How to compensate an agent on a build to suit deal

[Chad Lubke]

I met with an agent and her clients yesterday and today and a spec home we have for sale. They really liked the house but want to have a similar home built on another lot I own in the same community that has better views. The lot I own just has a sign on it with my logo and says "Coming Soon", no marketing, or MLS listing, etc. Total amount I have into the lot is $140k, the total package, house and lot will be around $850k. There has been nothing in writing yet, just a verbal discussion. I am wondering how do I craftfully get her to just get commission on the land, or is that implied since there is no listing...

[Wayne Brooks]

You don't.  In the same thought process, are you willing to make a small profit on the lot, and sell the house at costs?  The agent is bringing you a client for the finished home, not a lot purchase.  3-4% for a buyer agent is typical.  You shouldn't complain about this since your holding/marketing costs would be more without a buyer lined up.  This is of course, a totally unbiased opinion.

[Account Closed]

If the agent is bringing you, a buyer don't short change the agent gives the full commission with a smile.

Joe Gore

[Casey Cuppy]

I agree with @Account Closed and @Wayne Brooks  the agent brought you a buyer for the finished product not someone looking to just purchase the lot. Plus you will want the good karma down the road!!!

[Andy DeFruscio]

I am an agent so I am biased but I agree with everyone else. The agent has a ready willing and able buyer in the $700-800k price range. If I was this agent I would not settle on a $5,000 commission check when I could bring them to any number of other builders who would happily build what the client wants and pay a 3% commission.
The price you give the buyer should reflect a 3% buyers agent commission. If someone approaches you without an agent you can discount based on this fact.

[Chad Lubke]

What about timing on paying the commission.  I am ok with the lot portion of the commission being paid up front, but the other $22,000 of commission, would that be paid at the end.

[Karen Margrave]

@Chad Lubke  We build spec houses, and are also licensed brokers. We list all of our own properties, and most of the time end up selling them ourselves.  However; I do know the value of agents, and always make sure I advertise and put on flyers that we gladly cooperate with other agents. In fact, quite often we will offer a higher percentage to selling agents than is standard. Most buyers looking for homes go through an agent, therefore; having a good relationship with agents is always a smart move. You pay the commission upon the finished house closing escrow, based on the completed price.