Buyer's broker commission?

4 Replies

On smaller multifamily transactions, say less than $5 million, are buyer's brokers ever part of the equation/eventual commission, or is it similar to how the game works on larger deals?

Typically, large multifamily deals listed by the major national brokerage firms agreements forbid a buyer from bringing a buy-side broker to the table and if they do allow they usually say that the buyer is responsible for paying the broker themselves and the seller will not.

Is this typically how it works on the smaller deals as well?  If a broker helped a client locate a $2 million apartment deal, does a selling broker often split commission with a buyer's broker similar to how it's done in single family?

Buyer brokers get paid all the time even on larger deals over 5 million.

There are certain commercial firms in the industry ( I will not name them ). That offer no commission to the buyer brokerage. They are doing a HUGE disservice to their clients on marketing the property and in my view are not performing full fiduciary duties to the client.

Not offering a co-op is only serving the brokerages self-interest. It really gets paid anyways as the buyer offers a much lower price paying out the buyer brokerages commission. Most commercial firms do not work like you mentioned above.

There are black eyes in our industry that many firms shun at all costs.

I have ran across great companies and commercial brokers and then I have ran across some that I never want to interact with again as they are slimy, unethical, and do poor work on transactions.

We offered on one property and the commercial listing broker sent back another buyers LOI offer on the property! It had the buyers offer price, 1031 information, bank accounts and balance etc.

Really scary how they were operating. We didn't buy that property as we felt it would be a mess to get to closing and undiscovered issues would be found.

@Joel Owens  thank you -- great information!

I'm on the buy side working on behalf of an investment fund.  We typically buy deals listed by the major, national brokerages and in my many years have never done a deal that involved a buyer's agent.  Most deals we buy are in the $10 - 30 million range.  Most of the firms that broker the deals we buy are pretty solid in my opinion, but I can completely understand where you are coming from.  

I asked the question because I have a friend (licensed) who met someone looking to buy a $2.5 million deal and my friend wants to help him find a deal and earn a buy side commission.  I really appreciated the comments above.  Thanks.

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Sean S,

The other thing you may seen from those brokerage firms Joel is talking about is that they will make a 4% commission but then only offer a 1% split to a co-op.  This is a disservice to the seller in that the higher the commission may potentially attract more activity from real estate brokers.  When you see a typical lease on a property, the listing broker may make 2% and offer 4% to the selling agent.  Of course, commissions are always negotiable. 

Mark

Hi Sean,

The co-op offered will depend on who the seller is in that price range.

In your situation being  a fund you are a professional buyer only wanting the deal.

My clients tend to be high net worth individuals that do not know about commercial real estate. They are looking for  a brokerage company for  a lifelong connection to help them buy/sell and look over their portfolio to determine the best time to acquire and dispose of more properties.

That's what I focus more on is the individual relationships. The big multi-billion dollar firms with teams do their thing and I focus on mine with more personal one on one interaction. I do have some funds and REIT's that I look for properties for but they just want the deal. I devote much more time to my personal one on one clients.