- How Much Commission Do Commercial Real Estate Agents Make
- Commercial Real Estate Agent Salary
- Salary: Commercial Real Estate Agent In Phoenix, Az (oct 23)
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- How Is A Commercial Real Estate Agent Paid?
How Much Commission Do Commercial Real Estate Agents Make – You are interested in commercial real estate and are ready to get down to what matters most: money.
In this article we will answer these and many other questions. Keep reading to learn the ins and outs of commercial real estate commissions.
How Much Commission Do Commercial Real Estate Agents Make
As with residential real estate, commercial real estate agents work on a commission based on the sale or rental of the property.
Commercial Real Estate
For the majority of commercial real estate transactions, commercial real estate commissions are paid to one or two real estate agents:
Commercial real estate commissions are paid by either the property owner or the landlord, depending on whether the property is for sale or rental.
However, in a leasing transaction, you can expect the owner/landlord to pay only half of the commercial real estate commission when the lease is signed and the other half when the tenant moves in.
If you’re considering getting into commercial real estate, the income potential is probably one of the benefits that intrigues you most.
Real Estate Transaction Process Flow Chart
Before moving forward with a commercial real estate transaction, the seller and commercial real estate broker must agree on a commission, which is usually a percentage of the sales price.
Sometimes the commission will be specified in the agreement if the brokerage firm is able to enter into an exclusive listing agreement with the seller. If the brokerage firm is not listing the property for sale, the broker and seller will sign a listing agreement confirming both parties agree to the commission price.
When it comes to commercial real estate commission rates, brokers can decide what commission rate they want to charge and can vary their rates depending on the deal. However, it is up to the sellers to determine whether they will agree to this commission rate.
Under antitrust laws, brokers are prohibited from entering into an agreement that sets a standard commercial real estate commission. The commission rate for commercial real estate will mainly depend on the price of the property.
Commercial Real Estate Outlook
For example, a typical commercial real estate commission can range from 4-8% on transactions under $1 million. Once the property value exceeds $1 million, commercial real estate commissions begin to decline.
For example, a property with a sales price of $10 million may pay a commission of 1-3% due to the extremely high retail price of the property.
In some cases the commission may be fixed. Although uncommon, some brokers and sellers prefer to negotiate a flat commission, where a predetermined commission is received at closing regardless of the final sale price of the property.
A commercial real estate broker may also choose a minimum commission as a safety net in case the seller ends up accepting a low offer for the property.
Commercial Real Estate Agent Salary
For example, if you have a five-year lease with monthly payments of $6,000, your lease cost will be calculated based on your total payments for five years. In this example, your commission would be based on the property value of $360,000.
In some cases, a landlord may try to negotiate a lower commercial real estate commission rate for longer lease terms.
If the property in our example was leased for 10 years, the broker might agree to a 4% rate for the first 5 years and a 3% rate for the remaining 5 years.
Additionally, the broker may be able to negotiate a commercial real estate commission upon lease renewal. This is usually a reduced commission.
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Another common reason for negotiating commission rates for commercial real estate rentals may be to incentivize a deal for a low-occupancy building.
While these types of negotiations do occur, the majority of your transactions will likely be through non-negotiation fees.
Even if you handle the entire transaction yourself, state laws require you to pay a commission to the broker. The commercial real estate broker is responsible for paying the real estate agent’s commission.
Brokers can structure their commercial real estate commissions in a variety of ways, depending on how the brokerage is structured.
Salary: Commercial Real Estate Agent In Phoenix, Az (oct 23)
In smaller real estate firms, it is common for the real estate broker to take a portion of the commission and pass the rest on to the real estate agents involved in the transaction.
Agents can start with a 50/50 split and earn a larger percentage as they bring in more commissions.
However, a typical ratio is 60/40. In this case, the agent will receive 60% of the commercial real estate commission, and the broker will receive 40%.
The brokerage split may also be based on a sliding scale, which is reviewed annually. As real estate agents earn more commissions, their share may increase.
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Each team in a brokerage company is managed by a manager, under whom several agents work.
In such cases, the real estate agent may receive a smaller percentage because there are more agents involved in the split.
For example, a real estate agent gets 40-50% of a commercial real estate commission, a team manager gets 20-30%, and the brokerage keeps the rest.
Some brokerages operate on general commissions. Here, each team member receives a portion of the commercial real estate commissions generated from each other’s closed deals.
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Some brokerages make most of their money by charging agents a flat commission. An agent can make between $15,000 and $25,000 per year and only keep 5-10% of the commercial real estate commission instead of the majority.
There is no one “best” commercial real estate commission structure. What works well for one real estate agent may not work for another.
For example, if you work best in a team, you can make more money by working as a team, even if you have less commission.
If you are stronger on your own and feel like you don’t need the support of a manager to help you with transactions, you can make more money by working alone and earning a higher percentage of commissions.
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Some brokerages may offer a drawing in which the broker advances a certain amount weekly or monthly.
It is important to note that drawings are not wages. Think of sweepstakes as an advance on future commissions. You must repay this amount before you receive your commercial real estate commission.
Raffles can be an attractive option for those trying to establish themselves as a commercial real estate agent, or for those who simply want more stability in their income.
When considering the drawing, keep in mind that you will want to start earning commissions to offset the drawing amount before you start accumulating too much debt to the brokerage.
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It is also important to remember that if for any reason you want to switch to another brokerage, you will need to pay out the total winnings first.
This can happen when another agent brings the buyer to the listing agent. Typically, the buyer’s agent is paid from the commission paid by the seller or landlord, meaning the listing agent must split their commission.
This scenario is less common in commercial real estate than residential, but it does occur.
It may seem like the listing agent is failing in this case, but it actually helps them close the deal and they still get paid a commercial real estate commission for selling their buyer another agent’s listing.
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The distribution among agents is usually 50/50, but this is not always the case. As with anything related to commercial real estate commissions, splitting can be done in a variety of ways depending on the commission itself.
Typically, you can receive a commission on commercial real estate approximately 30 days after closing the sale or lease and entering into a commission agreement.
The processing time may be shorter or longer than 30 days after the purchase/lease agreement and commission are executed depending on your brokerage’s payment process.
However, in some cases, although not typical, you may not receive the entire commission at once.
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For example, the broker and landlord may also agree to a structured payment arrangement in which the broker will receive commissions for a certain number of months.
If the rental building is under construction, the broker may agree to receive half the commission upon closing and the other half upon development.
While such scenarios can occur, most often the commission is paid upfront after the deal is closed and the commission agreement is executed.
A commission agreement is one of the first steps when completing a commercial real estate transaction. The closing process is a little more complicated and will take most of your time before you feel the commission check in your hands.
How Is A Commercial Real Estate Agent Paid?
In Texas, the average annual salary for a commercial real estate agent is about $75,000.
While there is no industry standard for commercial real estate commission rates, a 4% commission rate is typical for the San Antonio commercial real estate market.
Keep in mind that while this commission rate is general, a large number of factors, as previously discussed, can affect your commercial real estate commission and
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