Agent Commissions When Selling Multi-Family Properties???
I may be selling my property here in the near future and doing a 1031. I could sell it myself with out an agent for 1.2 or 1.3M pretty easily. I have some brokers and agents that want to list it for about 1.75M.
What is a standard commission that I would expect to pay for something like that?
They're coming in at 5 and 6%. I understand that they're bringing value to the table, but what is enough....and how much is too much.
5% of 1.75M is 87K. That's a lot of money to pay out for the work involved.
Your thoughts???
I would offer a flat fee of $50K on a 1mo listing.
I've considered that, but it offers them no motivation to get a top-dollar price. I realize I can accept or reject any offer that comes along.
I've also considered a scaled commission, such as
1.5M = 25K
1.6M = 30k
1.7m = 40K
1.8M = 50K
1.9M = 70K
I want to hear some more thoughts....
It doesn't matter what the agents want to list it for. It's a matter of a fair price that the market can bear. When commercial property, it's all about cash-flow, cap rates, GRM, etc. If your property has a cap rate that's comparable to other similar properties in the area @ $1.75m price tag, then it can sell. If it's at a bargain cap rate compared to others @ 1.2M, you can easily sell yourself, I'd imagine. But there's a huge spread between 1.2M and 1.75M. Even if you have to pay an agent full commission, you'll net a LOT more money than @ 1.2M. Also, I've never listed commercial property, but the ones that I've pursued/showed, the coop broker commission were 2%, which implied 4% total commission. So you can definitely bargain them down to 4%, especially based on the $$$ amount involved.
compwhiz, thanks for your input
I've never purchased a listed property, so I've never gone through this before.
I do understand how multi's are priced. The brokers I've talked to say they have out of state buyers that know what they want and will pay top dollar for it (hence lower cap rates).
I'm not a "motivated seller" right now. I'll sell it if the price is right, but I'm not dying to do so.
I know everyone says this, but it would be a pretty decent condo conversion, at which point the value would be about 2.5M. Additionally, the financials aren't where they need to be for a local investor who needs to get qualified to come in and buy it. It's still in the "turn-around" process. Hence higher expenses and lower income.
By my estimations, it's still premature to sell. However if someone comes in with the right offer, I'll walk.
hibby76,
If I've done my math right, you're thinking about a 3% commission for $1.9mil and commission amount goes down from there.
I guess my question is: what "servicing" work are you looking to the listing agent to do (eg, MLS, answering broker inquiries, advertising)? If what you want is the agent to introduce the property to buyers the agent may be working with, why list it--why not just give an agent a specific period of time to get the buyer to a contract? This way, you can work your way through those agents you think may have buyers but not ask one agent to be listing agent and selling agent for this amount of commission.
Servicing a listing is very time consuming--if it's done right.
TO HIBBY 76 --
I just listed a 1.5M mobile home park in California at 6% fee.
Within 3 days my sellers are now involved in multiple offers and bidding war & terms between 2 buyers.
We are higher with both buyers than my seller every dreamed of !! The seller's park had over doubled in price in almost 3 years.
My sellers are quite pleased with the results at 6% fee.
The slight difference in commission % versus the larger amount that the seller will walk away with a big escrow check at closing is what most sellers want.
Cheryl Lopez
[ Edited by cheryllopez on Date 05/20/2004 ]