Tips To Help You Save On Commercial Real Estate Commission Rates
Avoiding some of the common expenses involved in commercial real estate transactions can help save buyers and sellers a huge amount of money. To make things even better, the savings made can contribute to the current or next investment depending on whether you are the buyer or seller.
Commercial real estate commission rates are usually around the 6 percent mark. Just like in the case of residential real estate deals. This percentage, though small may represent a huge amount in real cash terms, considering the relatively high value of commercial real estate properties.
Fortunately though, buyers and sellers in commercial real estate transactions have a number of options at their disposal when it comes to reducing commercial real estate commission rates.
Read on below to find out more about how you can make substantial savings on agent fees during your next commercial real estate transaction.
What Is The Average Rate Of Commission Fees?
Before looking at the different ways through which you can reduce commercial real estate rates, it is important to first look at the average market rate.
As previously stated, the average rate of commercial real estate agent fees is around the 6 percent mark; similar to the average rate in residential real estate transactions. It is however worth noting that most real estate agents will be willing to lower this rate as a way of incentivizing their client for the business they have brought them.
In most cases, the rate will be anywhere between 5 and 6 percent for commercial properties worth anything below five million dollars. For properties worth more than this amount, most agents are willing to settle for a lower rate of up to 4 percent.
Now that you have an idea of the amount of money you might be forced to pay out, fully or partially, towards meeting the cost of having a commercial real estate agent handling your transaction you can read on to find out how you can reduce or entirely avoid this cost.
• Negotiate For Better Terms
Did you know that you can reduce the amount of money you have to contribute towards the payment of commercial real estate agent fees by negotiating for friendlier terms from the beginning? If you didn’t know, now you know!
As a seller, you can negotiate to have the entire cost of real estate agent fees covered by the buyer, a common practice even in the world of residential real estate deals. However, you need to be a great negotiator to convince the buyer to shoulder the entire cost.
Furthermore, consider reaching out to your real estate agent and asking them for a better rate. If you handle a huge number of commercial transactions on a regular basis, most agents will be willing to offer you a reduced rate provided that you run most or all of your future business through them, for instance.
• Go It Alone
It is possible for commercial real estate buyers and sellers to find each other negotiate and finalize property exchange transactions without the help of real estate agents. This way, you do not have to pay any fees to the real estate agent; hence, getting the opportunity to get the most out of your hard earned cash.
However, it is worth noting that even though this sounds easy and straightforward, it is nothing but. Buyers and sellers who are looking to engage in commercial real estate transactions must find ways of finding each other, negotiate and complete the entire transaction free of any assistance from professional real estate agents.
Fortunately though, all this work will pay off in the end as you will not have to pay any commission fees.
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• Hunt For Wholesale Offers
Real estate investors looking to reduce or even do away with commission fees when making commercial real estate deals can also consider wholesaling as a solution to their problem. In most cases, wholesalers usually connect commercial real estate buyers and sellers in exchange for a small commission fee. This is mainly due to the fact that as opposed to real estate agents, these industry players do not have to leave their house/office or actively engage themselves in the details of each transaction.
Wholesalers create value to real estate investors in a number of ways. For starters, even though they charge a commission fee for brining buyers and sellers together, this fee is significantly lower than what commercial real estate agents charge. Secondly, wholesalers normally offer properties at significantly lower prices, wholesale prices, hence giving buyers the opportunity to make a higher level of savings, over and above the commission fees, at the end of it all.
• Look For Flat Fee Services
If you are still yet to find a way to reduce or eliminate commission fees from commercial real estate deals from the above options, consider going with a flat fee service. These services are designed to help eliminate the problems that sellers and buyers associate with traditional real estate agent commission fees.
Flat fee services usually connect real estate investors with qualified and reliable real estate agents in exchange for a flat fee. After paying the flat fee, buyers and sellers do not have to fork out more money towards paying any real estate commission fees. As such, going through such services not only reduces the amount paid as commission fees but also ensures that you reap all the benefits of having an established real estate agent in your corner throughout the commercial real estate transaction.
• Seek Rebates
You can ask for a rebate from your real estate agent when it comes to commercial real estate deals. A rebate, which is a refund of part of the funds paid as commission fees, can significantly reduce the amount of money that leaves your pocket.
The commission fees are usually split between the seller’s and buyer’s real estate agents. This essentially means that the buyer can get back most or all of the money contributed as their portion of the commission fees if their agent offers rebates, or they do not have an agent.
To avoid any surprises at the tail end of the deal, it is important for real estate investors to ask their agents whether they offer any rebates at the beginning, before making a commitment. This is due to the fact that not all real estate agents and brokerages offer rebates on commercial real estate transactions.
Conclusion
When it comes to high value commercial real estate transactions, what might seem like a small commission fee, may actually translate into tens of thousands of dollars, or more, for both buyers and sellers. This may represent a huge amount of funds that may have otherwise gone towards funding the current deal or future deals.
Over the years, real estate investors have had issues with the commission fee often charged by real estate agents. This has led to the development of numerous ways through which buyers and sellers can reduce or entirely avoid commission fees while still getting value for their money through high quality commercial real estate deals.
Whether you consider the services of a real estate agent to be essential to any deal or have total belief in your negotiation skills, there is a way for you to reduce commercial real estate commission rates to acceptably lower levels, or where possible completely eliminate them.
With the above tips on how to reduce real estate commission fees in mind, and in practice, you can be sure of making substantial savings on the costs involved in your next commercial real estate transaction.
