Commission on property sale - Fee to Mortage broker for referral

[christos]

What is normal or seems fair for this situation?

My mortage broker has referred me to a property that I will most likely settle on with a resulting sale commission of the deal being $15,000 that the agent has proposed to split 3 ways (Developer, Agent and myself - $5K each) which seems a nice sweetener.

Price is $299K

I will request that for me the $5K comes off the purchase price but my main question id what is normal or fair for the broker who referred me in the first place? The referral was just contact details - 5 mins of work.

I.e a percent or nominal amount of the 5K - i.e 1% ($50) or up to 5% ($250) etc or a nice bottle of wine etc...

Also once agreed how do you formally pay them or document this?

Broker will get trailing commission and percent commission from bank based on getting finance and to my knowledge receives no kickback from developer. He makes money getting repeat business and referals.


Thanks

 

[tobe]

How long is a piece of string? I suggest the best kickback is referring him more customers, and introducing him to your financial planner, accountant, other agents you know, any other proffessionals etc etc. You could also write him a nice recomendation.

 

[christos]

How long is a piece of string? I suggest the best kickback is referring him more customers, and introducing him to your financial planner, accountant, other agents you know, any other proffessionals etc etc. You could also write him a nice recomendation.

Yes I agree - its sort of been the other way around as its first time investing for me but then I did point out some other things to him that he didn't know so yes maybe just a bottle of wine.....

 

[Aaron_C]

Repeat business is always the best gift

 

[Terryw]

I have been approached heaps by sales people etc to try to get me to flog property, or introduce property to my clients etc. Some were offering up to 4% commission.

But what does this say about the property being sold?

Christos, I don't understand your post. You say "Developer, Agent and myself" received a commission and then mention the broker. Did the broker get an additional commission?

 

[Rolf Latham]

I suggest the best kickback

wash your mouth out with soap

Google that commonly misused word and u will see why

ta
rolf

 

[Rolf Latham]

What is normal or seems fair for this situation?

My mortage broker has referred me to a property that I will most likely settle on with a resulting sale commission of the deal being $15,000 that the agent has proposed to split 3 ways (Developer, Agent and myself - $5K each) which seems a nice sweetener.

Price is $299K

I will request that for me the $5K comes off the purchase price but my main question id what is normal or fair for the broker who referred me in the first place? The referral was just contact details - 5 mins of work.

I.e a percent or nominal amount of the 5K - i.e 1% ($50) or up to 5% ($250) etc or a nice bottle of wine etc...

Also once agreed how do you formally pay them or document this?

Broker will get trailing commission and percent commission from bank based on getting finance and to my knowledge receives no kickback from developer. He makes money getting repeat business and referals.


Thanks

There is a moderate chance that if this is a new property that there is a referral fee to the broker............................

Depending on the margin in the deal, its not unusual for that fee to be between 0 % to 1.5 %

If there is no disclosure and such a fee is being paid it is indeed a "kickback"

ta
rolf

 

[Aaron_C]

But what does this say about the property being sold?

It doesn't say anything about the property being sold at all. It just means that there's a lot of mouths to feed around the property transaction. I'd happily pay a 4% to you if you can sell my property for 20% above what it's actually worth.

 

[Terryw]

It doesn't say anything about the property being sold at all. It just means that there's a lot of mouths to feed around the property transaction. I'd happily pay a 4% to you if you can sell my property for 20% above what it's actually worth.

Exactly my point. Over inflated sale price- probably.

 

[christos]

I have been approached heaps by sales people etc to try to get me to flog property, or introduce property to my clients etc. Some were offering up to 4% commission.

But what does this say about the property being sold?

Christos, I don't understand your post. You say "Developer, Agent and myself" received a commission and then mention the broker. Did the broker get an additional commission?

To my knowledge the broker will not receive any additional commission outside of what he will get from the bank for processing my application on this particular property.

So my question was really about if he didn't get anything (I did straight out ask - do you get kickbacks, finders fees etc) to which he said no, so I feel its fair as a gesture of goodwill I give him something - be that repeat business/referrals etc

 

[christos]

With regard to the price and not to get off topic of this thread - its an NRAS property and as mentioned on other threads aware these can be subject to overpricing/low valuations however bank valuation is expected to match price. Identical property next door met valuation with same lender getting finance with last month.

Overall I am happy with it so far - getting 10K from QLD govt for builder bonus and a discount on the sale price (the 5K) + all the NRAs benefits.

Settle in a few weeks

 

[Rolf Latham]

With regard to the price and not to get off topic of this thread - its an NRAS property and as mentioned on other threads aware these can be subject to overpricing/low valuations however bank valuation is expected to match price. Identical property next door met valuation with same lender getting finance with last month.

Overall I am happy with it so far - getting 10K from QLD govt for builder bonus and a discount on the sale price (the 5K) + all the NRAs benefits.

Settle in a few weeks

If the bank VAL is OK and the property is sole security, then that should be all good

Ta
Rolf

 

[Andrew_A]

I don't trust this scenario, something doesn't seem right about it, the fact that it's NRAS just makes the alarm louder. We don't have much of the information so it's impossible to say for certain however.

I don't understand why the developer would be getting some of the sales commission on top of what is surely an already generous development margin? Broker should have to reveal their beneficial interest or document it. NRAS developers trip over themselves to offer me standard REIQ commission for nothing more than a referral (3% circa), you add all of these fees on top of the margins already there including a hefty one for NRAS. Great cashflow from the scheme but the underlying asset and price you pay for it will be what make or break you, I'm yet to see one I would recommend.. don't look at a lot of them so I'm sure they are out there, tread carefully though!

 

[Andrew_A]

Also the sales commission is probably better defined as what it is, which is something other than sales commission to a licensed agency as it's exceeding maximum REIQ commission.

 

[Terryw]

Also the borrower receiving money from the developer should probably be dislosed to the lender as it is probably a rebate.

 

[christos]

I don't trust this scenario, something doesn't seem right about it, the fact that it's NRAS just makes the alarm louder. We don't have much of the information so it's impossible to say for certain however.

I don't understand why the developer would be getting some of the sales commission on top of what is surely an already generous development margin? Broker should have to reveal their beneficial interest or document it. NRAS developers trip over themselves to offer me standard REIQ commission for nothing more than a referral (3% circa), you add all of these fees on top of the margins already there including a hefty one for NRAS. Great cashflow from the scheme but the underlying asset and price you pay for it will be what make or break you, I'm yet to see one I would recommend.. don't look at a lot of them so I'm sure they are out there, tread carefully though!

I hear what you are saying - some of the NRAS properties do have a lot a of spin and bs with things going on behind the scenes that the buyer is not privy to which is a shame as I still feel the underlying principle is sound.

And the location is important too - with regard to the actuals - property is in Redbank Plains QLD on elevated ground with predicted growth. From the ones I have been through this one performs the best.