Why Does Buyer Pay 3% BUYER FEE and NOT the Seller??

6 Replies

I am trying to do my first commercial real estate transaction and the seller/sellers broker is asking for a 3 % BUYERS FEE? Why would the buyer of commercial real estate have to pay a 3% Commission, shouldn't the seller be paying that? Is this normal? Appreciate any answers.

Pretty typical with commercial. Id say more than half of commercial deals in my market, buyers pay their own agents

It varies market-to-market and depends on the transaction itself. For example off-market commercial transactions more often than not include buyer agent fee paid by buyer. It can also be a factor of financing. Commercial representation agreements usually include a clause that states brokers will first look to landlord/seller for a fee but it may be the clients responsibility of none is available, this clause is usually accompanied by "fee not to exceed 3% of total purchase price" in some form or another . If you signed an agreement read through the language.

If you didn't sign anything hopefully your broker brought this up before negotiating on the property (instead of 3 days before closing for example). 

Your still in control, if the seller is refusing to pay a buyer broker fee you could pull the deal entirely or simply increase the purchase price by the amount owed to your broker. 

He/she's asking you to pay a fee on the buyer's side of the transaction as well because (I'm assuming) you don't have a buyer agent representing you.   The seller should be paying the listing broker, not you, unless it was specified in the purchase and sale agreement that it's your responsibility to pay the selling broker.  The broker just wants to collect on both sides of the transaction because why not?  

It's worth it to try and understand why they want a commission from you.  

@Darvin Ezell

Commercial is a different environment.

Sellers can refuse to pay the buyer's agent. In that case, the seller only pays the commission for their own agent. The buyer has to pay for their own agent.

I personally can't stand those types of deals where the seller wants buyer to pay broker fee. Buyer feels DUPED somehow whether they are or not.

I ask upfront when looking at a flyer what the co-op is.

Some of my buyers tell me if the seller requires buyer broker to be paid by buyer to not even show it to them for consideration. Sellers really screw themselves with this type of crap. I had a listing broker explain the reasoning before but it was still crap.

Certain brokerages I like doing business with because they have good overall fees to split.

There are some out there who work for peanuts frankly. I avoid those companies listings as I know how it will be. I do not work on transactions for low fees. The new agents tend to try and do anything to get business and are desperate usually. 

Some of the best deals I've ever done have been brought to me by brokers whom I've paid a fee to directly as my buyer's agent.  Because most buyers decline to pay a buyer's broker fee directly, my competition is vastly lessened on these transactions.

So, while the percentage of doable deals is still very low in this category, when the rare great deal appears my competition is vastly decreased.

I will give you a real example from the last few months.  A broker I have done business with in the past contacted me with the information that a bank note secured by a first lien on a restaurant/bar could be purchased at a significant discount and that the sale of the property was probable.  He wanted my word that I would pay him a fee if I successfully purchased the note.  After negotiation with the bank, my partner and I purchased this note, with a remaining principal balance of $321,582 for $195,000.  We paid said broker a $6,000 fee.  Less than 30 days later the property was sold, and we were paid off in full.  If I had gotten on my high horse, and refused to pay a broker a buyers fee, my partner and I would have foregone a profit of in excess of $119,000 (our legal bill was $1500) on a 202,500 investment in less than 30 days.

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