Splits with Buyer Brokers

Alexfpa's picture
Alexfpa - Certified Professional
Rank: Baboon | banana points 101

I work in Investment Sales and focus solely on obtaining exclusives. I tend to be hesitant to offer up 50 / 50 splits with buyer brokers given I went through all of the brain damage and did all the legwork to secure the listing. Over the years, I have met and worked alongside other brokers that think this way as well. Maybe this has left a lasting impression on me.

I realize that everything is negotiable but I was just curious what the community thought about this topic. I'm especially interested in the opinions of brokers that focus on seller representation.

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Comments (25)

Sep 2, 2017

It's a 50/50 split generally. Maybe you think you can add something special, I don't know? I do know finding the listing is 50% of the job the other 50% is finding the buyer.

Sep 2, 2017

In the world of brokering large, expensive real estate, buyer brokers are a joke and don't seem to have learned yet there is no money to be made in it. In my world, there are only a handful of players like ourselves that get listings and our database of buyers are extremely large and sophisticated. Our buyers have their own underwriting groups, well capitalized, and understand how to invest otherwise they wouldn't be looking at our deals to begin with. A buyer broker for them would be a useless middle man that just gets in the way of a deal getting done. The only time I see financial cooperation between a list side and sell side broker is in the world of small CRE where guys are listing stuff on Loopnet, because that is where the buyer market for small stuff is or they simply don't have a database of buyers. I occasionally have a "buyer broker" call me up about one of my listings. I generally ignore them or tell they have to sign a CA that acknowledges their client is covering their fee, because I'm not. Till this day, I've never closed a deal with a broker on the other side. If a buyer broker comes to me about one of my listings, once they register their client I put them in my database but they're on a red flag list, because if they need to use a buyer broker to do a deal it either tells me they are unsophisticated which means they most likely have no track record of closing deals and are undercapitalized. That's my brutal opinion about "buyer brokers."

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Sep 3, 2017

This is absolute bullshit. If your first instinct is to protect your fee from the buyer broker then you are a horseshit representative of your client, and yes, you're right that this happens all the time. I'm helping a buyer broker right now as an independent analytics contractor. This broker has a large database of cash buyer foreign clients looking in the multiple 9 figure range and she keeps getting shot down by the seller broker as they don't want to split commissions with her. It's absolutely fucking horseshit and people like them (and you) should be ashamed--I'd even think that what you're doing violates some sort of ethical standards for your industry (if not the law in some states). The reason you've never closed a deal with a buyer broker is because you keep shooting them down (by your OWN WORDS--"I generally ignore them." Are you fcking serious?). *Your failure with them is a self-fulfilling prophecy.

You have a fiduciary responsibility to your client to not turn away buyer brokers because you don't want to split the commission. Brokers aren't f*cking special--you're a glorified salesman. You are an easily replaceable commodity. If you got hit by a bus tomorrow the world would keep turning and transactions would keep getting done.

Sep 2, 2017

Spoken like someone that has no idea how the business works. If buyer brokers brought any real value to a deal, financial cooperation would be standard. The truth is... they don't. That is why the whole process of even entertaining them is a waste of time and actually serves as a disservice to my client for my reasons mentioned above. Your buddy being an outlier is not representative of the the everyday interactions we deal with on the ground. The fact you think there is some ethical regulation that requires that me or any broker for to have a fiduciary obligation to financially cooperate with another broker (which no such thing exists) speaks volumes to the fact you have no idea what the fuck you're talking about. Do me a favor... call up the bigshot up at your local CBRE, JLL, Colliers, whoever... in any property type. Ask them if they financially cooperate with another broker and if not, why? If they even bother to give you the time of day to answer your question, you'll probably get a similar to answer to the one I have above. It's funny how guys like you think brokers aren't so "fucking special," until you need us and want deals. All of sudden, you're ringing my phone off the hook asking me about my on market and off-market opportunities. If brokers weren't so "fucking special," then all deals would be direct. They'e not for a reason. Listening to run of the mill analysts whose bosses I regularly have closing dinners with and deal with directly lecture me about my "value" is quite rich. If your boss was forced to choose between the broker that brought him deals and you, he would can your ass in two seconds and replace you. Anyone can replace some guys to play around in excel. You can't necessarily replace the people that bring you good opportunities. Don't ever forget that big shot.

