Real estate commission question for a non exclusive transaction
How do you go about protecting yourself in a transaction where the owner agrees to pay you but has not (yet) put anything in writing? 

I have two fairly large deals that came to me sort of out of left field. Both are large single family residential bulk transactions. Two different sellers but the same issue. I want to ensure that they commit to paying a fee for bringing them buyers.

Do you draft a commission agreement and ask the seller to commit up front or just bake your commission into the contract? The latter I think is dangerous because the commission or fee will almost certainly get trimmed.
[{"id": "grd703c", "text": "Get that fee agreement signed now.", "replies": [{"id": "grd72ad", "text": "Edit: yesterday", "replies": [], "depth": 2}], "depth": 1}, {"id": "grd8mcl", "text": "Get a Commission agreement signed. Pretty much the only way.", "replies": [], "depth": 1}, {"id": "grd8mzx", "text": "No need to have an exclusive but definitely get a commission agreement signed.", "replies": [], "depth": 1}, {"id": "grd9j72", "text": "Former broker now buyer. Please get that signed up even if it\u2019s non-exclusive. Very very least get confirmation of % fee via email since it\u2019s recorded. \u201cHey ___ I understand if you\u2019re hesitant to sign, but can you please do me a favor and send me an email confirming you\u2019re willing to pay __ if I bring you a buyer?\u201d \n\nI\u2019ll be honest. Sometimes brokers will ask for like, a 4% fee for bringing us a buyer on a $5M deal... like really? I get you have to give half to the firm but $200k without any actual marketing is too high. You need to iron it out with them now. \n\nOn the other end, a broker plugged us in as the buyer. We came in at highest possible offer. Broker calls to tell me, \u201csorry seller won\u2019t budge on the 4% fee, he only wants to pay half, will you cover the other 2%?\u201d... sorry, I can\u2019t find $100k of value, didn\u2019t account for that in our underwriting. Now the only thing between us getting the deal is that the broker wants $100k extra, and for the sake of not burning bridges and going around them... the deal is now dead.\n\nLong story short just get it resolved RN. Don\u2019t let it go if seller won\u2019t budge.", "replies": [{"id": "grdatpy", "text": "&gt; Now the only thing between us getting the deal is that the broker wants $100k extra, and for the sake of not burning bridges and going around them... the deal is now dead.\n\nAmazing to me that a broker would rather make 0% than 2%.", "replies": [{"id": "grdhayg", "text": "This is why I deal with brokers as little as possible in real estate. Even 1% extra in my pocket on a deal instead of a broker is money well saved for the amount of time it takes to just find tenants/buyers myself. Most brokers are only beneficial if they really have very good connections.", "replies": [{"id": "grfgafu", "text": "Agreed. I work in acquisitions for a REPE group. We\u2019re in a very niche asset class but everything we\u2019re buying is core/core+ product. Always amazes me when brokers try to sneak in a deal when a buyer and seller are already direct deep in discussions. Tough value-add property? Yes brokers are needed. $60 million deal with a 20+ year absolute net single credit tenant? Sorry, broker isn\u2019t needed. \n\nThe best is when I get a frantic call from a broker pitching me a deal saying, \u201cwe need to move fast on this, can you get me an LOI this afternoon? Oh, and I\u2019ll need 3%, seller isn\u2019t paying me\u201d. That translates to \u201cmy team lost the listing pitch and I\u2019m trying to sneak into a deal.\u201d When I was just starting out, I took the bait and signed the fee agreement. 3 days later, I get an email blast with the deal from the listing brokers. While everyone else was offering on the deal direct, I was on the hook to pay this clown 3%. Learned my lesson on that one. Ended up getting the deal but I told the clown broker that tied me up for the fee, \u201clook this will be the easiest $400K you\u2019ll ever make, just go do something else and stay out of the deal far away. I\u2019ll work with listing brokers.\u201d \n\nOP, If you are legitimately adding value by finding a buyer off-market for the seller, then yes tie him up for a fee. If he won\u2019t sign anything then please don\u2019t go to buyers and try to tie them up for a fee without at least releasing them from the obligation to pay you a fee if the deal does ultimately get listed by someone other than you. You\u2019re adding no value at that point and you\u2019ll have a bad name in the industry with buyers. The amount of shit us and other buyers in our niche asset class talk about brokers that do that is comical. Very small niche, we all know each other. Don\u2019t be that guy. I\u2019ll gladly pay a broker for a true off-market deal but know when to get out of the way and save your reputation.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "grdi99e", "text": "I'm a sole proprietor so I can make as much or as little as I want. But one of the buyers is represented so I'd have to have something to split with them. And that agent thinks that because it's residential the commission should be 3%. I've explained that it's really a commercial transaction when it hits $30 million. Personally I think a 1.5% commission is enough for being a marriage broker. And if she isn't happy with 50% of that I'll find unrepresented buyers.", "replies": [{"id": "grdkww3", "text": "I actually checked my last agreement before leaving brokerage on a $20M deal... it was 2.4% for selling agents. If a buyer agent was present in the transaction, it\u2019s an additional 1% to them. \n\nThe 2.4% was contingent on various markers we had to hit. \n\nEither way, your participating broker won\u2019t walk away from money if you stand your ground IMO", "replies": [], "depth": 3}], "depth": 2}, {"id": "grhm5kd", "text": "&gt; I\u2019ll be honest. Sometimes brokers will ask for like, a 4% fee for bringing us a buyer on a $5M deal... like really? I get you have to give half to the firm but $200k without any actual marketing is too high.  \n\nI completely see where you are coming from, but I had it explained to me differently by a Broker with 50+ years of experience in my market. \n\nHe said he views the commission as a fee that is only partially based on the specific deal. A portion of the commission is also a \"consulting fee\" for the years of knowledge, education, training, experience, and expertise that the competent Broker brought to the transaction to make it as painless for everyone as possible.\n\nJust because I represent the Buyer, it doesn't mean that I didn't do a lot of work to make it happen, both with that transaction and the years of experience I brought with me.", "replies": [], "depth": 2}], "depth": 1}, {"id": "grdl849", "text": "Ask for their standard commission agreement or draft one yourself and get that fully executed before presenting any offers", "replies": [], "depth": 1}, {"id": "grdpqai", "text": "Attorney who does broker commission work here. I can give you the legal answer but the real answer is always get it in writing. That would eliminate 90 percent of my work in this area. Pm me for questions.", "replies": [{"id": "gri8big", "text": "Perfect answer! Ah, the entertainment value of technical legal terms, and the definition of \"agreement.\" I always find the nuances of law intriguing and fascinating.", "replies": [], "depth": 2}], "depth": 1}, {"id": "grduh5k", "text": "I ask the buyer to submit a written signed offer.  Once I have a physical offer in hand, I contact the seller and tell them I have an actual offer.  I explain to the seller that I do not have the legal authority to present the offer to them until they sign a commission agreement.  I decline to even discuss the offer, or price, with the seller until they comply with signing off on commission.  It works.", "replies": [], "depth": 1}, {"id": "gre0u8e", "text": "I feel like the best thing to do here is just be blunt.  At the first opportunity discuss it and ask what commission they will pay and what you expect.  If they say no or balk better to know now than to waste a ton of time, send your offer, and have it come back with your line crossed out.  If you can commit the buyer then you can not worry about this as well, but even that is a touch more complex.", "replies": [], "depth": 1}, {"id": "grelgd6", "text": "&gt;How do you go about protecting yourself in a transaction where the owner agrees to pay you but has not (yet) put anything in writing?\n\nYou protect yourself by getting it in writing.", "replies": [], "depth": 1}, {"id": "greor0g", "text": "Always get your commission in writing.", "replies": [], "depth": 1}, {"id": "grewlf3", "text": "When I go for presentation I have everything filled out with commission typed in. The only thing I left out is the asking price. But I have comps, CMA done suggesting a price.  I leave the listing contract there. You do not sign I do not do anything for you.", "replies": [{"id": "grewtb7", "text": "This is a 100 home portfolio. I was asked if I could help find buyers. I know several who would have an interest. I'm drafting a commission agreement and sending it over to the sellers.", "replies": [{"id": "greyll3", "text": "I will state the commission is  xx% or give on a graduate scale. In other words all 100% you charge a flat fee or %. 10 for more. Make the expiration contract reasonable or longer.  If you sign a 90 day exclusive someone they found can bypass you on the 91st day.", "replies": [{"id": "grf6rlh", "text": "I used to be an investment Broker with CBRE many years ago - before the named changed to CBRE - and we had commissions structured like 6% up to $1 million, 5% from $1 million to $2million, etc etc.  Do commercial agents do this anymore?", "replies": [{"id": "grf78ue", "text": "Possible.  In our sfba ca. A lot of competition everything is negotiable.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "grfflqv", "text": "You can also get a fee from the buyer and present a net deal to the sellers.  You may have more leverage to get a better fee since you presented a deal that wasn\u2019t widely marketed and brought value to the buyer. Obviously they want you to keep bringing opportunities and hopefully won\u2019t bite the hand. Sellers are more likely to squeeze you since they get pounded by brokers every day.", "replies": [], "depth": 1}, {"id": "grfkg7r", "text": "Commission agreement now as others said. Also most states will not allow mention of commission in contract but it can say who the brokers are.", "replies": [], "depth": 1}, {"id": "grhbhph", "text": "To echo others, get a commission agreement between the Seller and you/your broker signed immediately. As soon as yesterday or last week. Check with your state REALTORS\u00ae association to see if they have a template/form you can use. Each state may have its own term/name for the form, but in Texas, it is either a \"Commercial Registration Agreement Between Brokers\" or \"Commercial Registration Agreement Between Broker and Owner.\" \n\nNo matter what, get some sort of agreement signed by the Seller before doing anything else to move things forward. The longer you go without a written agreement, the harder it is to protect yourself.", "replies": [], "depth": 1}, {"id": "grkxux7", "text": "To say it plainly, in my state if it\u2019s not in writing, it\u2019s not binding!!!", "replies": [], "depth": 1}]