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Updated over 11 years ago, 09/10/2013
Commercial Real Estate agents commissions
Hi all, I am new to commercial. I interviewed one agent. He told me that in order for him to look for properties for me, I have to sign a contract with him so that he will be my sole agent. On top of that, he charged few grand up front for analyzing deals. I interviewed another agent. He never mentioned about commissions. But he told me he would charge 10% of the loan amount as he will assist me on bringing all info (Financials of the properties) to the banks to get the loan; and he suggested to get 20% ownership of my property if he brings me a good deal. My question is are these norms in commercial real estate? So when commercial real estate owner sells, there won't be a fixed percentage set as commission to agents like in residential? Any thoughts?
@Janice Manola where our you looking to invest ?
Maybe @Joel Owens can weigh in on this thread
Actually any where in USA that offers great cash flow.
Don't walk. Run from these scammers as fast as you can. There is no reputable commercial broker I've used that works that way. They get a percent of the purchase price from the seller, just like a home real estate agent. Now if you use one as a buyer's agent you may come to some agreement on a small commission but nothing as inappropriate as suggested by the agents you've met.
A commercial agent should be no different then a regular agent.
They bring you deals and if you buy they get paid. I agree with them to get you to sign a contract stating they are your exclusive agent to bring them deals. It doesnt mean you cant go and find a non listed deal by yourself.
Good luck
- Curt Davis
Hi Janice,
You definitely need to steer clear of these guys. As a Commercial agent, I know this business is about building trust. When you work with a buyer you want to be able to trust that they are not working with other agents. It's easy to "spin your wheels" in this industry when you do not have an existing relationship with the buyer.
Try to find one that is looking out for your interests. Just make sure you know what it is you are looking for.
What type of properties and what areas are you searching in? Feel free to contact me if you would like to discuss.
Run run run away. They are just trying to scam you. They good commercial agents will try to send u deals that may be o interest and even help to evaluate them.
There are many great agents but they don't charge upfront fees.
"Actually any where in USA that offers great cash flow."
Janice this statement tells me that you have not narrowed down enough what you are looking for.
Every commercial client I have we go through an in depth process. If they are in town I meet them after e-mail, and a phone interview. If they are not local then e-mail or phone for their preference and I can also do a Skype video chat but most prefer e-mail or phone.
Commission is paid when you close a deal. Now having said that my clients are loyal to me and I am loyal to them. I do not have time for flakes that jump all over creation and do not know what they are doing or even know if they qualify to purchase.
The other brokers know my clients will close the deal because I heavily qualify them and get the heavy lifting out of the way upfront. There are so many different types of commercial investments from multifamily, hotels, land banking for development, industrial, retail, triple net leasing, office. Literally I could go on for awhile with all the possibilities. Each investment has very different loan programs, cash flow models, and exit strategies.
You need to define great cash flow. Each commercial asset class has varying barriers to entry depending on how much money you have to start. I have clients locally, nationally, and globally that I work with.
I do not charge anything upfront but then again I only work with clients that demonstrate they are serious and can perform. The brokers taking upfront money that sounds like they are collecting money upfront and could care less if you land a deal or are qualified as they get paid anyways. That's not the type of person you want in your corner.
- Joel Owens
- Podcast Guest on Show #47
Janice,
Exactly like everybody above states "RUN". I am Multi-Family Agent and what your post sounds like a SCAM SCAM SCAM! If your gut tells you otherwise, don't ever sign or agree to pay a cent.
Janice,
You need to do your due diligence on commercial real estate agents and ask a lot of questions to make sure they can handle your needs and make sure they provide you a copy of their real estate license a copy of their E & O insurance policy.
Joe Gore
Janice you need to drill down on what type of commercial real estate you are interested in.
For instance I specialize in apartment buildings and also retail with triple net leasing.
If you came to me for instance wanting industrial I would tell you I have friends that have been doing only that for decades and I would give you their info. You do not want a generalist commercial broker or agent dabbling in everything. They typically have a general understanding but not the really deep knowledge and expertise for that segment of the commercial asset type.
- Joel Owens
- Podcast Guest on Show #47
Dear all, Thank you so much for your feedback!! You save my life! Well, maybe I need to explain more. I believe one of the agents is CCIM or maybe both are. I thought this is a very reputable designation and thus may offer superior services and thus higher fees (of course silly me to believe that). Both said they would do financial analysis for me. I did not understand the part that when the agent submits the financial information of the property for me to the bank and if the deal goes through, he would want a percentage of the loan to compensate for this work. I did not understand why he charges me up front when he analyses deal for me to pursue (doesn't he get paid when I buy? to compensate the work he did? that includes financial analysis too?) The 20% stake in ownership was proposed if an off-MLS deal which appears to be a super good deal for me and he wants a piece of it too. Oh well, it doesn't matter now. Both of them just are wasting my time. Thank you again to all of your advice!
I am interested in multi family properties, most likely California and Washington State because I have family(whom I can trust to check on my properties while I am not there) in both places but open to anywhere in USA. Since I am just starting, I still have a lot to learn. Wish me luck!:) Thank you Thank you Thank you!!!
Hi Janice,
CCIM is a great designation but it doesn't mean working with someone that has it is foolproof.
There are brokers or agents that like to do double funding of getting paid twice. meaning they want money (points) for sourcing the loan and then the commission as a real estate broker as well. My belief is that I do what I do best and let the other full time professionals do their job as well. That doesn't mean that I do not help clients by calling around to banks and lending sources to see what financing is out there.
