How much commission should I charge on a $50M listing?
How much commission should I charge on a $50M listing? This is the first time I’ve worked on a deal this big. I’m thinking 2% but don’t know if that is too much or too little to ask. Please let me know. Thank you.
[{"id": "frgkol0", "text": "So I\u2019ve had to learn this the hard way.  No seller is gonna let you take home a 1mm+ commission.  At MOST I would start at 1.5, that way you\u2019ll still make out good if you co-broke 50/50, and it leaves some wiggle room as he\u2019ll likely wanna negotiate.  Even 1% to be shared wouldn\u2019t be bad, but don\u2019t go below 1%.\n\nWhat type of listing is it?  I\u2019m assuming hospitality?", "replies": [{"id": "fri2lu3", "text": "u/NY_CRE_Broker I have a property worth 45M market and you sell it at 55M, I do not mind share with you $1M or even $2M.", "replies": [{"id": "friwb1s", "text": "Uhhh no one said anything about selling a property at above-market.  Yeah, I\u2019m sure I would feel the same way in that scenario.  But if you sell at 50mm would you REALLY feel comfortable letting a broker walk with 1mm?", "replies": [{"id": "frj5lrr", "text": "u/NY_CRE_Broker\n\nIf the property worth $45M and broker brings me a buyer for 50M. I do not mind pay you $1M or I will even pay $1.25M. Of course, if you can only bring me market offer or below market lowball, I will certainly not gonna pay you more. I will pay the average market level commission.", "replies": [{"id": "frt41m1", "text": "In that case I agree.  It was hard for me to fathom such a scenario because I\u2019m mostly dealing with assets that are currently inflated and/or otherwise unloadable (hospitality), at least in my market", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fri3vdw", "text": "To add to this, do not be afraid to negotiate your fee down to a 16th of a percent. I see too many of my guys leaving money on the table. Get creative", "replies": [], "depth": 2}], "depth": 1}, {"id": "frgktbf", "text": "It\u2019s an apartment complex. I appreciate that insight and was literally thinking the same exact thing.", "replies": [{"id": "frhv69f", "text": "250-400k is a good goal, that\u2019s market for that sized apartment complex.", "replies": [], "depth": 2}], "depth": 1}, {"id": "frglkpc", "text": "Agree - it can\u2019t hurt to ask for 2 and then get down to 1-1.5%. \n\nAlso - we have investors actively buying multifamily, please send me an email and we may have a buyer for you. Bperdeck@ariescapital.com \n\n-Brandon", "replies": [{"id": "frgpow9", "text": "Why are you getting down voted lol", "replies": [{"id": "frgq0ip", "text": "Because he's never going to get 1.5% on a $50mm multifamily deal", "replies": [{"id": "frgqcv8", "text": "Okay but he is offering services and negotiation?", "replies": [], "depth": 4}], "depth": 3}, {"id": "frgq2zr", "text": "This sub needs to chill.  If someone is trying to offer a buyer before this guy even gets the listing, that\u2019s huge for OP to have in his back pocket.", "replies": [], "depth": 3}, {"id": "frh6ntj", "text": "1- because he\u2019s wrong. 2- because he\u2019s promoting his business here, which is gauche", "replies": [{"id": "frhvdee", "text": "Also, unlikely he has one of the only clients in the country buying deals right now, everyone is one the sidelines, can\u2019t walk units, loans are a bit tougher, equity has shut off. Everyone in my past has a \u201cbuyer\u201d, they are rarely real, buyer brokers usually don\u2019t play in the large multi space.", "replies": [{"id": "friib45", "text": "Lol, no. People are still scrambling for deals.", "replies": [{"id": "fsvm4pd", "text": "Yep but sellers aren\u2019t selling. Deals aren\u2019t happening. If you disagree just put up some stats, deals closing that have signed up post covid. The deals that have closed are pre-covid and most of them fell apart.", "replies": [], "depth": 6}], "depth": 5}, {"id": "fstx2m5", "text": "Idk about that my guy. Tons of group are looking to deploy capital, pricing discovery is what is making things tricky. Pricing is just as good if not better than early Q1", "replies": [{"id": "fsul012", "text": "That\u2019s the great thing about the internet, everyone can have an opinion. Are you in CRE and if so, what new deals have you seen signed up post COVID? I am and talk to brokers every week, nothing is happening. Totally agree there is a lot of capital to deploy but they all want massive discounts and sellers aren\u2019t there yet. Everyone is waiting to see what happens when stimulus runs out. Why buy a deal now if it\u2019s looking like things will get worse, folks are just now missing interest payments and fundamentals are softening everywhere.", "replies": [{"id": "fsvl9rs", "text": "I\u2019m on the debt side. Most of our recent placements have been pre covid. Lots of refi\u2019s for obvious reasons however deal flow hasn\u2019t slowed and many buyers are feeling around the distressed markets with hopes to weather the storm come eventual recovery", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "ft5ibrc", "text": "This is commercial real estate. If you\u2019re not self promoting like Trump you\u2019re doing it wrong.", "replies": [], "depth": 4}], "depth": 3}, {"id": "fri340a", "text": "Because what he told OP to do is insulting to the seller and will lead to the guy losing the deal. Poster is an idiot.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "frgnv53", "text": "2% is steep, very steep. $50MM fee is going to likely be close to 1% or below", "replies": [], "depth": 1}, {"id": "frgpm3k", "text": "I'm a multifamily broker. Just sold two apartment buildings in that range in the last 6 months. Commission on both were 75 basis (you don't need to co-broke on a deal of this size). Every deal is different but I would say .5-1% is fair. Feel free to ask any questions.", "replies": [{"id": "frgq5bx", "text": "I used to be an institutional apartment investor. Our agreements were usually 50bps with a 25bp kicker if you beat the middle range of your bov and a 50bo kicker if you beat the high.", "replies": [{"id": "frgt378", "text": "OOooh. I like that", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "frgrk10", "text": "50-75 basis points. We usually pay flat fees to a broker we have used for years but a flat fee doesn\u2019t really get the broker to work to get us the most proceeds so we know our sell number and have to stick to it.", "replies": [], "depth": 1}, {"id": "frgs3b8", "text": "50-100 bps is what I usually see on a deal that size. Where is it located and who\u2019s brokering the debt? I\u2019m a lender, cover the West.", "replies": [], "depth": 1}, {"id": "frgu30q", "text": "Not an MF broker. One of institutional MF guys I know does the following:\n\n\u2018A sales commission of (i) three hundred fifty thousand and 00/100 dollars ($350,000.00) plus (ii) an incentive fee of five percent (5.0%) of any sales proceeds in excess of $XX,XXX,XXX shall be paid to Broker.\u2019\n\nGood luck", "replies": [{"id": "frhvg4j", "text": "Agree, common structure but typically it\u2019s a % up to a mid price and a % over that, rarely do flat fees get signed up.", "replies": [], "depth": 2}], "depth": 1}, {"id": "frgud38", "text": "1% is a good target, but be prepared to work every angle for it. Location of deal?", "replies": [], "depth": 1}, {"id": "frgzuvy", "text": "You can do a fixed fee and nix the percentage altogether.", "replies": [], "depth": 1}, {"id": "frh41kg", "text": "I think you risk looking greedy and/or like an idiot asking for 2 and could lose the deal. I would ask for 1% and be prepared to take 50 bp.", "replies": [], "depth": 1}, {"id": "frh4m4y", "text": "You\u2019re lucky to .5-.65 bps", "replies": [{"id": "frh6kvq", "text": "Pretty sure you mean .5 - .65% not bps.", "replies": [], "depth": 2}], "depth": 1}, {"id": "frh5brk", "text": "I've seen Seller's broker offer 0.9% to Buyer's broker on a $30mm commercial listing.", "replies": [], "depth": 1}, {"id": "frh6giq", "text": "0.5% and pray you get the business because you\u2019ve never done a deal that big and the dude over at CB whose does a ton a year is going to offer the same fee", "replies": [], "depth": 1}, {"id": "frhcznm", "text": "This is our average deal size. 50-65bps and a 5% incentive over a target price.\n\nEdit: Don\u2019t haggle hard with institutional sellers. Some don\u2019t let you have an incentive. Private guys you have leeway.", "replies": [], "depth": 1}, {"id": "frhdg1j", "text": "I am in loi phase on a $85m deal right now and we got a commitment for 2%.  I was happily willing to go to 1% and still be happy at .5.  Most big deals fall into that range it seems.", "replies": [{"id": "frhvnol", "text": "Elaborate, you are brokering or buying? 2% on an $85m apartment is bull honky.", "replies": [{"id": "frisa46", "text": "Brokering. 