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Best Response
Sep 3, 2017

Where do I even start with your unethical bullshit? I guess I'll start from the beginning.

DetRustCohle:

Spoken like someone that has no idea how the business works.

No, you're right. My 10 years of underwriting, developing, and buying and selling countless real estate transactions would indicate I have no idea how the business works.

DetRustCohle:

If buyer brokers brought any real value to a deal, financial cooperation would be standard.

So, you get to decide ahead of time that someone you don't know will provide no value to your client? Someone who says that he or she has an active buyer who wants to give your client money, in accordance with your client's demands. Hmm.

DetRustCohle:

The truth is... they don't.

This is an objective lie. If this isn't true 100% of the time then you are doing a disservice to your client because you care more about your commission than about your client.

DetRustCohle:

Your buddy being an outlier is not representative of the the everyday interactions we deal with on the ground.

And how the fuck would you know? By YOUR OWN WORDS you refuse to deal with them!

DetRustCohle:

The fact you think there is some ethical regulation that requires that me or any broker for to have a fiduciary obligation to financially cooperate with another broker (which no such thing exists) speaks volumes to the fact you have no idea what the fuck you're talking about.

You have a duty to your client. Whether or not that's enshrined in law or in the ethics handbook isn't relevant--you have a duty to your client to put their interests ahead of your own. The fact that you don't means you are a terrible broker and representative of your client and it's shameful as fuck.

DetRustCohle:

Do me a favor... call up the bigshot up at your local CBRE, JLL, Colliers, whoever... in any property type. Ask them if they financially cooperate with another broker and if not, why? If they even bother to give you the time of day to answer your question, you'll probably get a similar to answer to the one I have above.

Uh, duh. That's what I just said, genius. You guys are mostly greedy, unethical losers, and a time is coming the next decade or two when your services will no longer be needed.

DetRustCohle:

It's funny how guys like you think brokers aren't so "fucking special," until you need us and want deals.

You're no more special than a gas station. If one gas station is closed because it loses electricity there are plenty other gas stations to go to. You win deals for one reason and one reason only--the lead broker/MD or whatever bullshit title they have is a really good salesman. There's nothing else special to it. Anyone can run valuations and put listings on CoStar. You ain't special.

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Sep 3, 2017
Alexfpa:

I work in Investment Sales and focus solely on obtaining exclusives. I tend to be hesitant to offer up 50 / 50 splits with buyer brokers given I went through all of the brain damage and did all the legwork to secure the listing. Over the years, I have met and worked alongside other brokers that think this way as well. Maybe this has left a lasting impression on me.

I realize that everything is negotiable but I was just curious what the community thought about this topic. I'm especially interested in the opinions of brokers that focus on seller representation.

And how exactly is securing a listing more "brain damage" than securing the business of a buyer? And why is your first concern your commission and not your clients' satisfaction? Maybe if you were more client-focused and less YOU-focused it would be less brain damage securing business.

Sep 3, 2017

You need to chill out. This is standard practice at any reputable investment sales brokerage. Let me repeat again so you don't cherry-pick: INVESTMENT SALES. Leasing is a different animal.

I can go down the list in my market:

  1. CushWake: for private capital deals you'll be lucky to get 1%, assuming they even call you back. They only call back on listing they're having trouble selling themselves.
  2. M&M: Will just chuckle, send the form, then contact your client once they have their phone # and email.
  3. CBRE: Private capital similar to CushWake. Institutional...Yeah man good luck getting a split out of that monster team. At that level they know who can execute and who can't. It's literally their job to.
  4. HFF: Not a big presence in my market.
  5. Avison Young: Will co-broke but it's a newly formed office and the head of it is a leasing guy so that policy will likely change eventually.

The smaller local firms are the ones that expect co-broke fees. These are the ones that don't specialize and do both leasing and investment sales. The typical path for them is to get clients through small leasing assignments, build good will, then eventually get the right to sell the building when it's done. Due to their leasing assignments, they often come across business owners looking to buy so they inquire on whatever they find on loopnet and then the shitstorm ensues. I did do a deal with a broker that brought a buyer like this. I ended up becoming friends with the broker and, man, it's a different world at those little shops.

