3

We were approached by an independent broker. This broker has made us an offer on our house on behalf of a reputable developer in our city. I won't get into details but it is for an inner city multi unit development. 2 adjacent lots (other owners) are also involved. I am not concerned about the legitimacy of the parties involved or the fairness of the amount offered (I have looked into all this).

Question 1 . We have been offered just over 1 million each. The broker would get 5% of this. 150 thousand commission on the three properties. I thought 2% would be my offer. Is 5% justified? 20 thousand or 50 thousand!

Question 2. To round off the figures for convenience. The developer has offered 50 thousand deposit each property...the balance on final closing . The broker says that of our 50 thousand, he would get 25 thousand and we would get 25 thousand. If the deal does not go through, then we both keep our share of the deposit. Is it reasonable for the broker to expect 50% of the deposit when his overall commission is 5% ? Why would he not get 5% of the deposit ($2,500 instead of $25,000). He is getting half of his total potential total commission from the deposit.

The brokers aces in this....the offered price is about 40% above local property values. Our aces...no imperative to move. He needs all three properties for this transaction.

Perhaps this is all the norm. Any thoughts appreciated.

Thanks


Thank for the feedback.

As stated the final price, legitimacy of the developer, etc. is not my question.

I was wondering what a reasonable amount for the broker should be. 2% on a million is 20 thousand. That's a lot of money for putting a deal together. There isn't anything for the broker to split with another agent, etc. No advertising or other costs other than having pulled a few land titles.

What the broker has done has gone to a major developer in our city. Told them he can possibly get three adjacent residential lots together in an area that has high traffic already been rezoned for a multi residential unit. He offered us all the same ....just over a million each and 5% fee (from seller). So...I'm now leaning to 2% max. And, yes, I'm not naive and won't be signing anything until I go through everything with a fine tooth comb.

  • 1
    It would be whatever you agree to, obviously the deposit is a bit low, the cmommision a bit high, but if you are being offered 40% above what you consider market value, then it is something you will have to negotiate and agree to if you are happy to sell in the first place. – user9822 Jan 14 '15 at 20:52
  • When you go through an agency, the typical cut is %3, of which the individual broker typically gets half. Sounds to me like he is taking advantage of your lack of experience. Saying "no" is a very effective negotiation tactic. – John Shedletsky Jan 14 '15 at 21:29
  • What country are you in? – JoeTaxpayer Jan 14 '15 at 22:08
  • Welcome to Money.SE. The question is on topic, but what you added below as an answer is just a clarification of the question, and I moved it up here accordingly. – JoeTaxpayer Jan 14 '15 at 23:47
5

My concern is related to the deposit.

Imagine that you are selling your house on the market. You sign a deal that with a broker for 6% commission. If they don't find a buyer they get nothing. If they find somebody willing to make a deposit, but it falls through they still end up with nothing. If the buyer has their own agent the commission is split.

Now look at your case.

This broker represents the developer. They are offering you 1,000,000 but the broker will keep $50,000. So in reality you are being offered $950,000 for the property. Why isn't the developer paying the broker? They are being tasked to negotiate with three home owners.

The deposit is strange. 25K for you and 25K for the broker. But if they represent the developer why do they need to keep 25K per property.

Maybe they don't really represent the developer. But if they do represent the developer they may be trying to secure the property for a 2.5% deposit. The brokers 2.5% is a phantom.

You need a lawyer to review the documents. You need to make sure that the contract is legitimate. You also need somebody to appraise the properties. You also need a meeting with your neighbors. In fact that might be the place to start.

0

An offer price has nothing to do with the broker's commission. I would simply counter with 1.025 million. That is a million plus 2.5% for you if that is what you are entitled to.

I am not sure what you are talking about with your counter. You don't pay their broker, ever. With this much money involved you would either get your own broker or a lawyer. Most brokers/lawyers would be more than happy to make 5-10K on a done deal. So if you are looking at incurring costs that should be your range.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .