First Timer - "Finder's Fee" Arrangement

First Timer - "Finder's Fee" Arrangement

San Diego, CA · Member since 2017 · 105 posts · 55 votes

I'm currently in a situation where I'm looking to connect an interested Investor with a commercial property Seller (who is actually a Wholesaler herself in this case). What's the easiest way for me to collect a finder's fee/referral fee for helping to connect these parties? 

I'd prefer to avoid putting the property under contract myself and doing an assignment, since there's already a Wholesaler involved. This seems like a transaction I hear about being executed on BP all of the time, but I haven't found a simple explanation or template for how to formally execute the process. I don't currently have any business entity/LLC, so that would probably eliminate the option of implementing a consulting contract and charging a fee for services. I live in Cali so I'd prefer to avoid filing for an LLC until I'm fairly certain the deal would make sense for both parties. The property is located outside of Cali.

Is there a simple Finder's Fee template which contains enough protection to handle these common transactions? What's a reasonable fee to collect on a ~$1.5 million transaction?

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Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y

Interesting, curious to see what you find out.

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  • Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    Interesting, curious to see what you find out.

  • Vandalia, MI · Member since 2018 · 569 posts · 264 votes
    8y

    I was told finder fees start at 1% of the deal.  I thought that was a high.

    Anyone else have a number?

    Good luck and I am interested in knowing more also.

  • San Diego, CA · Member since 2017 · 105 posts · 55 votes
    8y

    Still haven't gotten much feedback on this topic. Surprising, I figured referral/finder's fees would be a fairly common scenario, though I suppose more so on smaller residential transactions. If anyone has any guidance it would be much appreciated.

  • Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y

    Personally, in the situation you described, I would just simply make the introduction between the two people I knew and hope they were able to make a deal work between them.  There's something to be said for just helping people out.  Not every situation has to be monetized. 

    Now, if you actually had the property under contract, that would be a different story.  But for just saying "Hey Joe meet Sally, I think she might have something you might be interested in", I think if they bought you a beer or a lunch after they struck a deal, that'd be a nice gesture and about all I would expect if it were me.  

    They'll likely remember you and you helpfulness may even pay off you somehow down the road.  If nothing else, you helped a couple people out and you can't go wrong doing that.

  • San Diego, CA · Member since 2017 · 105 posts · 55 votes
    8y

    @Kyle J. I definitely hear what you're saying. That's typically the way I operate. However in this case, I am dedicating a lot of man hours to sourcing commercial property deals, primarily for myself but am also keeping an eye out for other parties I know who are looking for deals. These are high dollar value properties, not just SFH, so being a match maker in this case deserves a fair reward in my eyes.

    Rather than get into a complicated series of "consulting contracts" preemptively with each potential Buyer, I was hoping to find a simpler way to collect a referral fee once I'd already done some preliminary vetting. Again I have to think this is a pretty common occurrence, but am having trouble finding the best way to execute and would love to hear from some people on the forums who have experience in this area.

  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    What you have described is brokering real estate.  Are you licensed to broker real estate in the state where the property is?

  • San Diego, CA · Member since 2017 · 105 posts · 55 votes
    8y

    Not licensed. I've seen this topic go back and forth on similar forums, whether this is truly considering brokering or not. Some say the best way to avoid this conflict is to wholesale/assign the property, but again I'm looking to explore if there's a simpler option. I've seen examples of professionally written "Finder's/Referral Fee" contracts for real estate, and have heard of cases where these have been successful, but haven't been able to get in touch with anyone personally who has experience in this area so far.

  • Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    8y

    I'm no real estate lawyer, and I have no moral issue with what you're trying to do, but this sounds like a pretty clear cut case of brokering real estate. 

    I'm sure you've heard of cases of this being done without a license successfully, I sure have, but that doesn't make it legal. 

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