You can say whatever you want about whether or not it's "right" or "ethical" but this is how the business works in investment sales. It's different if you're repping someone on the sale of a vacant industrial building or trying to do lease deals. Different dynamics all around.

As someone that at least tried working with outside brokers to get investment sales deals closed, I can tell you the amount of work is far less on the buyer-rep side. Those brokers become nothing more than an e-mail forwarding service unless some inspection problem comes up that they have direct experience with. They'll have some hand in the negotiation if their client is unsophisticated but I needed to do just as much work selling the deal to an outside buyer as I had to do selling it myself. The only difference is the person I'm communicating with on the buy-side.

And before you go off on another one of your rants trying to insult me like you did the other posters in this thread, I've closed a LOT of private capital deals, all sourced by yours truly. Double digits every years in my mid-to-late twenties in a very competitive market.

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Sep 3, 2017
Non-PC Broker:

You need to chill out. This is standard practice at any reputable investment sales brokerage. Let me repeat again so you don't cherry-pick: INVESTMENT SALES. Leasing is a different animal.

I can go down the list in my market:

    - CushWake: for private capital deals you'll be lucky to get 1%, assuming they even call you back. They only call back on listing they're having trouble selling themselves.
    - M&M: Will just chuckle, send the form, then contact your client once they have their phone # and email.
    - CBRE: Private capital similar to CushWake. Institutional...Yeah man good luck getting a split out of that monster team. At that level they know who can execute and who can't. It's literally their job to.
    - HFF: Not a big presence in my market.
    - Avison Young: Will co-broke but it's a newly formed office and the head of it is a leasing guy so that policy will likely change eventually.

The smaller local firms are the ones that expect co-broke fees. These are the ones that don't specialize and do both leasing and investment sales. The typical path for them is to get clients through small leasing assignments, build good will, then eventually get the right to sell the building when it's done. Due to their leasing assignments, they often come across business owners looking to buy so they inquire on whatever they find on loopnet and then the shitstorm ensues. I did do a deal with a broker that brought a buyer like this. I ended up becoming friends with the broker and, man, it's a different world at those little shops.

Jesus f*cking Christ. How many times do I need to repeat this? I KNOW this is standard practice and it's UNETHICAL. I literally said this in my opening statement. I'm not sure what I'm having to repeat this a third time.

Non-PC Broker:

You can say whatever you want about whether or not it's "right" or "ethical" but this is how the business works in investment sales.

It doesn't matter if it's just "how it works"--if you're putting your own commission interest above your clients' interest then it is UNETHICAL. And you can rationalize that however you want--it's unethical. It's wrong.

Non-PC Broker:

As someone that at least tried working with outside brokers to get investment sales deals closed, I can tell you the amount of work is far less on the buyer-rep side. Those brokers become nothing more than an e-mail forwarding service unless some inspection problem comes up that they have direct experience with. They'll have some hand in the negotiation if their client is unsophisticated but I needed to do just as much work selling the deal to an outside buyer as I had to do selling it myself. The only difference is the person I'm communicating with on the buy-side.

You're entitled to an unsophisticated and wrong opinion, but it's still wrong. I've been working directly with a buyer broker and for several months as an independent analytics consultant and it's an absolute war on both sides. The buyer broker is doing as much real, actual work as the listing agent. The main difference is in the marketing materials, which all major brokerage firms have an analytics and marketing team so you, the broker, aren't really even doing any real, actual work.

Non-PC Broker:

And before you go off on another one of your rants trying to insult me like you did the other posters in this thread, I've closed a LOT of private capital deals, all sourced by yours truly. Double digits every years in my mid-to-late twenties in a very competitive market.

I haven't personally attacked anyone in this thread other than pointing out that their behavior is unethical. And your personal production resume has absolutely nothing to do whatsoever with the topic at hand, which is denying your own client the right to engage with a buyer because that buyer has a broker. That is obscenely unethical. And if it's not I challenge you to tell your seller that you refused to engage with a potential seller because you didn't want to split commissions. Let's see how that goes over with your client.

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Sep 3, 2017

On a separate topic, investment sales listing brokers are among the most unethical people I've ever engaged with. In a different era they would be the people pick-pocketing in the ghetto. Do you know what's also standard practice other tha

Sep 3, 2017

Again, WSO not allowing edits: other things that are standard practice among listing brokers--blatantly lying or misrepresenting seller financials. These scumbags take caveat emptor to the next level. It takes a special kind of scumbag to lie on paper.

