Finder's Fee on Shopping Center in LA?

4 Replies

BP readers,

Thank you for reading! I recently presented a shopping center deal ($10,000,000 in South Los Angeles) to a broker friend who has an investor interested in the deal. They will put in an offer on the property. The confidentiality agreement from the selling brokers states that buyers broker would receive 0.50% of sales price (is it me or is that relatively low?).

My broker friend mentioned that he usually pays 15% of buyer's broker commission for the finder's fee, if there is one, but because we are friends he would do 25% (or $12,500 = $10,000,000 X 0.50% X 25%).

What do you think I should ask for in this deal?

And if this goes on what are your thoughts on a sliding scale finder's fee, how would you say that would look like?

Thank you in advance!!

A

That is extremely low.

Hi again @A Bee ,

It's not uncommon for commercial listings over the magic $10 million price point to only have a buyer side commission, which the listing broker does not split with a buyer's agent. I'm only speaking about Los Angeles real estate here, so outside of LA or Orange County this may not be the case.

So it goes in a market where supply is hard to come by and buyers are plenty. To the first part of your question, no that is not surprising or low for a split fee to a buyer's broker on a deal this size in LA.

To the second part of your question, how much you should take from the buyer's broker to whom you handed off the deal??  

First, can he ask his buyer for a fee?  Again not uncommon in LA commercial real estate. He'll likely be doing all the normal work, so I'd expect it's fair to ask his buyer to make up the difference to pay a "normal" fee.  I'd estimate normal side of a commission to fall between 1-2 points.

Finally, what is it worth for you to hand off a deal?  I'm assuming that you are forwarding a deal via email to a broker who has forged a relationship with a buyer.  A deal that was listed by another broker who worked the seller to get the listing, analyzed the market value and brought it to market.  Assuming this is the case, getting paid $12,500 to forward an email is pretty darn good in my opinion.

If you are doing more work for that paycheck, like securing/contracting for the deal prior to sharing, underwriting the deal prior to forwarding, finding something that is off market or unattainable unless it's through a relationship you've forged with a seller or listing broker, well.. that's a whole different discussion. 

Best of luck

A

Also, I believe in California, you must be a licensed agent with an employing broker, or be a broker, in order to legally receive any kind of kick-back, referral fee, or finders fee for any on-market deal. 

I would echo what @Allan Glass said. I'm working on a number of $10M+ deals and none have buyer brokers. Customarily if a buyer broker existed they would need to be paid by the buyer, and sometimes are. As for referral fee, typically this is 15%, but I've seen it go up to 50%, depending on how much value the referring party adds. Again, Allan has a good point there. Best thing you can do in these size deals is get the listing as the sellers agent.

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