If you’re wondering how commission works in commercial real estate transactions, you’re in the right place! Our team has put together this quick guide that gives you the essential information to understand how commission works.
First let’s clear up; what is commission? Commercial real estate agents are paid a commission for representing the parties involved in the transaction.
Who pays the commission? A property owner or landlord pays the commission in a commercial real estate transaction, depending on whether the property is for sale or lease.
More on that below, but let’s talk about how the real estate agent receives their commission.
The Closing Process
A title company plays a pivotal role in a commercial real estate transaction, including the distribution of commission payments to real estate agents. Before money changes hands, Mattingly Ford Title takes several critical steps to ensure the transaction closes smoothly.
We conduct a thorough search to verify a commercial property’s ownership history and to identify any easements, financial or legal claims that may exist. Our team also prepares and files necessary documentation to transfer the property title as agreed upon between the buyer and seller.
We’re the last but arguably the most important stop on the journey because we make the transaction accurate and official.
Commercial Real Estate Sales
How much commission a real estate agent receives in a commercial sales transaction is calculated as a percentage of the final sale amount, usually 4% – 8% percent. If there is one agent, they receive the full commission, but if there are two agents, it is split 50/50. With all commercial real estate sales, the property owner is responsible for all commissions upon closing.
A quick example of the commission an agent may receive in a commercial real estate sale transaction:
Sale price: $1,000,000
Agent full commission (5%): $50,000
50/50 split (2 agents): $25,000 each
Commercial Real Estate Leases
When representing landlords or tenants, commercial real estate agents receive a commission on lease transactions. The commission is a percentage of the total lease value. Similar to real estate sales transactions, the commission is split 50/50 if there is more than one agent. The landlord or property owner pays the commission. Half of the commission is typically paid at closing, and the remaining portion is paid when the tenant takes occupancy.
A quick example of the commission an agent may receive in a commercial real estate lease transaction:
Total lease value: $120,000 for 2 years
Agent full commission (5%): $6,000
50/50 split (2 agents): $3,000 each
Mattingly Ford Title Services
Mattingly Ford Title Service is ready to make your next commercial property transaction move as smoothly as possible. Our clients always receive fast, friendly, and accurate closing services at a fair price.