Home Buying in New York>Question Details

Kabbaddi, Real Estate Pro in New York, NY

I am planning to buy a mixed use building and my broker said I had to pay the 3% commission. Is that normal ?

Asked by Kabbaddi, New York, NY Mon Dec 9, 2013

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Keep in mind that commissions are always negotiable between you and your agent, there are no set standards; since you are questioning your broker's commission, curious to know if the fee was discussed beforehand, and if not, you should consider asking your agent the question...
0 votes Thank Flag Link Tue Dec 10, 2013
In NYC commercial real estate, it is common for the buyer to pay the broker a commission. However, 3% can be negotiated down depending on the price of the building. I have commonly seen 2% in the Manhattan/Brooklyn areas and I've seen several deals killed at the table over the payment of commissions and by which party. Unlike most residential deals governed by a real estate board like REBNY or LIBOR, commercial real estate transactions are like the wild, wild west and I would highly suggest that you make sure you have a competent and experienced attorney representing you in this transaction.

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0 votes Thank Flag Link Tue Dec 10, 2013
98% of all Commissions are usually paid by the seller.

If the Townhouse is NOT LISTED with a Broker and/or The Seller is NOT willing to pay the commission, then in some cases, the buyer is paying the commission. All these terms will be common knowledge at the closing table.

So if the townhouse meets your needs, you can find out from your broker if the seller is paying the commission. You have the right to ask.

If the seller is paying, then you should have a conversation with your broker to negotiate your own terms.

Good Luck!!
Fern Hamberger
Lic Associate Real Estate Broker
Citi Habitats
The Fern Hamberger Team
fhamberger@citihabitats.com
0 votes Thank Flag Link Tue Dec 10, 2013
"98% of all commissions are usually paid by the seller". Do you mind sharing where you got that statistic from?
Flag Tue Dec 10, 2013
If the seller is not paying it, then if the buyer wants to use the broker's services, the buyer will have to fit the bill.
0 votes Thank Flag Link Tue Dec 10, 2013
Etieen and Tom make incredibly valid points.
Tom states these is 'NO NORMAL."
As buyers AND sellers have demanded more options in regards to how they want to sell their real estate, the industry has responded. The end result is more and more of the costs CAN be deferred to the buyer.
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When a seller is faced with the situation Etieen creates, and some 'kick back' mortgage folks, that is, the funds the seller INTENDED to pay for professional services are given to the buyer....the seller can decide to NOT ALLOW THAT TO HAPPEN BY MAKING THE BUYER PAY THEIR AGENT. Along with the availability of more choices comes more complexity.
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There is no normal. What a buyer can expect depends on the specific real estate they choose. A buyer can instruct their agent to show only real estate where the buyers agent compensation is fully paid by the seller. You will be surprised what can happen when YOUR agent is assured of their compensation.
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I primarily represent sellers and I know how the seller responds when I advise the seller that the buyers agent is a rebater. Those who choose this option may find it as beneficial as having Wells Fargo as the lender for your unique home, seeking an FHA backed mortgage. The choices a buyer makes has consequences. Choose wisely.
0 votes Thank Flag Link Tue Dec 10, 2013
It will depend what you agreed to pay when you signed your buyer agency agreement. Some agents ask for additional commission but most do not. Most buyer brokers do get paid the fee offered by the listing agent and paid by the seller.
0 votes Thank Flag Link Tue Dec 10, 2013
Kabbaddi, in NYC, there pretty much is no "normal". Many listings brokers will cobroke their listings and split the commission that their seller has agreed to pay. But sometimes the seller will only pay a commission of 1 to 3%. Or the listing broker has several other brokers in his own firm that have to be paid. So in those cases you may be forced to pay your broker. In my own recent personal experience, the listing broker at one of the larger NY commercial firms refused to split his commission because it was already being split among himself and several other people at his own firm. In another case, the listing broker was being paid 2% by his seller and so I had to get my fee from my buyer.
Bottom line is that the buyer is always paying either directly or indirectly, as others have said. After all, its your money thats purchasing the property.
So I would simply say that you need to make your buying decision on your overall total costs to purchase. Commissions, closing costs, rehab costs, etc all go into the equation. So if you're paying 2 million for the building and all of those other costs add up to another 500K, does the total 2.5M cost still make it a deal worth moving forward with?
0 votes Thank Flag Link Tue Dec 10, 2013
It seems a little high, I think, but you have provided virtually no information about the circumstances.

