Commission from Sale to Tenants in Prop Manager Agreement?

[Paul Cordasco]

I have settled on a property manager for my recently acquired rental property. In the agreement they sent over there is a clause that stipulates that they receive a 4% commission if I was to sell the property to tenants they place. Is this typical? Can I negotiate this? Is this just an assurance I use them as my broker in that case? Any experienced POVs here are welcome. Thanks BP community. 

[Kim Tonetti]

What state is this in, and I would ask if your property manager is also a real estate agent or realtor? (Licensed Realtors have to abide by higher ethics standards to be certified than agents)

Anything is negotiable, and you can always ask other property managers in your area. 

If a property under $1M is advertised on the Multiple listing service (MLS) by a licensed agent, the fee to seller is usually about 5-6%, as 1/2 goes to each agent's broker to serve you and buyer fairly. If your property manager is also an agent, and advertises on the MLS, then a split is 2% for your prop mgr/realtors broker and 2% for the realtor who brings a potential buyer.

If a sale happens as a result of the property manager advertising outside of the MLS such as (zillow/craigslist), and a buyer comes directly to your property manager, that agent may try to represent the buyer, then your property manager may be keeping 4% it to manage both sides of the transaction. Realtors usually try to steer away from this situation as a conflict of interest.

Property managers are not held to the same standards for their license, though, unless they are also a licensed agent/realtor.

There is oversight to inquire with the realtors association and the property management association in your state. Good luck!