Real Estate commissions? Thoughts on a $34M sale $400,000 ($200,000 per) to $500K

[Chris Blackburn]

Thoughts on this commission?   Too rich?   One more layer?

Here is what one of my 4 AIs say:

The commission structure detailed in the image for a real estate transaction involving a property valued between $30M and $40M is as follows:

• Under $34,000,000: 1% (0.50% per side)
• $34,000,000 - $34,999,999: $400,000 ($200,000 per side)
• $35,000,000 and above: $500,000 ($250,000 per side)

To evaluate whether these commissions are fair for a 112-unit apartment complex valued between $30M and $40M, let's compare them to typical real estate commission rates for large commercial properties:

1. Typical Commission Rates:
   • For commercial real estate transactions, commissions generally range from 1% to 3% for properties valued above $10M. For properties valued between $30M and $40M, the commission rate tends to be on the lower end of this range, often around 1% to 2%.
   • Some brokers may also opt for a flat fee structure, which can be advantageous for high-value transactions.
2. Comparison with Provided Rates:
   • For a property under $34M, the commission is 1%, which aligns with the lower end of typical commercial real estate commissions for high-value properties.
   • For properties between $34M and $35M, the commission is a flat $400,000. This equates to approximately 1.18% to 1.14%, which is still within the typical range.
   • For properties above $35M, the commission is a flat $500,000. For a $35M property, this equates to about 1.43%, which is slightly higher but still reasonable.
3. Market Norms:
   • In some cases, commissions for very large transactions can be negotiated lower, especially if the property is expected to sell quickly or if the broker anticipates minimal effort to close the deal.
   • The presence of a flat fee for properties above certain thresholds is not uncommon and can provide predictability for both the seller and the broker.

Conclusion:
The commission structure provided in the image appears to be fair and within the typical range for large commercial real estate transactions. The use of a flat fee for higher-value properties is a common practice and can be beneficial in ensuring transparency and predictability in transaction costs.