Sep 4, 2017

With statements like that, I can't help but feel as though you are trolling.

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Sep 3, 2017

Here is an interesting article covering a real estate agent's fiduciary responsibility to a client:

Loyalty: As the agent for your client, you must be loyal and keep their best interests ahead of those of any other party, including yourself. How much commission you might make, particularly in competing offer situations, should not be a consideration and would be disloyal to your client.

https://www.thebalance.com/fiduciary-definition-28...
F*ck you--don't tell me you don't have an obligation to your client. Many commission agreements will state a specific percentage where the client must make up the short-fall, but you have a fiduciary responsibility to your client to bring in the best offers you can possibly bring in, regardless of the commission and how it's split or paid. If you literally ignore a buyer or lie to them ("we're presently under contract") because you don't want to deal with their commission splits then you are a scumbag broker. If I found out that my broker was stabbing me in the back for their commission then I'd strongly consider suing them for breach of contract.

Sep 4, 2017

We typically stipulate different fees in our listing agreements for different scenarios, i.e. 2% if no other broker is involved, 3% if we cooperate with an outside broker. An exclusive buyers rep can provide a lot of value to a private buyer if they are truly acting as an advisor since these guys need a lot of handholding at times. I have yet to work with an institutional buyer that has been repped by a broker, and for good reason as these firms have legal departments and acquisition teams, etc.

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Sep 4, 2017

At my former firm, we had sold multiple properties and had good relationships with MDs at top firms. With that said, several years ago, we kicked one of them to curb and blacklisted them from not only our firm, but partner firms as well. They did not show us a potential buyer because they were represented by another firm. This happened on two instances. It turns out that the buyer bought one of our other office buildings and they mentioned to us at closing that they were interested in our other assets, but that our broker did not work with their's.

DwD is absolutely right. You have a fiduciary duty to at least tell us that there is a buyer interested regardless if the fee is split or not. We are paying your salaries and if you try to get around this, then we no longer wish to have a relationship with you. We pay you to bring us the best offer, we don't care about anything else.

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Sep 4, 2017

My question was primarily aimed at smaller pop deals that generally stay in the sub-$10MM range. Every deal is different but I tend to lean more towards holding somewhere around 60% of the total commission for my side.

There's been a lot of solid feedback here. Thanks.

Sep 5, 2017

Can anyone comment on how landlord rep/owner should work for leasing a pretty sizable space? Think 100k+ SF of space in an office building. Are exclusives the norm?

Sep 5, 2017

My firm refuses to offer on fully marketed properties without a buyer broker. I think it's kind of stupid, especially, because it's a non-arms length buyer broker. The higher ups, always say the broker has a fiduciary duty to present all offers. I've pushed back at times seeing as how I do all the work anyway, I should be able to dictate the selling broker keeps the commissions if I want. I guess my point is I'm sure we aren't the only ones using the buyer broker as a way of essentially getting a 1-2% discount on the property. I don't have time to call all the random landowner holding $1mm-10mm properties, so I think the broker that brings it to market does deserve at least a larger share than 50/50 for that.

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Sep 5, 2017

Depending on who you talk to, the brokerage game could look dramatically different in the next 10-15 years. There are alot of jackasses running around trying to sell deals that have no clue as to the underlying asset, at best they are clueless but at least try to be helpful, at worst, they will give you bad information and then shrug their shoulders when you call them on it later. I agree with one of the comments regarding buyer brokers basically just passing emails back and forth, the really great ones will go above and beyond, the 98% don't add value, and simply call to "check in" on how things are going (i.e. when can I expect my commission check).

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Jan 10, 2018

Coming from the principal side this is a fear. Brokers looking to other brokers and using their actions as a benchmark for good practice is insane. You talk to a crackhead and they're going to think smoking crack is pretty normal. Your logic and approach are wrong, and I'd terminate the relationship and make our entire network aware. It's bad practice and would bring the hammer down from any client.

Jan 11, 2018

Let the buyer's broker write in their fee in their offer.

i.e.-how much do they think their buyer's offer is worth to the seller?