There are also brokers who set up and agreement where they get paid on purchase, take an ownership interest in the deal, get paid PM fees, and then have it also that they get paid on the sale on the back end. Some of these situations work out and some do not.
If I was you deciding what return you want is critical and area. You might find after searching that the yield you want doesn't exist in your area so you have to be willing to except certain returns or go elsewhere to hit the margins you want.
As far as family watching over while you are gone this depends on what we are talking about. Big difference between owning a 4 unit building and a 50 plus unit. Money to invest is key as well. 100k,200k,300k,400k?? How much do you have to invest and also with that amount how much are you comfortable with making your first purchase.
I REALLY,REALLY think you need to talk to someone credible to help get a direction to find out where you might want to go with investing. Professionals will tell you options and not push you to do anything. In fact if they believe your money might be better suited elsewhere they will tell you as such.
- Joel Owens
- Podcast Guest on Show #47
Jance,
If you do become interested in Multi-Family in Washington State that is what I specialize in. Unless were talking a deal that is $5-10MM+ sellers usually pay all the commissions. I have completed all my CCIM classes; however, I have not taken the final exam to achieve the actual designation. I do have a thorough understanding of underwriting Multi-Family/Commercial assets and would be happy to do so for you. If we are seriously analyzing a deal to consider purchasing I won't charge fee's up front, just take my split on commission when the deal closes. I only work in Washington State. I also own Multi-Family so my knowledge goes beyond just the brokerage aspect.
Janice there is a lot of good information in this thread. What I would also like to point out is that brokers will see that you are a newbie if you fumble and ask uneducated questions. I remember taking a broker out to lunch and told her that I wanted a MF property that had positive cashflowed. The broker proceeded to tell me that just about any property could cashflow depending on how much I put down. I was at a loss for a response. My point is, keep following this site. Ask the seemingly stupid questions (not saying you have asked any) here. Let this forum answer without judgement.
The broker doesn't want to waste his/her time on someone that probably won't close. Get educated. Know how to evaluate a property and learn what questions to ask. When I see a property offering memorandum on a property, I skip over the brokers analysis and their, "modified actuals" and proceed to ask for the real numbers so I can do my own analysis.
"But he told me he would charge 10% of the loan amount as he will assist me on bringing all info (Financials of the properties) to the banks to get the loan; and he suggested to get 20% ownership of my property if he brings me a good deal."
Please take this a constructive critique, but whoever said this saw a lamb coming to slaughter. My mortgage broker that gets me the loan only gets 1% of the loan and he works for it. 20% ownership is laughable. I once gave my broker 1% of the deal because he went above and beyond.
Test out your questions here and let this group help you analyze the deals
Good luck
So, speaking from a different perspective here. What it sounds like is you got the blow off. I have done this to clients as well. Is it wrong, unethical, or illegal? NO! Not in most situations. Here is why, typically commercial transactions can take 6 months to close, that is once you have found a property. When you are using the time value of money approach, the agents time is worth money. Would you go 6 months to 12 months without a paycheck and still work as hard as you do on day one of the assignment? Chances are, no. What sounds like happen is, the agent asked you a couple of qualifying questions during the interview process, in which case they were also interviewing you (the potential client) and they didn't like like what they heard and determined that either due to the price point or any other factors, it would take a long time to get paid, if paid at all. So they said you have to pay a little up front. I understand and agree with that. Infact I teach my students to actually do that and don't be afraid to fire or not take a client. My time is worth $150 and hour and I need to know that Im going to get paid, or Im not working for you. When agents start thinking like business owners it only strengthens the real estate industry.
D. Scott,
Are you a real estate agent?
Joe Gore
Yeah licensed in 2000 I believe. Been in it since 1996.
The reason I ask we have problems here in Texas where real estate agents will string along clients or not return calls or cannot answer question, and I think it would be a good idea to follow what you said your time is worth $150 hour so the real estate client's time should be worth $150 hour also if the real estate agent jack around the client. What do you think
Joe Gore
Commercial brokers are different from residential. There is no multi-list per se for commercial though there are Loopnet & Costar and other commercial sites.
NAICIR also has a website as well as other commercial brokers. As in all real estate commissions the fees and commissions are negotiable. We have paid as high as 15% and as low as 1.5% commercial commissions. We NEVER pay commissions in advance and never pay bases on loan amounts, though I would like that since many of our deals are cash with no loans which would mean ZERO commission by the schedule proposed to you.
Many commercial brokers start with the buyers and have them sign exclusive buyer agency agreements, which is more common in the commercial end than the residential end. Sometimes the buyer even actually pays their broker, which almost never happens in the residential area. If you sign such an agreement there should be limits like a certain period of time and limits to properties that they actually bring to you. And no money changes hands until settlement.
You should look for brokers that are in the areas of CA and Wash. where you want to invest and have knowledge of the area. One of the other things that commercial brokers do more so than residential brokers is that they will seek out unlisted properties that meet your requirements and that way not only get double commissions, but also bring you properties that other people won't or can't.
D Scott, I have no problem with the brokers prequalifing the client, and I have been asked for POF before being shown a property. It does sound like Janice did not pass the interview and received the brush.
Another reason that you neeed to come off as an experienced investor is this. When you start off building a relationship with a broker her/she will usually start off by bringing you all of the junk they could not move. Don't just throw out the junk and move on to another broker. Go back to the broker and tell them why this does not work for you. The more professional you come across in your analysis the more respect you will gain.