Property Mgmt Agreement w/ Sales Commission

[David Beard]

I was curious how many of you have property management agreements where the PM has inserted a clause saying they'll be paid a specified % of the sales price if sold during the term of the agreement. Sounds crazy to me, but I've just encountered this.

[Paul B.]

Two percent sounds high. If we assume that the property is worth 5x the annual rent (that's using the PFA system), then a 10% PM fee equals 2% of the value of the property, so they are basically asking for a year's worth of PM fee.

I think a percentage of the remaining term is more than fair, and as a future PM I would probably gladly negotiate that away if asked since so much of your success as a PM hinges on word of mouth.