Commercial Realtors, commission question.

lendaddy · 11-20-2006, 11:45 AM

What is standard commission on a sale?

What commission would you charge to act as a buyers agent on a piece of property where there is no selling Realtor? In other words you approach an owner who's property is not for sale and make an offer on behalf of your client.

This would be a $850k or so deal.

nota · 11-20-2006, 01:11 PM

6% with 3x3 split
BUT they want all 6 if there is no listing broker
you can cut a deal but it is like puling teeth
they want it all, and hate to give any up to a FSBO

lendaddy · 11-20-2006, 01:16 PM

Quote:

Originally posted by nota
6% with 3x3 split
BUT they want all 6 if there is no listing broker
you can cut a deal but it is like puling teeth
they want it all, and hate to give any up to a FSBO

You lost me, there is only one agent involved. I will likely justy get a lawyer to review my end (I'm the seller) so this agent will get it all (paid by the buyer).

This is where it gets interesting. We are going to lease the property back for a short period and they want to base my payments on a percentage of cost-to-acquire (selling price, plus closings, plus commission) and I want to be sure he's not inflating the commission claim.

rammstein · 11-20-2006, 02:43 PM

Yup- for $850,000 6 points is par. Granted- you can say the buyer is paying the fee- but you know there is no free lunch. If the buyer is truly paying the fee, the buyer will pay less accordingly.

Anyhow, you will be able to get paperwork from them about the commission %. However, there is always a chance that they could be in 'cahoots' and inflate the commission with a kickback from the broker back to the buyer. But seriously, just do what makes sense from your end and who cares how they run their end? If you believe fair rent is X, pay X. Don't get sucked into paying rent based on price + closing costs + commissions. Simply ask the seller for the end number, and if its good pay it. If not, counter. The commission business should be irrelevant from your perspective.

Good to hear that things are progressing favorably for you. Isn't money great?

rammstein · 11-20-2006, 02:47 PM

As for the 3x3 split mentioned by Nota:

Listing Agent gets 3%
Selling Agent gets 3%

Listing agent can sell it himself, and get the 6%.

With no agent on your end, its an open listing. The buyer has an agent, unless I am misunderstanding. The agent's commission in this case will be entirely between he and the buyer. On an open listing, the buyer's agent will want his 6%, and sometimes get it.

Again, get a concrete lease amount- the only variables I would be comfortable with would be those outside of buyer control (i.e. set rent bumps, CPI increases, etc).

lendaddy · 11-20-2006, 03:22 PM

Maybe I become the sellers agent, I could use the 3%

rammstein · 11-20-2006, 03:45 PM

Don't think that people don't do that ALL the time... there are more salesperson licenses in FL than driver's licenses.

jjwood · jjwood's Garage

In Texas, real estate commission is FULLY negotiable. Make the commission part of the negotiated price --- what is reasonable to you as a seller?

lendaddy · 11-20-2006, 04:25 PM

Well the guy has $55k listed, that may include closing costs but damn! It works out to 7.5% so I'll check. I really think 3% is much more than fair given he didn't have to list anything, advertise, etc... Hell, I think he'd be overpaid at $5k, but if 3% is standard then so be it.

11-20-2006, 05:28 PM

Standard commercial fee in TX is 7.5%. With only one broker you can negotiate it down to around 5%. Part of that depends on how much time broker put into it. If he was a tourist in the deal, you may beat the 5%. Also depends on your negotiating ability and leverage position.

lendaddy · 11-20-2006, 05:52 PM

I really can't imagine a simpler gig for the guy, no work at all just a little negotiation with me. Also he has done 3 other adjacent deals for the same buyer here on our block so I imagine he's cutting his rate for volume.

Dantilla · 11-20-2006, 08:07 PM

I recently accepted an unsolicited offer on a large property. The broker is acting on behalf of the buyers, and as such, I am not paying any commision as seller. The buyers are paying the broker a fee for finding properties for them.

