What is a fair acquisition % fee in this scenario?

Question

My brother found a 4 unit multifamily house that was listed way too high at $525k initially. They listing had a failed pending sale and eventually my brother talked them down to $400k sales price planning to buy it on his own. He couldnt get the mortgage he wanted and needed help with the down payment from me, so we formed an LLC to buy the house with each of us investing 50-50 equally on the down payment.

He did all the work finding this deal and negotiating the great price so I agree he is entitled to some sort of acquisition % fee. He proposed 2% which would be $8,000, does this seem fair or standard? Should the fact that I only own 50% of it change this fee since he is a 50% owner of the deal also?

First time encountering this scenario so I appreciate any advice

Marc Winter · Answer

A request for separate compensation should have vanished when you formed an LLC to purchase, and no mention of a 'fee for service' was mentioned.

Nah, please don't bring up 'you owe me' AFTER the deal is done.

Next time, all this stuff should be spelled out in the agreement to form an LLC, or shared in the LLC percentages of ownership/partnership.

Good luck.

Russell Brazil · Answer

Sounds like you are coming to the rescue to save a deal your brother doesnt have the capability of closing himself. So if it was me, I wouldnt pay him anything.

Gino Barbaro · Answer

@Kurt Beadling

What were you willing to pay? I personally think 2% is reasonable, especially if he found the deal and did all the work to get it over the finish line. You can bring up you only own 50%, but I don't think that's relevant. He is charging for a service that you would not have been able to secure on your own.

I would stipulate this is on a per deal basis.

Gino