What is the range of acceptable commission rates charged by Realestate Agents to Sellers &/ Buyers? Commercial &/ Residential?
Is 8%/10% on a $3M property unheard of?
State/Country relating to question: New York
I would like proof that buyers have paid brokers 5%-10% commission/finders fee for finding them a hard to find property, in addition to the 2%-3% they may get from the seller
There is no legal maximum or minimum rate in any jurisdiction, because it would violate federal antitrust laws. It's whatever you can negotiate. However, as an amount deviates higher from the traditional 6%, it also begins to suggest something called legal "unconsionablness," which means "shocking unfairness." So, there is a legal theory under which a party could avoid a commission of unusual magnitude (10% in this market would be difficult to defend, in my view).
Hope this helps.
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someone who is actually working together with another independent Broker to find certain customers a hard to find specialized Commercial Property & as there are few such customers & properties around, they find it is only worthwhile if they ask a 5% comm. from the buyer to supplement the 2% split they would get from the seller. they would then split the total 7% comm giving each 3.5% comm for finding an unusually beautiful, hard to find property which suits the cust. perfectly. Would that seem like legal "unconsionablness," ? The Customer's board would be willing to supplement it if it would not be deemed as Ripping off the Customer.
If the commission is based on unusual circumstances, then that may justify the additional commission. Unconscionable contract terms must "shock the concsciousness" of the judge.
The classic case is one where an old lady was charged $32,000 for dance lessons. over a six month period. At the end of that time, she couldn't dance any better than when she started. So, that's what you're competing against. A 10% commission is pretty hefty, but if you can justify it, then it's not unconscionable -- it's just compensation for services actually rendered.
Do you have access to find some instances where commercial brokers or specialty brokers have negotiated 5% from the buyer or 7% or 8% from the seller?
No important cases come to mind. Sorry.
I was hoping with your broad scope & open forum you could find some.
This is the only case I can find in NY (Jones v. Star Credit Corp, 298 N.Y.S.2d 264 (1969), that might be relevant. It deals with unreasonable charges in general -- not necessarily commercial real estate. But, the principle is the same. Quoting the court in Jones:
How about in the other direction? Instances where commercial brokers or specialty brokers have negotiated 5% from the buyer or 7% or 8% from the seller?I saw online that the typical rate for sellers is 6% or 7%. I was told by a purchaser that he paid a 10% comm. on a $300,000 income producing property & by a seller in passing that he listed his comm property with a large national firm for $2.2M with a 10% comm. if they get over $2M & atleast 6% but i think it was 8% if less. I also saw a proposal by another large comm. firm to sell a $6M property with a straight 8% comm. but it wasn't executed as far as I know. I know some are taken aback as I was by the large comm. but others don't seem to have a problem at all.I came to this site because I thought you would be far better able than I to find such instances.Although I am impressed with the workings of the site & socrateaser I have unfortunately so far not received what I was shopping for. Is there any other information which might be of help? I see that you have made effort & I would love to show appreciation for something tangible.
It's not clear to me as to what you are attempting to prove. What exactly is the dispute?
A broker has been working with clients to find them special properties to serve their needs. Being that he specializes in this area & there are a very limitted # XXXXX these clients & the properties are hard to come by he has requested a supplemental comm. from the buyers to make finding such properties worth his while. He has been working with a certain client for over 5 yrs & has recently secured a property which suits their needs beautifully. the Director of the Group recognizing the great effort put forth in finally finding this property agreed verbally to increase the comm. However the new Co-director & other members feel it might be an unreasonable sum & therefore do not want to agree unless demonstrated that it is not unreasonable. The simplest way to demonstrate that is to show that even in not such unusuall circumstances Brokers do get such percentages (aprox. 7% ). (Which here it is then divided with the other Brokers.)I was asked to see what I could find. In searching I found th various things mentioned earlier & additionaly I found this web site & I thought it might be able to find more than I myself was able to find.
After researching relevant case law, I find nothing more than what I have already provided. There are other cases in other jurisdictions that refer to unconsionable commissions, but none that specifically discuss your narrow area of interest.
I "justanswer" questions about the law, per the law of NY, the examples of commissions that I have provided were ruled unconscionable. Thus, my answer, while it may not be to your liking, it is substantively correct.
Beyond that, there is nothing more that I can offer, at least not from a purely legal perspective.
The rest is up to you. Good luck.
Attorney and Real Estate broker -- Retired (mostly)
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