I don't know if the broker gets a percentage, or simply a flat fee per property. Doesn't matter to me. I never listed the property, and I wasn't asked to pay any commission at all.

ed martin · 11:09 PM

I'm not sure if I understand the question. I am licensed here in California, so I'm not really qualified to answer your question as you reside in Michigan. As far as California law goes however, if you are not licensed then you are not entitled to a commission. If you are not licensed than you cannot represent the buyer or either principal for that matter, it is illegal. As far as commissions, they are negotiable. Six per cent here in California is on the high side, given the relative high values of property. Five per cent is more typical. Commissions and percentages must be fully disclosed in writing as is the disclosure of agency. That overall per cent is split (not necessarily 50/50) between the listing and the selling agents and or their respective brokers. The business of Real Estate is highly regulated given large sums of money involved and the potential for fraud. I would imagine the laws in Michigan are similar.

ed martin · 11:29 PM

OK, I see what you are saying now, just read the third post down. You are the owner-seller. In this case I suppose if you are represented by an attorney, I would guess that he would be entitled to a per cent or maybe you can negotiate a flat fee. Remember, nothing is set in stone and everything is negotiable. I would say that for the buyer's agent, well that would be the buyer's concern. 2.5 per cent would be reasonable. As far as the leaseback goes, I would offer only reasonable market value, it's not your concern whatever the buyer ultimately ends up paying.

lendaddy · 11-21-2006, 03:42 AM

Thanks Ed, 2.5% seems more than enough for the effort here, but it's not my industry.

Regarding the leaseback, it's my concern in that the guy has a ceiling for his out-the-door expense on the building and what doesn't go to the realtor....goes to us.

ed martin · 11-21-2006, 12:47 PM

If your going to negotiate a leaseback or rentback, you should negotiate that up front, before you make the deal. Leaving the terms of the leaseback open at the back end of the deal leaves you pretty vulnerable. Furthermore, the buyers costs should have no bearing as to what he should charge for rent. You should not pay more than what the market would bear. It's like someone customizing their Porsche, spending a ton of money and asking the a buyer for reembursment. You know how that story goes.

lendaddy · 11-21-2006, 01:11 PM

Quote:

Originally posted by ed martin
If your going to negotiate a leaseback or rentback, you should negotiate that up front, before you make the deal. Leaving the terms of the leaseback open at the back end of the deal leaves you pretty vulnerable. Furthermore, the buyers costs should have no bearing as to what he should charge for rent. You should not pay more than what the market would bear. It's like someone customizing their Porsche, spending a ton of money and asking the a buyer for reembursment. You know how that story goes.

I understand that and in theory you're absolutely correct. But if the buyer has a ceiling out-of-pocket expense of $850k then the less the Realtor gets the more is left for us.

Plus the buyer wants to lease back at a rate that supports the debt he has incurred in the acquisition. Therefore the commission is included and the higher it is the more debt he must support via my lease payments. He IS going to factor this in, so I must consider it.

The rent setup is actually pretty fair and is less than I pay now. He wants 8.5% of his cost of acquisition returned each year(say $850k * .085 / 12 = $6,020 a month).

If I push for fair rent........I'll end up paying more

This how he wants to control his investment, he's going to spend the $850k, the only question is who gets what.

The Realtor just dropped off another offer an hour ago and he lists 7% commission paid by the buyer. The idea of him making $56 large for middling the deal makes my head spin.

rammstein · 11-21-2006, 01:16 PM

I'd still be wary of any uncertain terminology, but you are more familiar with the parties involved and you are in a better position to make the judgement call. Good luck!

TerryBPP · 11-21-2006, 01:43 PM

3% 3% is par for SW FL too regarding commercial. Spend a weekend and get your lisense. Takes a 10th grade education to pass.

ed martin · 11-21-2006, 03:32 PM

Quote:

Originally posted by TerryBPP
3% 3% is par for SW FL too regarding commercial. Spend a weekend and get your lisense. Takes a 10th grade education to pass.

I guess that means they don't teach spelling until the 11th grade in Florida.