How to compensate an agent on a build to suit deal

6 Replies

I met with an agent and her clients yesterday and today and a spec home we have for sale. They really liked the house but want to have a similar home built on another lot I own in the same community that has better views. The lot I own just has a sign on it with my logo and says "Coming Soon", no marketing, or MLS listing, etc. Total amount I have into the lot is $140k, the total package, house and lot will be around $850k. There has been nothing in writing yet, just a verbal discussion. I am wondering how do I craftfully get her to just get commission on the land, or is that implied since there is no listing...

You don't.  In the same thought process, are you willing to make a small profit on the lot, and sell the house at costs?  The agent is bringing you a client for the finished home, not a lot purchase.  3-4% for a buyer agent is typical.  You shouldn't complain about this since your holding/marketing costs would be more without a buyer lined up.  This is of course, a totally unbiased opinion.

If the agent is bringing you, a buyer don't short change the agent gives the full commission with a smile.

Joe Gore

I agree with @Joe Gore and @Wayne Brooks   the agent brought you a buyer for the finished product not someone looking to just purchase the lot. Plus you will want the good karma down the road!!!

I am an agent so I am biased but I agree with everyone else. The agent has a ready willing and able buyer in the $700-800k price range. If I was this agent I would not settle on a $5,000 commission check when I could bring them to any number of other builders who would happily build what the client wants and pay a 3% commission.
The price you give the buyer should reflect a 3% buyers agent commission. If someone approaches you without an agent you can discount based on this fact.

What about timing on paying the commission.  I am ok with the lot portion of the commission being paid up front, but the other $22,000 of commission, would that be paid at the end.

@Chad Lubke   We build spec houses, and are also licensed brokers. We list all of our own properties, and most of the time end up selling them ourselves.  However; I do know the value of agents, and always make sure I advertise and put on flyers that we gladly cooperate with other agents. In fact, quite often we will offer a higher percentage to selling agents than is standard. Most buyers looking for homes go through an agent, therefore; having a good relationship with agents is always a smart move. You pay the commission upon the finished house closing escrow, based on the completed price. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here