Compensation to assist off market $5-10M industrial sale?
I'm curious what people here think would be fair. I've been working for several years with local brokers who lease out space for me in a brownfield industrial facility I'm improving. I planned to eventually list for sale with them when facility was fully stabilized. That plan isn't complete but I stumbled into talks with an owner user interested in purchasing, which would be in the $5-10M range. They didn't come at me hard, more asked me about buying some vacant land so they could build a warehouse. I don't have the best land around for them, but after hearing their requirements I suggested they just buy my complex with a 504 loan, would be great for their plans and would throw off some income to cover most of the financing. They're interested as they could be up and running with local production much faster this way.

To the point, potential buyer's finance team is flying out from NYC to tour the property. I could give them the tour but I'm thinking it might present better to have local broker (who knows local industrial market well) give the tour and speak to local market conditions and buyer's specific requirements etc.

Thoughts on what would be fair compensation to take buyer's team through, assist on negotiation and guide through sale? If this did not close we'd revert to the long-term plan of continuing lease up with eye on a sale several years down the road. I had been thinking 1%. 

FWIW market is in Texas, \~200k sq ft facility on 25 acres. No LOI yet.
[{"id": "gvzbs49", "text": "Out here in NJ market standard is 5% paid by the seller. Split down the middle if another broker brings the purchaser to the table. Granted this is for an on-market listing. Given this situation with you dealing directly with a owner/user, I'd say you need to up the % if you want your interests rightfully represented in this process.", "replies": [], "depth": 1}, {"id": "gvzc7a7", "text": "You need to have a frank conversation with your broker. Even though this deal is off market, they will be putting the time and effort into transaction even though the buyer may not follow through. I would only expect a slight discount on their typical listing fee. \n\nIf you want to negotiate a lower commission, I would offer to sign a listing agreement so that way if the transaction doesn't close then the broker could at least list it afterwards and earn that commission.", "replies": [], "depth": 1}, {"id": "gvzwpyl", "text": "Typically when the dollar amount hits double digits, commission will tier down a bit.  It depends on a lot of things. One thing I can assure you of, if you negotiate a fair commission with your broker, you\u2019ll be very grateful. That extra commission you pay will very likely come back to you in a higher sales price. I would sit down with a broker to discuss. Not harm in a conversation. Perhaps speak with a few. I\u2019m trying to think of who I may know in your market to refer. If it comes to me, I\u2019ll message you. Good luck!", "replies": [], "depth": 1}, {"id": "gw05uj5", "text": "1% is more than fair. Anything over 100k split between the representing brokers is more than too much.", "replies": [{"id": "gw1rdzk", "text": "This is a ridiculous answer. 5-10 million dollar properties come with 5-10 million headaches. The commission entirely depends on the market. For instance, in my market 5-6% spilt between the two brokers would not be uncommon on this type of deal.", "replies": [{"id": "gw1yc9o", "text": "From an owners perspective, 6% on 10 million is absurd", "replies": [{"id": "gw22nid", "text": "I understand the sentiment, but its pretty normal.", "replies": [{"id": "gw25fgt", "text": "I think any broker who would turn their nose up at a 50k commission doesn\u2019t want to work hard enough, and I say that as a broker as well. What market are you in can I ask?", "replies": [{"id": "gw2mzre", "text": "I am in the southeast. I would not turn up my nose at a smaller commission, but I know brokers who would not give it their full attention unless they were getting the full commission that they felt they deserved. \nGenerally speaking, as the price of the transaction increases the % commission decreases. I have yet to see 1% on this size of deal.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "gw42zua", "text": "An owner always has the ability to negotiate the commission percentage on a deal. Absurd is a matter of opinion with...and without having all of the details on what it would take to put the deal together and actually close the transaction, we have no idea if it is a realistic and fair compensation amount or not. \n\nI've worked with a number of owners who have said, \"so and so was charging me \"X\"\"...when in actually, so and so didn't charge them anything because they never were able to sell the property.", "replies": [], "depth": 4}], "depth": 3}, {"id": "gw24rzt", "text": "Agree. I'm trying to understand that balance between absolute levels of compensation and percentage comp as price increases and complexity increases. \nFor example I've paid 6% in the $2-3M range, in the end the broker took both sides but I felt he earned it. We spun through a couple of LOIs and broker put a lot of effort to keeping the eventual buyer (REIT with too much on its plate) more or less on track. Whole thing took six months.