Real Estate Commission Concerns

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Summary

In Georgia, its common for sellers to pay both buyers and sellers agent commissions. The Letter of Intent (LOI) outlines terms for a property sale, including a long inspection period, buyers right to assign the agreement, and sellers responsibility for various costs. The offer price can be negotiated based on market conditions. Consult a real estate attorney for a detailed review.

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RE: Total approximately *.* acres including any improvements located at * Lancaster Hwy, Charlotte, NC *, Mecklenburg County Parcel ID# *. This letter is intended as a letter of intent outlining a proposal by GSG HOLDINGS, LLC or its subsidiary or assigns, to purchase all of the real estate and improvements referred to below under the terms and conditions basically set forth herein. This letter represents preliminary negotiations between the parties and is not a binding contract, however, the parties intend to proceed to a binding contract in accordance with the terms hereof. The terms and conditions of this letter of intent are the following. *: SELLER: THE MONBARREN FAMILY PARTNERSHIP LTD *: PURCHASER: GSG HOLDINGS, LLC or its subsidiary or assigns. *: PROPERTY: Approximately *.* acres including any improvements located at * Lancaster Hwy, Charlotte, NC *, Mecklenburg County Parcel ID# *. (See attached Exhibit A “Property Depiction”). *: PURCHASE PRICE: Two Million Five Hundred Thousand and */* Dollars ($*,*,*.*) for approximately *.* acres as verified by current survey. *: EARNEST MONEY: Within ten (*) business days after execution of the Purchase Agreement, Purchaser shall deliver $*,* cash to Escrow Agent (per Buyer’s instructions) which shall be applicable to the Purchase Price. *: INSPECTION PERIOD: One Hundred and Eighty (*) days from the Effective Date of the Agreement. Purchaser, and/or its agents and employees shall have unlimited access to the Property to conduct studies and inspections, to perform due diligence, and to determine if the Property is suitable to Purchaser. Purchaser shall indemnify Seller for its actions and restore the Property on account of its activities. *: ZONING AND ADDITIONAL DEPOSIT: If purchaser determines that a rezoning of the property is required for Purchaser’s intended use, Purchaser shall, at its cost and expense, submit a rezoning application to the appropriate governmental authority during the initial inspection period. *: CLOSING DATE: Within thirty (*) days after the end of the inspection period, or the receipt by the Buyer, in satisfactory form, the Site Plan Opinion, (as outlined in section *). Closing to take place at a mutually convenient office. *: EXTENSION OF INSPECTION PERIOD: Purchaser shall have the right to extend its inspection period for 60 days upon delivery to Seller of a $*,*.* refundable deposit. Such deposit will be applicable to the purchase price. *: SURVEY: During the inspection period Purchaser shall be responsible for obtaining a Class A land title survey of the property prepared by a qualified registered surveyor in the state of South Carolina. Purchaser shall have thirty (*) days after the receipt of the survey to determine whether it will accept matters shown on the survey. *: TITLE INSURANCE COMMITMENT: Purchaser shall be responsible for obtaining a title insurance commitment, disclosing the title to the Property to be good, marketable and insurable, subject only to the exceptions which Purchaser is willing to accept (the Permitted Exceptions). Purchaser shall be responsible for paying costs associated with the title insurance commitment and any final title insurance policy. *: CLOSING COSTS, PRORATIONS AND COSTS: Seller shall pay for deed preparation, documentary or transfer stamps or fees, normal and reasonable closing costs of Seller, all past due taxes, all rollback or deferred taxes, and prorata real estate taxes and assessments for the current year. Purchaser shall pay for the title examination, Escrow Fee and recording the deed. Each party shall pay its own attorney's fees. *: SELLER'S DELIVERIES: a) A general warranty deed conveying the Property free and clear of liens and encumbrances, except the Permitted Exceptions. b) Affidavits required by the title company. c) Certificate of Non-Foreign Status and Residency Affidavit. d) Corporate Resolutions, Incumbency Certificate and organizational documents required by the Title Company. *: ASSIGNMENT AGREEMENT: Purchaser may assign its rights under the Agreement. *: COMMISSIONS: INK Realty Group (Eduard Pershin – Broker) is representing the Purchaser and shall be due a commission from the Seller per separate agreement. *: ESCROW AGENT: Per Buyer’s instructions. *: