Saint In The City Part 2
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This document discusses two real estate broker experiences where commissions were not paid as expected. In the first case, the broker represented a restaurant tenant but was not paid the full 5% commission by the landlord after completing the deal. In the second case, the broker referred a deal to another broker but was only paid a portion of the expected 20% referral fee after the other broker accepted a lower commission from the landlord. The document emphasizes getting commission agreements in writing upfront to avoid misunderstandings and unpaid commissions later. Brokers are advised not to assume others will act with integrity and should clearly establish payment terms and schedules to protect themselves.
Saint In The City Part 2
- 1. Case study: Collecting Commissions, “It’s Hard to Be a Saint in the City” Part 2 I n Part 1 of case study, Collecting He said “If we don’t take the listing someone else will” I replied Your Commissions, “It’s Hard so what, why deal with people who don’t pay you? He commented to Be a Saint in the City” we “it’s about signage and name recognition and market share”. To discussed typical clauses pertaining me it is real simple; if I represent a client I will show them every to commission within the Letter Of opportunity within the market place that fits their criteria. But, I will Intent. The first was for a commission also make it a point to let my client know that I have been burned by without a co-broker where you were a landlord and ask them to protect me throughout negotiations. With either the tenant representative broker regard to taking a listing, I will never take a listing simply for market or the listing agent and the scenario share; however there are others who always will. was the same, with a commission line item within the LOI that the deal was The reason we are in this business is to earn commissions, and that Jack Intrator based on. The second scenario was means getting paid. If you want to be a Saint, join the Peace Corp. CPM, RAM, ARM a co-broker or co-operating broker We are in this line of work because we believe we can control the situation where you were the tenant art of the deal and make money. The art of the deal is the excitement representative and requested 3% of the that motivates guys like me. Bottom line, get your commission gross commission instead of splitting a 5% commission (2.5%/2.5%) worked out right up front and don’t take anyone’s word for it. Still, as represented in the commission agreement or the Exclusive Listing there are some brokers who will agree to receive commissions as Agreement, which is the case in Part 2. collected, which to me, is by far the very worst form of commission agreement. Under this scenario, you become the Landlord’s partner, Recently, I was the tenant representative for a deal completed in sharing his down side but none of the upside, and leaving you totally PA. I represented a regional/national restaurant operation and a well unprotected. Brokers do their job when a deal is completed and known competitor within the industry repre- should be treated with the same courtesy as sented the Landlord. Within the very first any other professional who gets paid at the conversation I asked about the commission conclusion of their performance. But as and was told to include whatever I wanted “Discuss the deal and all the story relates above, there will always be in the Letter Of Intent. I explained I would Brokers who will agree to anything in order like 5%, however I knew I would be willing terms at the very beginning to take a listing, they devalue themselves and to negotiate, as 3% for a co-brokered deal not at the end of the deal. they devalue their industry as well. is certainly a good situation if the commis- sion agreement total is 5%. Now in order to Sometimes you win and Second example: I am representing a national get paid per the agreement whichever way it other times you lose, but franchisee at another well known firm and pans out, you have to include an anticipated referred the business to an associate from a payment schedule. You submit a bill and never be afraid to ask.” national net-work, another broker in another you hear nothing for a week. You make a call state that had a personal relationship with my and you are told that they are processing it, former company and all the Principals within and then another week goes by. It’s week three and you see the the company. A deal was completed and as usual we anticipated landlord at a function, he promises payment and times goes by. You a 20% referral fee. I asked on several occasions during the course want to act like the gentleman you are and leave the line of com- of 6 months for a commission schedule and was rebuffed. I did not munication open, so you dance between assertive collection of your pursue or push to bring it to a head; instead I acted like the saint money and keeping in mind the relationship your company wants to and deliberately held back. When the day came to get paid, I was maintain. Hopefully you end up getting paid, however even with told they only did a 5 year deal instead of the usual 10 year term. an Exclusive Listing Agreement where your compensation is speci- And that due to a personal or long standing relationship with the fied and both Landlord and Broker have signed, sometimes there is a company and the owner, they agreed to take a lesser commission. problem. The agent anticipates commissions as earned per the ELA, They were the sole Broker and accepted a 3% commission. So my but many times its hope for the best, while engineers, attorneys and 20% was based on a 3% commission not the anticipated 5%. But other professionals charge and are paid their fee, the Real Estate who was to blame? The Saint. I tried to take the high road, showing Broker is the last to get paid and often the commission is renegoti- faith that it would all get worked out and did not want to come off ated or reneged upon. the bad guy with the company principals, nor sour their relationship with the broker I had referred to them. What did I learn? Take Last year, at the ICSC show in Las Vegas, I was sitting at Binion’s nothing for granted. Don’t assume people will take the high road Casino in the old part of Las Vegas when in walks a friend and his and make things right. At the end of the day, it comes down to self wife, the friend is a principal partner at a well known brokerage house interest. Learn to ask for your commission right up front. Discuss in the greater Philadelphia area. We got to talking about several the deal and all terms at the very beginning not at the end of the deals we worked on together through the years and the status with deal. Sometimes you win and other times you lose, but never be regard to non-payment. I asked why he and his company continue afraid to ask. The point: If Landlords could do a deal themselves, to take listings like this when they have gotten burned in the past. they would do it. If you are dealing with a co-broker you need to 14 DELAWARE VALLEY’S MANAGER
- 2. know what his agreement is from the very start, because he may be pretty, you get their stores rented and you contribute to their bottom making deals that are not typical. Discuss all details upfront and line. It’s such a fine line to dance that talk, should I be the Saint of come to a clear understanding. As a final comment, I later drove by the City? the shopping center and noticed the broker that I did the deal with no longer had his signs on the property, but instead were replaced by Jack Intrator is a CPM, RAM, ARM and Restaurant Leasing another broker. I was told by the new broker that part of the pitch to Specialist, Zommick McMahon Commercial Real Estate Inc, a gain this account was to take a discounted commission schedule and Commercial real estate firm located in Pennsylvania. He is a board work with the bosses on their terms. Sound familiar? member of the Pennsylvania Restaurant Association, Delaware Valley and a member of Brandywine Chapters, which is an affiliate “Those downtown bosses, all sure talk pretty. I felt just like a of the National Restaurant Association. Jack is also a member of back street gambler, searching for a commission. It’s so hard to be International Council of Shopping Centers, the Institute of Real a Saint in the City,” when you have money out on the street. Let Estate Management, Tri-State Association of Realtors and National someone else cry nickels for your pity, it’s your commission that’s Association of Home Builders. For more information please contact due. The sages of the industry know it’s you who make them all look Jack at 610-359-1100 or visit online at jintrator@zmcre.com. 15 DELAWARE VALLEY’S MANAGER