Agent Fees

There are a variety of ways to pay real estate agents. In Chicago, the most common method involves the property seller paying a commission to their listing agent, who in turn splits the commission with the buyer’s real estate office. In the Chicago area, a commission based on 4-7% of the property's selling price is customary. In other words, if you purchase a space for $150,000, and the commission is a 50-50 split on a 5% commission, then your agent’s office earns $3,750 on the sale [($150,000 x 0.05)/2]. If you pursue for-sale-by-owner or other non-listed properties, you might have to pay your agent’s commission out-of-pocket.

If you were leasing a commercial space, then the agent’s commission might be based on the amount of rent over the term of the initial lease. However, leasing of commercial property is complex, and commission arrangements might vary drastically from situation to situation.

Other arrangements might include a flat-fee for service, or an hourly rate. If you are working on a fee-based system, stipulate that payment is contingent upon the agent locating and putting you into a space. If you pay by the hour, obtain an agreement (preferably written) that explains how the agent will charge you for their time. Ensure that the agreement specifies what you get for the fee.

Some real estate agents might ask you to sign a buyer contract, which often stipulates how the agent will be paid, how they will handle dual agency and conflicts of interest, and what you can expect from them in terms of time, research, etc. As with any contract, the terms of an agent contract are negotiable. Review, discuss and amend its terms thoroughly before you sign.

Consider having your attorney review the contract, especially if you are looking for space for a business or organization or purchasing or leasing an expensive property.

TIP: Information about working with a real estate agent to find property is discussed in greater detail in Chapter 5: Finding Space.