A real dose of reality regarding low cap properties.
Your question was regarding commission.
As a real estate professional who has been in the business since 1982, you should place value on these estimate that somewhere between 24 to 60 hours will be invested by some one in every home that is sold.
If one assumed the 'prevailing rate' the gross compensation for $50,000 real estate will look like:
$3,000 gross compensation divided equally by buyer/seller brokers
$1,500 customary split between agent and their broker
$750 for agent / 42 hours = $17 per hour (if 60 hours are spent it drops to $10/hr)
You should also keep top of mind the number of low cap purchases that fail. Someone must absorb these costs. From this $750 dollars the agent must pay their real expenses (the broker does not provide that car), taxes, insurance and all costs related to being in business. No, the broker pays not a single dime...the agents pays for EVERYTHING!. The real dollars the agent has to spend is SIGNIFICANLTLY less then $750, but I will use the highest number for this example, $750 for the home owner agent and $750 for the agent representing the buyer. The possibly of working for much less that $10 an hours certainly exists. I only takes on mistake, one failed attempt, and the situation is unrecoverable....that means the agent loses money. They in essence have to pay in order of a buyer to purchase low cap real estate. And when that happens...not even a 'thank you' from anyone.
For low cap real estate, it is not uncommon for the buyer to pay their agent. It depends on the property. In the end. those real estate professional intending to be in business next year will have a business model for low cap properties will have effective fees equivalent to 12 to 25% compensation. (Use a $3,000 flat fee and reverse the math) Now add to that fee any fees passed on to the buyer. In some cases the BUYER must pay their agent directly. That is usually a flat fee that must be added to the effective compensation. The price of the real estate is low but the costs to complete the sale remain the same. Therefore the ratios get distorted at the low end of the market.
To be quite frank, you should feel fortunate if you can find an agent who will work with you using the traditional model. By necessity, alternative models have been developed that makes your compensation question a foggy notion that simply does not work in this environment.. If low cap properties are not managed properly, they will be the quick sand that can devour a real estate business.
The good news is, there are models that work. You simply need to pick up the phone and call a Hollywood Fl real estate professional.
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
All the best,
My office is in Pembroke Pines and I work primarily in the S. Broward area. Let me know what
you are looking for - and I am sure I can help you
Commissions are typically paid by the seller not the buyer. If you agreed upfront through a buyer's agency agreement to pay your agent a set amount, and the listed commission was less than you would owe the difference.
There are no "set" amounts and commissions by law are negotiable. Each agent or office can determine what they expect or want to get paid. It's also not uncommon for some offices to charge a higher percentage on land or less expensive properties then for more expensive ones.