Appropriate sales commission on $3 million multi family block ?

Question

What commission is typical / appropriate on a multi family block with a sale price of $ 3 million?   This is in respect of an unsolicited bid received by the broker from a single party.  There is no extensive marketing campaign or advertising needed:  broker I bought through a couple of years ago has approached me to sell to an interested buyer she has identified and she is proposing 6%.    I have the feeling this is on the high side for multi family transaction of this magnitude.    Any thoughts?

Bill S. · Answer

@Peter Fro so here are a few thoughts. 1) What is the property worth on the open market? If you don't know that, then you are looking at the wrong thing. If the buyer is paying you a premium to complete an assemblage then the agent might be worth the 6%. Otherwise it is likely that you would be getting less than market and paying the broker the 6% commission.

2). If you have a number, that is the number and the agent must get paid by the buyer. If the buyer thinks they are adding 6% to the deal then they are worth 6% TO THE BUYER. IMO if the buyer is willing to pay the agent 6% then you are selling well below market.

3) The highest and best price, in 98% of the cases comes from greatest market exposure which means listing it on the open market. If you have other things that are more important then price, then selling off market maybe the way to go. That said, in this market with the low inventory if you let the market know what you need, it will likely reward you.

If you would like a second opinion on value, post back here with specifics and the Bigger Pockets community can weigh in.

Phillip Bicker · Answer

6% for this size of a transaction is reasonable, but that is if you are represented with someone who has the fiduciary duty to do  what is in your best interest and is negotiating and working the deal for you. If you went with 6% and they represent both sides, they would be a transaction broker that does not represent the interest of either side and should be discounted. I'd still recommend considering having someone represent you even if they are potentially bringing you a buyer. If they are serious, they will likely remain if you have someone brought on to represent you.

Good luck with the transaction.

Cara Lonsdale · Answer

That depends....Do you want to sell it now to a qualified Buyer ready to Buy?

My suggestion would be to figure out what your NET is.  Then tell the agent that you will sell it as long as you NET XX amount.  What do you care what the agent charges for doing ALL the work for BOTH sides?  Earning a commission is more than just marketing....and a $3mm multi comes with alot more work than a SFH.

Alternatively, you can offer half of the commission, and sell it as a FSBO.  Just know that you will go unrepresented, and that may cost you more than the other half of the commission.

Russell Brazil · Answer

Ive done two deals at right about this price point for multis in the last 2 years. One I made 3%, the other I made 2%.

Rich Weese · Answer

You are the one that is in charge here. I haven't done any large buildings in Colorado in three decades. I did sell a 154 unit building in Garland Texas last year. I had enough contacts here on bigger pockets as well as in the general market place, that I sent a letter out to each one with what I was willing to pay for commission. I am knowledgeable enough that I did not need a listing person. The story of that transaction is somewhere here on bigger pockets. I had numerous offers on the building and each realtor knew that I was paying no more than 1 1/2% commission. I ended up negotiating it down to roughly 1% total and sold for $8,750,000. My belief is you are being ripped a big one at 6%.

Good luck.

PS. Remember, inventory is at a premium and you are in control. I have two other buildings in Dallas area and I received calls every single week about a buyer that wants to overpay for one of my buildings. Keep that in mind.

Steve Vaughan · Answer

I'd say sure, if buyer comes up to $3,150,000.

No way. 2.5% to bring the buyer coordinate the deal flow would be my counter offer.