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Retainer fee?

Is it common practise for a broker/brokerage firm to charge a retainer fee for listing a biz with them. Sounds bogus to me.

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Answers (8)
Jon Franz
Franchise Clearly

I own a business brokerage and I do charge a retainer. Reason for the retainer is that I want to know the seller is serious about selling. Statistically speaking, less than 20% of businesses on the market ever actually sell. My practice is built around making sure all parties are educated and communicated to effectively. I believe I understand many of the reasons 80% of businesses never sell and I want to make sure I am working with sellers that are serious about selling. It is not uncommon for brokerages to charge a retainer fee. I wish you the best!

Dec 4, 2010
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Freedom Business Brokers
Orange County, CA

Beware of these sharks. Just like in any profession there are some crystal clean people and there are others who an stoop low.Sometimes they succeed by taking dvantage of innocent sellers who are trapped in a long lease and their business is down, these brokers lure them and entice them in retainer fee upfront and later they disappear and blame the seller for noncooperation and as if the seller's expectations were too high therefore he could not help the seller.
There is a new breed of brokers and agents who in order to make fast money cross the parameters
of ethics.They should be reported to DRE so that they will be blacklisted. They don't have confidence in their abilities and therefore can't take chances of listing the business and advertise at their own expense.
In the loan industry this is very common to entice the homeowners whose homes are about to be foreclosed to offer some too good to be true loans a so calledt nominal retainer fee which run in thousands.
That loan never obtained and that retainer fee also disappears and that office closes the office and disappears with the mortgage broker who is fictitious.

Sep 7, 2010
Rick Carlson
Ace Business Brokers
Los Angeles County, CA
Premium Broker

The only way it would make sense to pay a retainer from a Seller's perspective would be if you got a decent discount on the back end once you sold. Let's say that you and your Broker actually have a decent relationship and trust each other. If the Broker's firm offers the retainer option and the Seller and Broker both agree that they have priced it right, it may be in the Seller's best interest to exercise the retainer and get the discounted commission. We don't offer it at Ace Business Brokers because we'd rather get full price on the commission.

Sep 5, 2010
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The BAF Group LLC

Retainers are not common. However, an increasing number are asking for "marketing fees" of varying amounts. I have seen them from $500 to $1500. Anyway you look at them, regardless of what you call them, they are wrong.

The only retainer that is commonplace are those that are levied on corporate buyers. That is a completely different scenario. A private Buyer would not normally have any reason to pay a retainer, either. And selling on the basis of a retainer is just poor practice - to say the least.

A number of years ago, a Seller called me and said he wanted me to list his business, which he said was worth over $1 million. I almost broke my neck getting to the car and driving 90 minutes to see him. When I looked at the numbers, I had to tell the man his business was only worth about $250k. I thought he was going to hit me!

I asked where he got his $1 million number, and he said a broker had given that price to him. I asked why he had not gone with the other broker, and his response was that the broker wanted $5,000 to formalize the price evaluation, before he would agree to list the business. The Seller did not want to pay the $5,000, up front.

I had to break it to him that the other broker apparently was not really interested in selling the business; he was interested in only selling price evaluations.

The man never did list the business with me; he said selling for $250,000 was not worth it. And I agreed.

Whenever possible, try to list a business - or buy a business - from a broker whose name came by referral. You want to know the broker has been successful in selling, not just talking a good game when he/she is trying to get your business.

Sep 2, 2010
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I thought it sounded shady. I wonder how many brokers do this?

Sep 2, 2010
Buy-a- Company

In a word: heckno! The only reason they want a fee up front is that they know they'll never sell it to earn the commission.

Shark alert! Turn and run!

Sep 2, 2010
Harry & Sally Vaishnav
Angel Business Advisors
Oakland County, MI

I would not pay retainer fee to any business broker no matter how good he is. I just wrote couple of posts on working with seller business broker on my blog. You might wan to check it out here -

Sep 2, 2010
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The BAF Group LLC

Some Brokers do it. We don't. I would not, if I were a Seller. Where is the incentive for the Broker to actually WORK? Moreover, many Brokers list hundreds of businesses at any one time. They don't really promote and sell any one, individual business; they are simply throwing stuff against the wall to see what sticks. You get enough listings with a retainer, you have even less reason to actively sell them.

Sep 2, 2010

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