Brokers are experts in their field. That’s why you want them on your team. They have the resources, knowledge, connections, and negotiation skills to be a key component in getting the best deal. Brokers save you time, money, hassle, and best of all, they watch your back.
But many wonder, who pays them? Because it’s such a common question, let’s unpack how we’re paid.
1. Brokers work on commission. That means, we receive a set percentage of the value involved in a transaction for the services we perform. The commission paid is agreed upon by both parties at the beginning of the partnership.
2. Antitrust laws prohibit a set industry standard percentage brokers receive. Clients and brokers negotiate, keeping in mind the difficulty of the deal. Some deals require more work and time, taking not months but years to close. Commission rates usually fall between 1-8% of the total sale or lease value.
3. Typically, part of that percentage goes to the brokerage firm. The split varies from firm to firm. Some are strictly based on seniority, while others are a set percentage based on the transaction total or production of the broker. When a broker joins a firm, they agree to the terms.
4. Leasing fees depend on the type of space, rental price, and complexity of the deal. Generally, fees are paid by the building owner or landlord. Often, the first half of the commission is paid to the broker when the lease is signed and the second half once the tenant occupies the space.
5. When a commercial property is sold, the commission dollar amount is figured once the buyer and seller agree on a price. Typically, the percentage is higher for lower-priced sales and lower on higher-priced sales. That compensates for the fact the broker does the same work for each. If both the buyer and the seller have a broker, the commission is split between them. Although it can be negotiated, the commission is usually paid by the seller.
The benefits of having a broker on your team are huge. They navigate the current market, get the right deal structure, and successfully negotiate, which saves time and money.
At CEG, we’re here to help! Email our team at hello@cegspaces.com or call 612-788-1552 if you have any questions. You can find me at 612-428-3333 or jeff@cegspaces.com.
Jeff Salzbrun is the owner/broker of Commercial Equities Group (CEG). As a veteran-owned real estate brokerage, CEG has been involved in thousands of sale and lease transactions, ranging from single offices to 250,000+ square foot buildings. At CEG, we get your deal done. We know space, and we know the CRE business.