Residential or Commercial Real Estate?...That is the question.

Published Wednesday, August 24, 2022

One of the first things you learn right away while studying real estate are the 5 basic categories: residential, commercial, industrial, agricultural, and special purpose properties (like churches, schools, hospitals, etc.). They all correspond with local zoning laws.  Plus, there are different areas within each category. For example, residential properties can include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences.  The different areas in commercial real estate can include office, retail, industrial, institutional, investment, or recreational.  Although it’s possible to work in more than one category, the most successful agents tend to specialize mainly because each of these require different expertise.

In just about every pre-license classroom, the question is asked, “what kind of real estate should I practice, residential or commercial?”  The fact is both professions require the very same real estate broker license, but the two areas are very different.  

Let’s look at the basic differences.  The first is emotion.  When you are doing residential brokerage, we need to recognize that our clients are often in a very emotional state of mind.  When a consumer is buying a home or selling a home or doing both at the same time, it’s a very trying and often confusing time.  It’s one of the biggest decisions anyone has to make and it’s often very emotional and exhausting. With that height of emotion, often people have trouble acting reasonably and decisions are hard to make.  In residential real estate you can expect a lot of “hand holding” with your clients.

Residential agents understand that they need to work when their clients are not at work.  Therefore, working nights and weekends are to be expected.  Commercial brokers tend to do business during regular business hours.

There are lots of laws and regulations governing residential transactions such as RESPA, Fair Housing Laws, TILA, Landlord Acts, etc. Except for real estate licensing laws, there are few, if any, regulations which govern commercial real estate transactions. 

Generally, laws are created to protect the public/the consumer. Commercial real estate transactions, whether lease or sale, tend to be B2B deals. (B2B = Business to Business, versus Business to Consumer). Because these are business related agreements, the contract or lease rules the transaction and will be specifically negotiated to meet the exact needs of the businesses involved.

While the commercial brokers have some standard forms, these forms are not used as consistently as standard forms in residential real estate. In fact, depending upon the type of commercial business a broker is in, pre-printed standard forms might never be used. It might be that each deal is custom designed.

Another factor which differentiates most commercial work from residential is zoning or use. Usually when someone buys a house, they buy it to live in, rent to someone else who will live in it, or use it for a vacation home or rental. When someone buys or leases commercial space, the use could range from office, retail, institutional, industrial or some combination thereof. An empty building may have a variety of uses, some which would require special permits or a rezoning.

You can find success in whatever area you choose to specialize in. Understanding the basic differences between them is key.

If you are interested in learning more about this topic we are hosting an Exploring Commercial Real Estate Brokerage Workshop with guest speakers from GC Realty & Development, LLC on Saturday, September 24 from 9am - 12pm.  Click here for more information and to register  It is an event you don't want to miss!

If you are passionate about real estate, interested in investing in real estate, or just looking for a new career with growth potential, a real estate license could be the right move.  People can get started in real estate investing without a license and do ok. But those who want to take their investments to the next level, have control of their assets, build their network, and have direct access to the MLS need to get realtor training and get their real estate license. Does this sound like you? If so, give us a call at 630-844-0222 or check out our Real Estate Courses link on the main page to get started in real estate today and build your new career now!  We would love to help you get there.

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  • Meet the Author: Vince DePaul

    Vince DePaul Vince DePaul is Director of Your House Academy. Vince began his real estate career in 1976 and is a real estate broker and a licensed real estate and continuing education instructor. He has taught real estate at College of DuPage in Glen Ellyn, Illinois, and Oakton Community College in Des Plaines, Illinois for several decades. For ten years he produced and hosted a weekly, live call-in radio broadcast in Chicago called “Your House” where he was known as “Mr. Real Estate.” In 2015, Vince received the prestigious Educator of the Year award from the Association of Illinois Real Estate Educators (AIREE). More about Vince »

A REALTOR® is a licensed real estate agent who is a member of the National Association of REALTORS®, (NAR) the largest trade group in the country.

Every agent is not a REALTOR®.  You become a REALTOR® after you pass your real estate course, pass the state license exam, join a real estate company and then join the National Association of REALTORS®.

According to the NAR, the term REALTOR has one, and only one, meaning:
"REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics."

Michael Fair, President and Director of Your House Academy is an NAR member.