Business Sale - Broker Commision question - Posted by Jack

Posted by John Hyre on July 25, 2011 at 06:50:23:

Really the seller’s issue, unless it’s a deal killer for the seller, in which case it becomes your issue. There are some major details that we are missing, such as: What does the listing contract say? I tend to think that bringing buyer’s agent in has a good chance of making the issue go away, or settle on favorable terms. Though if seller is looking to fight, they’ll argue “what buyer’s rep? We didn’t talk to no stinking buyer’s rep.” Check the listing agreement…and be prepared to at least offer them a commission on any future buyout of remaining 50% by you.

John Hyre

Business Sale - Broker Commision question - Posted by Jack

Posted by Jack on July 14, 2011 at 11:35:57:

Hi Wondering, if anyone of you can suggest your opinion on this situation:

I saw a business for sale on the MLS (I am not an agent but have access to MLS via a friend who is an agent in NJ). I called the Selling agent and was put in touch with the Seller. Now, seller and I have agreed to go into 50/50 partnership ( I am buying 50% of shares)

In the MLS, the commission is listed as 6% (3% each for Seller and Buyer agent). Now, when the seller talked to the Selling agent, they want 100% of the commission. I am wrong to think that this is unfair?

First, if I wanted to, I can always bring in my buyer agent (friend) and they will need to split 3% of the commission with him. Second, as the end transaction is 50% of business and not the entire business should not the commission be half (not sure?)?

What leverage do I have when I talk to the Seller Agent? Suggestions?

Thanks,
Jack

Re: Business Sale - What sale? - Posted by ray@lcorn

Posted by ray@lcorn on July 30, 2011 at 09:22:32:

Jack,

I would first reiterate John’s comments… the terms in listing agreement must be known to determine the starting point of negotiations. Notice I said “starting point”. In this market everything is highly negotiable.

If the listing agreement is specific regarding partial interests and the broker is licensed to broker same, then that may tighten the parameters, but not close the discussion.

However, if the agreement is silent on the issue things get interesting. Your agreement is to become a partner, not a buyer. You’re buying “shares” which unless that broker has a securities license, is not legally eligible to collect a commission. Fines and penalties are more likely.

I’d suggest you and your new partner sit down with the broker and negotiate a walk-away fee in return for avoiding all those nasty scenarios that involve courts and regulators.

ray