real estate question

[Orpheus6]

my friend is helping a stranger find a business property in a particular ethnic community. My friend is not a real estate agent, but because he is familar with the community, was able to find a property (that was not originally listed for sale) for this stranger. Now, it seems that this stranger is interested in buying the property and has said he would give my friend a commission of some sort (still has not indicated the amount). This stranger wants my friend to talk to the propoerty real estate agent to get the lowerest price. My friend has already got the owner of the property to drop $300,000 dollars. the property is listed around 1.7 million.

My friend is not sure when to approach this stranger about getting a commission and he is not sure the amount to ask. He doesn't want to do all the work for this guy and then end up getting nothing or very little. As i have said, he is not a real estate agent and can't really force this guy to give a commision.

Open to any suggestions or thoughts. Let me know what you guys would do if you were in such a situation.

 

[Maury Beniowski]

If the stranger has already given up $300K, I doubt your friend will get much. There is no agreement in place, so it is really up to the goodwill of the stranger. If he hasn't put in much time and effort in the sale, like real estate agents for instance, then you cannot expect much of a compensation, if any. Don't expect a percentage of the sale either. If I was the stranger, then maybe $500 might be in order as a token of appreciation.

When you say "all the work", what exactly did he do? Promotion? Advertising? Client communications? Hours? Days?

When a real estate agent gets say, $5K on a split, he/she really has to work their butt off for that dough. Occasionally they get a lucky strike with a short exclusive listing, but those are rare in this MLS world. The listing agent usually does all the work; the referring agent usually gets all the glory...

 

[Orpheus6]

thanks for the reply.

I don't know all the details, but from what i understand, the property was not listed for sale. He knew the owner of the building and got the owner to sale the property. And because he knew the owner, he was able to get the owner to drop down the price significantly. To which, the stranger would not be able to get if he dealt with the owner's agent.

i am not certain, but how much would a real estate agent get for a 1.4 million property???? I know the stranger was just planning to rely on my friend to take the place of a real estate agent.

it is kind of tricky i guess. On the one hand, i know that my friend doesn't expect the stranger to offer him the same amount a real estate agent would charge, but he would be disappointed if 1) the stranger ends up not giving him any commission for his work, or 2.) give him a few hundred dollars for saving the stranger hundreds of thousands of dollars.

 

[lookinforfun]

If the deal has not already happened, tell your friend to buy the property, and then turn around and sell it to the stranger for a profit. This is called business.

 

[Maury Beniowski]

i am not certain, but how much would a real estate agent get for a 1.4 million property???? I know the stranger was just planning to rely on my friend to take the place of a real estate agent.

It all depends on the value of the property, the agent, the agency, the seller, and sometimes "what it costs to get the deal done". Commercial property is in a glut mode on the Lower Mainland, so prices and commissions paid can fluctuate wildly. A lot of agents won't touch it, and prefer to sell on the residential side only. As an example, an agency might set a fee based on a percentage of the first $100K (say 2.5%), and another percentage of the balance (say 1%). The agent may choose to take a lower/higher fee to attract buyers or other agents. The agent may also slash his commission to break a logjam in negotiations, though some consider this to be unethical, and won't budge on this. On the residential side, a $500K deal could pay anywhere between $10K to $20K, so it's really hard to make an accurate determination. If you know the agency selling the property, you could ask them to tell you what those numbers are.

 

[Ray]

Why would your friend help out a stranger in a business deal? Out of altruism?
Maybe this should have been discussed beforehand.
The stranger wouldn't 'owe' him anything unless it was discussed beforehand.

 

[DDawGG]

The seller may have saved $30,000 in commission, but given away $300,000 in negotiations.

Then again, the seller may have price a $900,000 property at $1.7mil and come down to $1.4mil. Meaning the buyer paid $500,000 over market!!!

 

[Penhold99]

Your friend should be very careful because he may be breaking the law. I believe it may be illegal for anyone other than a licensed real estate agent to act as an agent on behalf of a buyer or seller in connection with the sale of real estate. This should be confirmed by appropriate research, as well as how the "fee" or "bonus" could be characterized to try to avoid being in contravention of legislation.

 

[luv-em-n-lv-em]

I'm not sure why but I see "scam" all over this.

 

[visiting]

I can tell you it is illegal to receive a commission from the sale of real estate unless you are a licensed real estate agent, a lawyer or an accountant in an estate situation, or you are employeed by a builder/developer to market and sell their product exclusively. Professionals have Erros and Ommission insurance to cover liability, your friend would not be covered and the courts would not look favourable on anyone receiving payment for doing a job that they did not have the training or qualifications to do. When a deal sours the buyers and sellers look for ways out and that is when your friend could go down with the boat. Perhaps he should look at an agent and see if there is a way he could get a referral, it may not be possible however for the agent to pay him since he has already done some of the work a Realtor does under license.

I don't agree with your statement. I do agree that you can not act as an agent, but to get a "finders fee", it is common, I have even seen it negotiated with agents.

 

[imagination]

Shawn_Surrey is correct as I have been in the real estate business for over 15 years. Even the finders fee mentioned can get the party's into problems in some instance if the person receiving the funds is not licensed.

 

[michel]

Let me put my bits

Imagination and shawn are correct ! I have dealt with advisors like financial and legal; in fact all professionals body have rules regarding commission being paid out to non related professionals who benefit from industry specific compensation. Both regulators and the court not to mention the professioinal body governing the industry and the agents have very strict rules regarding this kind of engagement. Best to work with a professional and see what the rules are or you can get into a lot of legal and other related troubles.

Michel

 

[CARGO1]

Your friend should buy the property himself for the discounted price. Then sell it to the stranger at a bit of a reduced price from the asking value. Then that becomes profit and smart. Working for free is just dumb.

Cargo