Seller paid Acquisition Fee?

Question

Hi all,

Great context on this forum! I had a question I'm hoping someone could help us with. We are making an offer on a 27M building in AZ. Normally when we are looking for investors/partners we would include an acquisition fee into the deal so our group can get paid for their efforts. But how can we structure the acquisition fee to be paid by the seller? 4 of the 5 of us are licensed agents. This way the investors come up with a bit less. Has any one received an acquisition fee this way?

Scott Barnes · Answer

Gabriel, thanks so much for taking the time on this. Exactly what I was looking for.

Gabriel Graumann · Answer

@Scott Barnes I believe what you're trying to do is roll your 2% "commission" paid by the seller into the deal. The most common issue with attempting this is that title/escrow cannot apply commissions to down payment or funds applicable to the purchase as it requires the sale to process in order to make the commission funds available. Furthermore, I'll assume what you are also attempting to do is use the 2% commission equivalent to cover that portion of the down payment needed to close on the purchase, which would give you a larger equity position in the deal.

If the above assumptions are correct, the simplest method would be for your group to front the cash equivalent to the 2%, which will be reimbursed to you through the 2% commission collected at closing. This assumes you have the funds available to do this. A second method would be to add your name as partners in the deal with a percentage of ownership equivalent to the 2% commission you would have earned but is being removed from the acquisition costs by you relinquishing the acceptance of a commission. This lowers the acquisition price to the buyer, which you are now a part of, and your equity in the deal is pre-established. Happy to connect if helpful. Good luck with the deal.

Scott Barnes · Answer

Great question. I guess I should have clarified further. The seller is going to pay a broker fee at closing. Instead of us asking investors for a 2% acquisition fee, we were trying to get a 2% share of the broker fee. Just not sure if and how that would work.

Bob S. · Answer

Why would the seller pay the fee?