Commercial realtor fees

[Cin Khai]

Hello BPers. I recently closed on a duplex (my first property ever bought) and still learning the ropes. I'm looking at apartments too for my next target and since I don't have much experience and knowledge I'm wondering how much value can I get from commercial realtors.

How do commercial realtor get paid? Do they get paid just like residential realtor 3% if representing buyer side? What are the difference in roles between residential and commercial realtor? How do I choose commercial realtor? Will they help with due diligence and getting documents from seller/broker, etc? Thanks.

[David M.]

@Cin Khai

It’s a totally different ballgame. 1-4 family properties are residential. After that it’s commercial. Commercial agents generally leave the deal with the attorneys once they are involved.

Have you heard how not all real estate agents are Realtors? Well, this is the primary case. Commercial agents do not need to be members of the National Association of Realtors. Thus, they are not bound by the Code of Ethics, so there are really no rules. Consumer protections are for 1-4 family properties.

Commercial agents do work as buy’s agents. Their commission determination is the same. They get whatever split the seller is offering, assuming it’s there. I’ve seen it more of an uneven split. For example, 5% if the listing broker brings the buyer, but 7% total (5% to the buyer’s broker and 2% to the listing broker) if somebody else brings the buyer. Remember, commercial tends to be harder because of lower volume.

FYI, for rentals, their commission is generally setup differently. They get a percentage of the entire deal. So, if rent is $5k a month for two years, they get a percent of $120k ($5k * 12 * 2). I believe this is generally because there are so many more rentals than there are sales. You can imagine how nice it would be be to land a 10 year lease, right? But, there won’t be another deal for at least 10 years (or more, especially if there isn’t a clause where the realtors get a cut on any extensions). I hope that helps

Good luck