How do we pay people who help us close the deal?

16 Replies

Hello, My partner and I need help figuring out how much to pay this person. Here's what happened, she answered the call, negotiated the deal, we bought the property @ $160,000, we'll be keeping it as a rental. How much do we pay her for picking up the call and negotiating the deal? 

@Ashley Victor

Who was this person? A wholesaler? A broker? A transaction broker? A third-party that just put you two together?

Not virtual and not on salary. It's my mom she got me into the business  years ago and I really can't put a price on what she brings to the table, but I want to be fair. If I was selling the property it would be a percentage but since I'm holding it I'm having a hard time figuring out how to compensate her.

@Ashley Victor I'm missing something here, she did all this with no pre-negotiated rate in place? She can make you a lot of money then wait hoping you'll give her a nice check when all is said and done?

Its your Mother , stroke her a check for $ 25,000  she wiped your butt , put on your band  aids  and  made your meals . 

@Ashley Victor

Okay. If she's your mom, and I assume she's another investor like yourself and not an agent, you should just really decide up front how you want to handle things. Could be a reasonable gift. % of cash flows or sales profits.

Plan was if we sell the property she gets a percentage, but we are holding it, now I can't figure out how much to give her.. @Matthew Paul she'd love you for that..lol @Ray Johnson she knows I will give her a nice check, but at the same time I'm running a business that's why I needed some outside opinions.

A percentage of the rent each year rented and same percentage as in the past when sold.

How much time did she take on the negotiating? It looks like it was not a lot of time. If it was a couple of hours and then you took it from there I would say giver her a nice hourly rate $100/hour and calculate it out.

My sister works for me doing paperwork and some admin stuff about 4-6 hours a week and is just out of school. I pay her $15 and she thought that was too much! I know it can get tricky with family being fair but running a business, so it's good to be up front and even ask..."mom what would you think was fair for your time helping make that sweet deal happen, I really appreciate your input and getting the job done and want to compensate your eel for your efforts?"

Justin Brown, Real Estate Agent in PA (#RS329365)
(814) 933-8623

@Ashley Victor I would pay her like a buyer's agent since she basically represented you, negotiated the deal, and got you to closing on a property. Most buyer's agents are making 2-3% of the acquisition price, so pay her $3,200 - $4,800 and move on to the next deal. 

Harrison Smith, Real Estate Agent in ME (#SA920283)
(207) 956-0872

I agree with @Justin. Maybe $125/ hour.

Was your mom expecting anything out of it in the first place?  Is this going to be a regular activity for her, or just a one off thing?  How much equity did you capture with the purchase?  The answers to those questions might paint a better picture on what is the correct amount...  My first thought was $5K based on the limited information.

After all costs equity in the property is 105k, I can make it an ongoing thing. I really would like to establish a flat rate. If I were to consider hourly pay then I would also have to pay for the endless hours of tire kickers. Seems like 5k per closed deal should be it, at the end of the day the job remains the same whether we purchase a 30k property or a 300k property so percentages wouldn't work all the time. Thanks everyone I really appreciate the input. Continued success to all!

I think you should base your decision based on the amount of hours she put negotiating the deal and perhaps how satisfied you are with the amount of equity your getting from the deal. If just making a few calls, I would say she was more of a "deal finder". But if she put in a decent amount of hours, followed up consistently with the seller and got you a better deal than you had anticipated, then she probably deserve a decent commission. Keep in mind, I'm using the commission term loosely. In most states it would be illegal to receive money for brokering services without having a license. 

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