2% paid by seller.", "replies": [{"id": "frjca59", "text": "Well you can say anything on the internet, if it\u2019s true congrats, it\u2019s likely the highest commission ever paid on an apartment deal. Why would the seller offer you over $1.5m when no one underwrites that in their exit model, it dilutes investors returns for no reason, and market is ~400-500k? Again, possible it\u2019s true but help us understand the circumstances.", "replies": [{"id": "frjpeic", "text": "Not sure what to tell you, we always ask for two, will go to one if needed, we push for two though as I have a four person team so our pitch is we are splitting it four ways with a company split on top and most likely a broker on the other side splitting.", "replies": [], "depth": 5}, {"id": "frjplme", "text": "Also surprised you are so blown away by this. Two other loi\u2019s on the table where the buy side is getting an additional 2% out of the buyer... which surprised me but hey it was pre negotiated I guess so more power to them.", "replies": [{"id": "frjs4al", "text": "Ok, whatever you say. From previous posts you\u2019re new to CRE and work in a smaller market, if you say you have an $85m listing that a seller is paying $1.7m and the buyer is somehow also paying a $1.7m load on their investment, when no one in the country is signing up new deals, I don\u2019t buy it. Doesn\u2019t make sense why you would make it up so there must be something here but any owner that is sophisticated enough to own an $85m asset would know what market is. To confirm, you are saying this is an apartment project? How many total multifamily deals have you closed?", "replies": [{"id": "frk2dg7", "text": "Correct.  Been in cre about two years now, about 5 years of residential community development before that.  Up until the last six months my business was split about 50/50 between local deals and larger capital deals in the Eastern US. Recently put a capital team together to focus on multifamily and retail assets. This will be my biggest deal to date if it goes through, I don\u2019t have 20 years of experience correct, but I\u2019ve had some great success so far and I\u2019m not sure why it\u2019s so hard to believe. I get it most owners are barking at 1% on a deal half that size but In my last two years I\u2019ve seen that 2% is not unheard of.  I currently have another loi for a stnl portfolio at $30m with 2%, a failed multifamily deal at $70m with 2%.  So far my closings have been under 75 doors so no examples relevant personally that closed, but hopefully one of these makes it.", "replies": [{"id": "frk39xi", "text": "Honestly, that would be awesome if it hits but usually if something seems to be good to be true it is, no hate here if you can get your pay day. I\u2019ve seen hundreds of multi trades and have never heard of a straight 2%, maybe a kicker of 5% over mid price but never a straight 2. Good luck with it all, it can certainly be a lucrative industry!", "replies": [{"id": "frkcbpr", "text": "Thanks.  It\u2019s looking good so far but I\u2019ve been at it long enough to know not to calculate the commission until closing day haha. Just had a $28m deal that seemed like a sure thing blow up.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "frhvm8n", "text": "A little less than the law allows.   But seriously, if you make them $1 more than what you charged, then it's worth it.", "replies": [], "depth": 1}, {"id": "frhwhgy", "text": "1.25 is good .", "replies": [], "depth": 1}, {"id": "frhwx7x", "text": "I pay 45 - 55 BPs to strike price on BOV then 5% over strike price capped at 65 BPS. If you asked me for 2% (or really anything over 75 BPs) I\u2019d tell you to get fucked and never use you again.", "replies": [{"id": "fri88n3", "text": "Seriously, if a broker comes in asking for 2% at that price, then that person either hasn't done this before, or they've taken advantage of whoever they have represented.  Neither is good when talking about deals at this level.", "replies": [], "depth": 2}], "depth": 1}, {"id": "frinlkl", "text": "1% is probably the top end of what you could ask for.", "replies": [], "depth": 1}, {"id": "friul60", "text": "I've gotten 5% on a $10mm listing before. Feel free to PM me.", "replies": [], "depth": 1}, {"id": "frjipdl", "text": "I think it really depends on the time and difficulty of the deal, for example something like. Strata windup for 50m I\u2019m going for 3% because it\u2019s a headache and I know I need to spend a year on it. Whereas a easier deal with single vendor I will charge like 2-2.5?", "replies": [], "depth": 1}]