I have settled on a property manager for my recently acquired rental property. In the agreement they sent over there is a clause that stipulates that they receive a 4% commission if I was to sell the property to tenants they place. Is this typical? Can I negotiate this? Is this just an assurance I use them as my broker in that case? Any experienced POVs here are welcome. Thanks BP community.
What state is this in, and I would ask if your property manager is also a real estate agent or realtor? (Licensed Realtors have to abide by higher ethics standards to be certified than agents)
Anything is negotiable, and you can always ask other property managers in your area.
If a property under $1M is advertised on the Multiple listing service (MLS) by a licensed agent, the fee to seller is usually about 5-6%, as 1/2 goes to each agent's broker to serve you and buyer fairly. If your property manager is also an agent, and advertises on the MLS, then a split is 2% for your prop mgr/realtors broker and 2% for the realtor who brings a potential buyer.
If a sale happens as a result of the property manager advertising outside of the MLS such as (zillow/craigslist), and a buyer comes directly to your property manager, that agent may try to represent the buyer, then your property manager may be keeping 4% it to manage both sides of the transaction. Realtors usually try to steer away from this situation as a conflict of interest.
Property managers are not held to the same standards for their license, though, unless they are also a licensed agent/realtor.
There is oversight to inquire with the realtors association and the property management association in your state. Good luck!
We have a similar clause in our management contract.
We added it after an owner went around us and sold directly to the tenant, really made a mess of things and then expected us to handle everything for free.
Our contract commission is 3% or a minimum of $3,000.
If they are licensed and open to splitting the money should the tenant want to use their own realtor (always a good idea), then I wouldn't have a problem. What are the chances that you'd sell it to the tenant? also if you sell it to someone else, you are free to use your own person. Just make sure that this means they do all the paperwork associated with the sale.
If a property mgr places a tenant, they usually represent that tenant only for a lease term and parties (you and tenant) would be free to choose representation after lease is up.
If you extend an agency relationship with the property manager to represent you as the seller of your property (if they are an agent) they'll expect compensation. If you decide to sell to the tenant directly, then the PM may act as a transactional agent, where fees are far less than 3% (and sometimes flat) because they don't do the heavy lifting with advertisement online, photography, qualifying candidates, meeting buyers, open houses, like they would to represent both sides if not already in place. They are a neutral party in this instance. see that works in your state.