisition funds, and a project team (e.g. an architect, an attorney, a joint venture partner, and a potential lender).
With a plan and development resources, the broker will see that the CBO is serious about a real estate deal and is more likely to commit the time and effort to find a development site.
A broker can be helpful in cases where a CBO lacks strong ties to the property-owning community or has little deal-making experience.
During the outreach process, a broker can engage an owner's interest and maintain a transaction-oriented focus. A community organization might otherwise emphasize its own mission or vision for the area, which may be of little interest to a property owner. In other cases, a property owner may perceive a community organization as opposing its interests and not trust it to strike a deal.
If a property is contaminated, an owner may be concerned that the prospect of a sale of the property will raise environmental liability issues and, in the process, depress a property's sale price. A broker can allay such concerns and advance productive conversations with property owners.
A broker can be especially helpful in price negotiations. An expert with knowledge of the local real estate market, a broker knows the value of comparable property and can protect against the seller inflating the price of the parcel.
A broker can also help protect against the seller inflating the price due to the non-profit's reliance on subsidized acquisition financing or its need to postpone a closing because of the time required to assemble multiple sources of public financing.
What to expect when a community organization engages a real estate broker? There are no set rules. If a community developer has a prior relationship with a broker, the broker may be willing to work for free and earn a commission on the land transaction of 1% to 5%. When a community based organization does not know a broker, it can expect to pay an upfront fee ($2,500 to $5,000) with an understanding that at closing the broker will earn a fee of 3% or more.