What is a reasonable referral fee for a commercial deal?

18 posts by 11 users

Medium 1399284996 avatar dan inc Dan Inc
Investor from Charlotte, NC
210 Posts
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Dan Inc

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?



Medium 1399610970 avatar rrs16 Ross Schneider
Residential Real Estate Agent from Fort Worth, TX
61 Posts
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Medium 1448323178 avatar blackbelt Joel Owens
Commercial Real Estate Broker from Canton, GA
10234 Posts
5060 Votes
17 Awards

Joel Owens Verified Video 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


Dan Inc

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 Verified Video 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


Dan Inc

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.



Medium 1412209793 avatar brighterdays Karen Margrave
Brokers-Developers-Licensed G.C. from Orange County, CA
5526 Posts
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Karen Margrave Moderator

Brokers-Developers-Licensed G.C. 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.



Medium tmg  1 Karen Margrave, The Margrave Group #00636992
E-Mail: [email protected]
Telephone: 949-933-3955


Dan Inc

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

Brokers-Developers-Licensed G.C. 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.



Medium tmg  1 Karen Margrave, The Margrave Group #00636992
E-Mail: [email protected]
Telephone: 949-933-3955


Dan Inc

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?



Medium 1398940100 avatar oc pro Jake Kucheck
Residential Real Estate Agent from Newport Beach, CA
1019 Posts
354 Votes
6 Awards

Dan Inc

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 :)



Medium 1399534090 avatar benny75 Chris Sweeney
Real Estate Investor from Austin, TX
174 Posts
54 Votes
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Chris Sweeney

Real Estate Investor from Austin, TX

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.



Medium 1399529668 avatar jcyrierccim Jeremy Cyrier
Commercial Real Estate Broker from Wakefield, MA
60 Posts
11 Votes
1 Award

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 1399595474 avatar nippontradings Ziv Magen
Fukuoka, Fukuoka
144 Posts
23 Votes
1 Award

Ziv Magen

from Fukuoka, Fukuoka

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.



Medium 1399600324 avatar par excellence Kenneth Paar
Real Estate Investor from Clovis, CA
3 Posts
0 Votes
1 Award

Kenneth Paar

Real Estate Investor from Clovis, California

Apr 22 '15, 07:04 PM


I asked this question of a local CRE broker on Monday, April 20th and here was his response:  "Standard practical referral fee is 25% of gross commission."



No avatar medium Jacobus Bor
Investor from Las Vegas, NV
88 Posts
14 Votes
1 Award

Jacobus Bor

Investor from Las Vegas, Nevada

Apr 25 '15, 01:45 AM


You should have ask for a fee before not after 25 is a reasonable amount 

and if the deal does not fly call me i love paying fees



No avatar medium Wayne Brooks
Real Estate Professional from West Palm Beach, FL
9229 Posts
3255 Votes
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Wayne Brooks

Real Estate Professional from West Palm Beach, Florida

Apr 25 '15, 03:09 AM


2-2.5 % would be the fee for providing full services as a listing or buyer's broker, with the associated liabilities.  Referrals are usually 20-25% of that.



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