The Buyer Normally Pays the Listing Broker’s Fee
Irrespective of the type of representation chosen, single agency or dual agency, it is the buyer who pays the listing broker’s fee – That’s because the broker’s fee is included in the total purchase price that a buyer pays for a business, and that the listing broker receives its brokerage fee from the seller’s proceeds of the sale, irrespective of who brings the buyer. That being the case, the buyer is actually paying for the listing broker’s services irrespective of whether or not the buyer chooses to be: (1) represented by the listing broker (dual agency), (2) a salesperson within the listing broker’s firm (dual agency), or (3) chooses to be represented by its own independent broker (single agency). The key differences are the quality of representation received by the buyer and possibly additional costs, should the buyer choose its own independent broker and single agency.
Getting the Most for Your Money as a Buyer
Given the reality that the broker’s fee is a portion of the total purchase price paid for a business, the buyer is actually paying for the listing broker’s services irrespective of whether or not the buyer chooses to be represented by the listing broker, an agent within the listing broker’s firm, or chooses to be represented by its own independent broker. The key differences are the quality of representation received by the buyer and additional costs, should the buyer choose its own independent broker.
In the typical listing / representation arrangement between a business owner and a broker, the business owner agrees to pay the broker a fee certain for finding a buyer, who is ready, willing and able to purchase the owner’s business, for representing the business owner’s interests and for potentially representing a buyer’s interest in addition (dual agency). That fee is usually paid to the listing broker upon the close of escrow for the sale. While many listing / representation agreements are silent on whether a listing broker is required to share his / her fee with a cooperating broker (one who brings and represents a buyer), most listing brokers will share a substantial portion of the total fee with the buyer’s broker, if a cooperating broker (buyer’s broker) introduces the buyer and represents him / her in the purchase of a business. In addition, most sellers have the expectation that their listing broker will share a fee with a buyer’s broker for doing part of the listing broker’s job, finding and representing the buyer. We’re happy to discuss the intricacies of this process to ensure that you are able to obtain the best representation while minimizing the fees you pay to Business Acquisitions Advisors.
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