Commission are not always negotiable, it depends on the individual and what they believe is their worth. It's also your prerogative to decide if you feel the value is there just like any other professional service. The way to do that is check out reviews and/or speak with other brokers for comparison if your are unsure. If this is popular building you will need to move quickly due to low inventory. Good luck.
0 votes Thank Flag Link Tue Dec 10, 2013
Kabbaddi,

Most important in the answer is that all commissions whether sell side, or buyside are negotiable.
I often return 1/3 of my commission or 1% of purchase price to "good buyers" in the form of a realtor concession. This guarantees a lower purchase price.

The listing agent will disclose the total commission structure of a property. Many times if the property is quite large over 10MM commission on these properties shrinks.

Commission is often not explicit but included in price, and strictly paid by seller. Very few commercial deals are collect your own fee, or buyside commission

Please let me know if i can help you.

Etienn Couret
Licensed RE agent
347 834 0213
Spire RE Group
New York
0 votes Thank Flag Link Mon Dec 9, 2013
While this is not uncommon for commercial property for a buyer to pay his Broker, it feels like there is information missing. Is this property represented by another Broker or "your" Broker? You might want a slightly better explaination from your Broker. All deals are different and it's difficult to know exactly what has occured without further details from you. Remember, commissions are negotiable.

As you mentioned, "I just thought in commercial real estate like Mixed use buildings the seller pays his broker and the buyer pays his broker." You may very well be correct at least in relation to the deal you have in front of you but there is no one size fits all mold for any real estate deal.

I would think you have an Attorney. Ask his/her opinion also. I also suggest you review any documents you may have signed (if you have a copy) with the Broker. Your obligation may be in writing somewhere. Good luck.
0 votes Thank Flag Link Mon Dec 9, 2013
Not really. Almost always the seller pays the commission. But every situation is different and IF you're hiring the Realtor as a "buyer broker", then you will likely pay commission. Also, take into consideration how good the deal is. If the 3% still makes it a good deal, then you might want to go for it either way! You also said it was a mix-used property, this could be treated as a commercial property as I have also seen them treated the same a residential properties when it came to commissions.

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0 votes Thank Flag Link Mon Dec 9, 2013
In a commercial property sale does seller pay his commission to his broker and buyer pays his commission or is it like residential sales where seller pays the full 6% which is split between the 2 brokers
0 votes Thank Flag Link Mon Dec 9, 2013
If your Broker is requesting 3% from the Buyer, and it is a good deal that you cannot pass up it may be worth it. He may not have control of the deal and the listing broker does not want to share his fee or he could just be greedy and is getting 3% from you and the Seller. In many cases, you can just work directly with the Listing Broker and get the deal from them without having to pay a Buyer commission. Most Commercial Brokers list their properties on LoopNet.com. If your Broker is just having you sign off on 3% across the board on every deal, you can most likely get a Broker to work for you for cheaper. In many cases, there are Brokers without any product that just hunt deals and want to make sure you pay them for this hunting. Let me know what you are looking for and I may be able to throw some deals your way without charging 3%.
0 votes Thank Flag Link Mon Dec 9, 2013
Kaddabbi,
Commission is usually paid by the seller, not the buyer. Depending on what the seller is willing to pay, it can vary anywhere from 3% to the full 6% of the selling price. If there are two or more agents involved, the 6% commission is split amongst the brokers (each would then get 3%). I work with a lot of building owners (in fact, my family consists of building owners) and have worked with buyers and sellers before. If you nee any further info, don't be a stranger and feel free to contact me.

Eric Rohe
Licensed Real Estate Salesperson
CITI HABITATS
400 E 84 St
New York, NY 10028
201-328-2758
Erohe@citihabitats.com
0 votes Thank Flag Link Mon Dec 9, 2013
thank you , I just thought in commercial real estate like Mixed use buildings the seller pays his broker and the buyer pays his broker , which is the same if the seller was paying 6% and splitting 50/50
Flag Mon Dec 9, 2013
thank you, I just thought that commercial sales it is different
Flag Mon Dec 9, 2013
when I represent a buyer in a commercial purchase, I submit a letter of intent to the seller which will include my commission rate. It's part of the deal. Each realtor operates in different fashions and if you are not comfortable with how your Realtor is moving forward with the transaction and the realtor is not willing to change thEir method, you have an option to change Realtors.
0 votes Thank Flag Link Mon Dec 9, 2013
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