BiggerPockets


What is a reasonable referral fee for a commercial deal?

Forum Powered By:

15 posts by 8 users

To participate in forum discussions, create a free account or login.

Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 06:36 AM


I found a great deal on a piece of commercial property and passed the deal on to someone I know that is seeking this type of property. It's worth about $2.4M and he'll likely be able to get it for $1.3M. What is a reasonable referral fee to ask for?



Ross Schneider

Real Estate Broker from Fort Worth, Texas

Oct 26 '12, 08:31 AM


It depends, are you a licensed real estate agent?



Joel Owens Moderator

Commercial Real Estate Broker from Canton, Georgia

Oct 26 '12, 08:56 AM


You can get more creative with fees on the commercial side and call them many different things as RESPA does not apply to commercial properties.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 09:11 AM


I am not an agent, I am sure that I can invoice for my consulting services, I just need to know what amount is reasonable for a transaction like that. :)



Joel Owens Moderator

Commercial Real Estate Broker from Canton, Georgia

Oct 26 '12, 09:14 AM


Lock up the deal yourself and then assign it for a fee. Do not trust that you will not be cut out of the transaction later to save costs.

By controlling the property you secure your position to get paid and not bypassed.

The fee will depend on how much work you do on the front end and it all varies.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 09:17 AM


Joel, normally I would agree with you about locking it up. Unfortunately, it would cost me $67,000 to lock it up, and I can't risk that not knowing if I can get it sold and closed in under 3 weeks, which is what would have to be done in this situation.

I trust my buyer, we've done business before. I just need to know what would be appropriate to ask for from him. I spend a lot of time reviewing potential deals to find the gems, and while the time spent on this deal isn't that much, the knowledge of finding the deal and connecting it with the right buyer has value.



Karen Margrave Moderator

Developer from Orange County, California

Oct 26 '12, 10:51 AM


@Dan Inc What is customary in your area? It's always best to work these details out, in writing, before you pass along the information to the prospective buyer.



Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 03:20 PM


Karen, I don't know what's customary, that's why I'm posing the question :)

Also, in order to work the details out in writing I would need to know what amount to propose...



Karen Margrave Moderator

Developer from Orange County, California

Oct 26 '12, 03:38 PM


@Dan Inc You said you worked with the buyer before, so what did you do then? The problem is, you've already passed the deal on to him, so you are at his mercy. In the future, get the terms tied down before you pass it along. Now, the only option you have is to ask him what he thinks would be a fair finders fee, and try to negotiate something that works for you both. Good luck.



Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 04:00 PM


Karen, we did a different type of transaction so I can't base it on that.

I just want to get an idea of what others would see as being fair. I'm not worried about being at his mercy. He helped me out and I am happy to help him out. I was thinking 2%-3% would be fair, what does everyone think?



Jake Kucheck

Residential Real Estate Agent from Newport Beach, California

Oct 26 '12, 05:20 PM


So like... why aren't you buying this yourself?



Dan Inc

Real Estate Investor from Charlotte, North Carolina

Oct 26 '12, 05:37 PM


Originally posted by Jake Kucheck:
So like... why aren't you buying this yourself?

Jake, that's an easy one to answer... I don't have $1.3M :)



Chris Sweeney

Real Estate Investor from Malibu, California

Oct 26 '12, 07:23 PM


Maybe base it on a residential wholesale model of 70% of ARV less reno less wholesale fee? That might be a 380k spread if vacant land with no reno/clean-up. I wouldn't offer an amount, I'd let the end buyer make the first offer. 2-3% seems like a low fee for $1.1M walk-in equity but commercial isn't my deal.



Jeremy Cyrier

Commercial Real Estate Broker from Wakefield, Massachusetts

Oct 28 '12, 12:34 PM
1 vote


Dan,

Since there's no set fee that you should charge, you should tell him that you're happy he's got an opportunity to make some money and that you'd appreciate a fee for turning him onto the deal.

Ask him to tell you what he thinks is "reasonable and fair". How you feel upon hearing his offer (or non-offer) will tell you pretty quickly if you think the value you provided him was worth it or not.

If you're good at sourcing deals, next time make sure your buyer signs a non-circumvent agreement with a named fee before sharing anything with him.

Too many folks get burned on fees because they trust the other guy to take care of them after they've handed over the value before discussing a fee.

Your value declines immediately upon releasing the information, so get the agreement first, then hand over the information.

Money does funny things to relationships. I've seen it more times that I care to mention.

Good luck.



Medium_creinvested-logo-blue-transparentJeremy Cyrier, CreInvestEd
E-Mail: [email protected]
Telephone: (888) 224-6650
Website: http://www.CreInvestEd.com
Investing in commercial real estate? Get our free email mini course.


Ziv Magen

Real Estate Investor from Fukuoka, Queensland

Oct 29 '12, 10:14 PM
1 vote


In Australia and Japan, where we work, 2-3% (average, unlicensed) to 5-6% (excellent deal, licensed agent). A bit more for deals under $1M or roundabout.



(Don't Want to See This? Log in or Create a Free BiggerPockets.com Account!)

Ubg-book

Get the Free eBook from BiggerPockets

Get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly!

  • Actionable Advice for Getting Started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more!

Sign up below to download the eBook for FREE today!

We hate spam just as much as you


To post a reply or start a new discussion, create a free account or login.

Manage Keyword Alerts

View All Forums