PURCHASE AND SALE AGREEMENT: This letter sets forth our proposal to enter an agreement and any agreement shall be subject to preparation, negotiation, and execution of the same. Within twenty (*) days of the Acceptance and delivery of this Letter of Intent Purchaser shall have prepared and delivered to Seller a proposed Purchase Sale Agreement (the 'Agreement'). The parties shall use their best efforts to enter into an Agreement satisfactory to Seller and Purchaser. *: CONTRACT EFFECTIVE DATE: The Effective Date of the Agreement shall be the date on which Seller shall have delivered to Purchaser the Agreement fully executed by Seller, Purchaser and Escrow Agent. *: SPECIAL CONDITIONS: None. *: TERMINATION: This Letter Of Intent shall be considered terminated if it has not been accepted by Seller within seven (*) days from the date of this letter. *: NOTICES TO: If to Purchaser: GSG HOLDINGS, LLC C/O __________________ ______________________ ______________________ If to Seller: THE MONBARREN FAMILY PARTNERSHIP, LTD C/O __________________ ______________________ ______________________ *: PERMITS: During the inspection period, the buyer shall submit requests and applications for, and shall diligently endeavor to obtain, all permits, approvals, variances, licenses and other determinations required under the federal, state, county and municipal laws, ordinances, regulations and administrative rulings deemed necessary to develop the premises. "What are your thoughts on this Letter of Intent from the sellers perspective?"
This LOI seems to put much responsibility on the Purchaser. But, there are few points to note:
- Commission for the buyer's broker is paid by the Seller.
- Purchaser has a long inspection period and can extend it.
- Seller covers costs like deed preparation and past due taxes.
Please consult a lawyer for a comprehensive review.
If the appraised value is $*.9million, dont you think that is what the offer should be atleast?
The offer usually depends on various factors such as market conditions, property condition, location, etc. It's not unusual for offers to be less than the appraised value. However, it's also not unusual for sellers to negotiate a higher price. Consult a real estate attorney for guidance.
Why would the seller pay the purchasers commission?
In Georgia, it's common for the seller to pay the commission for both the buyer's and seller's agents. This practice is largely due to the tradition where the seller pays for the cost of marketing the property, including the commission to the real estate agents involved in the transaction. However, this can be negotiated in the contract.
Since it seems like the buyer is taking a lot of responsibility here, cant they put that on the closing statement and the seller will get less money?
In Georgia, the closing costs, which may include the buyer's agent commission, can be negotiated between the parties. However, traditionally, the seller pays these fees. If the buyer agrees to bear some costs, it can be reflected in the closing statement reducing the seller's expenses. Consult an attorney for tailored advice.
Is there anything negative that sticks out about this LOI from the sellers perspective?
From the seller's perspective, a few potential concerns in this LOI could include:
- The long inspection period (180 days) with an option for extension.
- The seller is responsible for paying the buyer's broker's commission.
- The buyer retains the right to assign their rights under the Agreement.
Please consult a real estate attorney for a detailed review.
what does the buyer retains the right to assign their rights under the agreement mean?
The clause "the buyer retains the right to assign their rights under the agreement" means that the buyer can transfer their rights, obligations, and interests in the property to another party. This could be another individual or a company. This is commonly seen in investment or commercial real estate transactions.
Why are those the potential concerns within the LOI?
The potential concerns within the LOI are:
- Long inspection period: Gives the buyer plenty of time to back out or renegotiate.
- Seller pays buyer's broker's commission: This might be an unexpected cost for the seller.
- Buyer's right to assign agreement: This means the buyer could transfer the contract to another party, which may not be desirable for the seller.
What other concerns do you see in the LOI?
Other potential concerns in the LOI might include:
- The buyer has the ability to rezone the property.
- The LOI is not a binding contract.
- The seller is responsible for various closing costs.
- There are no special conditions mentioned.
- The LOI will terminate if not accepted within 7 days.
Please consult with an attorney for a detailed review.