Commercial real estate brokers get paid a commission only after a sale or lease transaction closes. Determining the amount is easiest on purchase transactions as the entire amount is due at the closing table. Determining the amount on leases depends on how long the lease term is and the monthly rental amount. Commissions on lease transactions are typically paid half upon leasing signing and the 2nd half when the tenant moves into the space.
So how much do commercial brokers get paid?
On commercial purchases the commission amount is a percentage of the sales price (this can vary for each market). For lease transactions it’s a percentage of the total rent over the full lease term. Commissions are typically paid by the building owner (landlord) or seller. The percentage amounts are pre-negotiated on the listing agreement or proposal and the amounts vary for each market. In Austin, Texas commission percentages are typically 6% of the sale price, OR if leasing 6% of the total lease amount over the term.
Who all gets paid?
In most transactions there is typically a landlord representative (represents the owner of the property) and a tenant representative (represents the tenant or buyers bests interests). When a lease or purchase is executed the commission is typically split between the landlord rep and tenant rep. If you don’t have a tenant representative you won’t save any money as the commission is already built into the sale price or lease rate. So that being said it’s in your bests interests to hire a tenant representative on your next commercial lease or purchase. And since you have representation on your side you should expect the deal to go much smoother and to get the best rate and terms possible.
Do commercial brokers pay for referrals?
Yes, however to be eligible to receive money for referring business to a commercial real estate broker you have to be a licenses real estate agent yourself. If you are not licensed then you should expect nothing more than to receive a referral back.
This is a very basic explanation on how commercial real estate brokers get paid. If you have additional questions please don’t hesitate to contact us!