I just signed a listing agreement for my business. The asking price is about $1.5M. The broker insisted on keeping their minimum fee in the listing agreement. Why?

There are two reasons for this. The first is that brokers typically can’t alter the listing agreement without their brokerage’s approval, and the brokerage doesn’t like to vary their standard contract. This could be a reason, but is probably not the whole story.

It is not unusual for you to agree to carve off a part of your business and sell it to one buyer, and sell the rest to another buyer. The minimum fee – and the overall fee structure – applies to each transaction. Say you have two branches, one in Auckland, and one in Christchurch. You get a buyer really interested in the larger Auckland branch, but they have no interest in your small Christchurch office. You sell the Auckland branch to this buyer without the Christchurch branch. The broker then finds a buyer for Christchurch. This is a separate transaction, so another fee applies.

Even if you have no plans to split your business to sell, you need to keep the broker’s fee structure in mind when listing in the event that the sale involves more than one transaction. This could result in you paying far more commission than you envisaged. If the broker brings you an offer for only a part of your business, you can negotiate then around the commission on the sale of subsequent parts. Just ensure there is sufficient incentive for the broker to keep trying to sell the other part/s of the business.

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