“The broker will get me a better price, that pays the commission.” That is the argument. It is sometimes true for a house. For an income property, where value is calculated and buyers are professionals, it rarely holds. Here is the full math, line by line, on a 12-unit worth 2 million.
4 to 6% plus taxes, i.e. $92,000 to $138,000 on $2,000,000. It is the only line you see. For the broker to “pay for himself,” he must get at least 5% more than a direct buyer would offer — on a building whose value is set by income, that is rare.
A listed multiplex sells in 3 to 6 months on average, plus 2 to 3 months to the notary. Meanwhile you manage, heat and repair. A direct sale closes in 4 to 8 weeks, or on the date you choose.
Ten, twenty showings of occupied units. Tenants who learn the building is for sale, worry, sometimes leave. A direct buyer does one visit, with you, and tells the tenants once the sale is done — telling them they stay.
On the open market, the highest offer is often from a buyer who needs financing and will come back after inspection asking for $50,000 less. One offer in three falls through. A buyer who pays cash and buys as is prices the work before offering: the signed price is the paid price.
Through a broker: $2,000,000 minus $115,000 of commission and taxes, minus 6 months of management, with renegotiation risk. Net: about $1,885,000, in 8 to 9 months. Direct: $1,950,000 signed, paid in 6 weeks, no showings. For the broker to win, he must get you more than $2,065,000 firm — 3.3% above income value. Ask him to commit to that number in writing.
A unique building — commercial, heritage, or with development potential that only competing bids will reveal. Or if you have no serious direct offer in hand. In both cases, get a written offer from a direct buyer first: it is your floor, and it is free.
“There were no problems during the transaction, they are on top of their business and gave me a lot of confidence.” — Pierre B., seller
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