\n\nLet's call this one $7.5M, more than double. Marketing and broker connections to generate interest/offers don't really come into play. I would say the upfront uncertainty is likely reduced due to hot lead. But the handholding &amp; \"5-10M headaches\" could certainly be there.", "replies": [{"id": "gw2n9oa", "text": "Generally as the price of the transaction increases the % commission decreases. I wouldn't expect to pay a broker full 6% in your case, but  2-3% wouldn't be unreasonable. Maybe a little less if you have a longstanding business relationship.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gw20qfj", "text": "these types of things are always hard because from the sellers point of view its a t'd up transaction that should be easy and pay less.  From the brokers side they still have to do most of the same work they'd do in a normal transaction, but if it doesn't close they basically auto lose the listing vs being able to reuse all that work.  \n\nI'd candidly make a detailed list of what services you want, then talk to a few.  I'd consider offering a retainer or making part non contingent too.  This will substantially drop the fee and let them know you aren't kicking tires and wasting their time.  I'd consider getting it appraised too, that is going to set the price better and again thats a big ax over your brokers head where if they know they can't get it done with this specific buyer they get paid 0.  Hard to negotiate in your best interests with that set of facts.  I'd probably want to know your true bottom line and make sure I thought it was reasonable before I took something like this on.", "replies": [{"id": "gw250me", "text": "Thanks for your thoughts. I like the idea of making a portion non-contingent, given that the plan is not to list property if this offer doesn't materialize.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gw2dgpq", "text": "TL;DR at the bottom\n\nTexas CRE Broker here. Have you signed a \"Commercial Real Estate Listing Agreement - Exclusive Right To Lease\" (Texas REALTORS commercial form) with any of the brokers who have handled the leasing for you? If so, here are a few things to look at first:\n\n1. Paragraph 4 (Page 2) - Term: Is the listing agreement still current? Check special provisions on page 9 to see if there is a clause there to auto-renew until canceled in writing.   \nIf still current and/or auto-renewed, proceed to point 2.   \nIf expired, continue to point 3.  \n\n2. Paragraph 5D(2)(a) - Fees in Event of Sale - Is this filled out? If so, this spells out the agreed-upon commission in the event of a sale.  \n\n3.  Paragraph 5D(2)(b)This covers the commissions due if you sell the property while the listing is active. In this event, since the potential Buyer is a Tenant, part (b) applies. This spells out the agreed-upon commission. Also, the paragraph below this says that Paragraph 5D(2) survives the expiration or termination of the listing agreement.\n\nIf you didn't sign a listing agreement, it would seem you have more flexibility. If the Tenant's lease is on the Texas REALTORS Commercial Lease, you might not be out of the woods yet. Look at Paragraph C on the \"Commercial Lease Addendum for Broker's Fee\" that is most likely part of that lease. If it is filled out, talk to your attorney to see if that paragraph would have priority over the listing agreement.  \n\n\n&gt; I could give them the tour but I'm thinking it might present better to have local broker (who knows local industrial market well) give the tour and speak to local market conditions and buyer's specific requirements etc. \n\nAs a Broker, it should be obvious that, of course, I would lobby for a higher commission. What self-respecting Broker wouldn't, right?!\n\nIn order to be an expert in the current market conditions, the Broker has invested hundreds of hours of research and education to become that expert. Tours, negotiations, and guidance through the sale take more time and work on the Broker's part than you may initially think. All of this factors into the Broker's position of negotiating a higher commission rate. \n\nYou might have a hard time finding the industrial market expert you want who will agree to a 1% commission, especially if the Buyer loops in a Broker as well. Unless the contract states differently, your broker would split the commission with the Buyer's Broker. Now they are down to 1/2% each (on $5M, that is $25K each). \n\nYou might find an agent/broker who will take it for 1%, but you might not get the market expert you are looking for.\n\n**TL;DR** \\- Review your Tenant's current lease and any lease listing agreements you have signed to see if they already dictate any commission amounts. Also, if you want an expert, brace for paying at least a 5% commission (2.5% each side), if not a full 6%. Just build that into your price.", "replies": [{"id": "gw2l0se", "text": "Thanks for the detailed reply, good points to check. We're not locked into anything as the fee on sale section was struck from the listing agreement; I have no contractual obligation in that regard. Tenant's lease is on my paper with no fee-on-sale clauses. \n\nI have a good relationship w/broker and am more interested in what's fair for the effort involved (pricing in the market knowledge etc). This is contemplating no broker on buyer side. They approached me with no broker so if they got one that'd be for them to sort out (or price goes up).", "replies": [], "depth": 2}], "depth": 1}, {"id": "gwbydbi", "text": "You are effectively acting as the buyers agent.  For that reason, I would want my compensation to be close to what a buyers agent would expect to make if they were the procuring/buyers agent for an on-market deal.  I'd want as close to 3% as possible but I think 2% is fair.", "replies": [], "depth": 1}]