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Commercial Real Estate Fees...a question from a reader...
April 8, 2009 - Gary Tasman
I recently received this great question from a reader about commercial real estate fees and here is my response that I thought I would share with all of you.
“I have a question for Mr. Tasman: When a commercial real estate professional like yourself is contracted to find a renter for a landlord, what is the going rate? I have been approached by a woman who has quoted what I think is a rather high rate, especially for this economy. She is asking me to make big concessions such as 6 months free rent to attract a tenant, but she seems unwilling to budge on HER fee. Also, she insists that all the money be paid to her up-front. What happens if the tenant leaves, and fails to fulfill his share of the contract. I'm out the full fee, obviously, and I'm back to square one. Thanks.” - Groundhog Fan
My response: Typically when I approach a landlord with a proposal to handle the leasing of their property, the fee is between six and eight percent (depending on the complexity of the assignment ). I take into consideration the effort and expenses that we anticipate incurring over the term of the assignment.
And yes, we do typically get paid up front. The difference between a broker and an owner-interest is the broker brings all of the information to the table to an owner who has the ultimate decision (if and under what terms) he/she is willing to accept this tenant. Frankly, I would not advise you to take a questionable tenant but as an owner you are expected to take the risk of ownership in making the decision to lease to a particular tenant. At that point the broker has fulfilled their assignment and should be paid as agreed.
Thank you all for reading my column and keep the cards and questions coming. I can be reached at firstname.lastname@example.org
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