A written and signed contract is essential for a finder’s commission agreement. The agreement should include the commission percentage, when the commission will be earned, and how payment will be made. Negotiations with the seller determine the final commission amount. A lawyer should draft and notarize the agreement.
A finder’s commission agreement should be viewed contingently as all conditions, terms and circumstances are different with regards to each seller. A written and signed contract is essential if the finder expects any kind of legal obligation to collect payment. Agents or brokers setting up buyer-seller interviews should always work with a contract that is presented at the beginning of the agent-seller meeting.
The agent’s commission should always be included in the finder’s commission agreement upfront, and the commission is usually expressed as a percentage of the sale price. Brokers and agents call the finder’s fee a referral fee. Many times, the broker’s request for even 1% of the sale price as commission ends up being half. The final result depends on the negotiations made with the seller.
A finder’s commission agreement should not only state the agreed percentage to the commission amount, but should specify when the agent or broker will have earned the commission, such as after a specific date or process. For example, if a broker introduces a prospective buyer to a seller’s company and then that prospective buyer becomes the actual buyer, the contract should state that transaction as collateral for the referral or research fee.
Especially without a contract, casual “seekers” may not receive any compensation, depending on the personal and business relationships involved. The obligation felt by the seller usually determines whether a non-contracted finder’s commission will be paid. The value of the introduction is a consideration when negotiating a finder’s fee. A suggestion from the “seeker” that the seller should call a certain potential buyer is generally not considered worthy of a commission.
A finder’s commission agreement should be drafted by an attorney and notarized whether the “finder” is a friend or family member or not. Always discuss the prospect of a research commission from the outset and never assume that there will be one. The contract should specify not only when but also how payment of the commission will be made, for example by check or direct deposit into the finder’s account.
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