03-11-2019 - Laserfiche WebLink

Home Browse Search

The Mounds View Vision A Thriving Desirable Community Item No: 6B Meeting Date: March 11, 2019 Type of Business: EDA Business Administrator Review: ____ City of Mounds View Staff Report To: EDA President and Commissioners From: Brian Beeman, Assistant City Administrator Item Title/Subject: Broker Fees – Keller Williams Introduction: It is common for Cities and Counties to pay broker fees when a real estate salesperson brings forward a credible prospect for the development or redevelopment of publicly owned property. The broker fee is commonly referred to as a finder’s fee. It is less common for EDA’s to enter into exclusive listing agreements. Although, some EDA’s have chosen to enter into exclusive agreements on distressed properties especially during the Great Recession to help sell industrial lots etc. normally, the fee wouldn’t be paid unless the EDA enters into a formal purchase and development agreement with a credible developer. There are two types of listing agreements, exclusive and non-exclusive. An exclusive listing agreement obligates the EDA to one brokerage firm who markets the site and collects a brokerage fee on the percent of sales of the total land price. This excludes other real estate firms from collecting a fee even if they are successful in bringing a prospect to the EDA. In that case, the exclusive firm would have to negotiate a fee amount amongst the other broker themselves from the EDA’s paid fee. A non-exclusive agreement means the EDA will pay any brokerage firm a fee or percentage of the project for successfully bringing forward a credible prospect who ends up signing a purchase and development agreement. The negative of this type of agreement is that many real estate firms won’t spend a lot of time on calling prospects if they are not exclusive to the EDA. The positive is that any real estate firm can bring forward a prospect and expect to get paid by the EDA. Another commonly used document is a one-time showing agreement. This is used when a broker brings a prospect to the EDA and is only good for that particular prospect. This protects the broker so they can get paid if the prospect signs with the EDA and it expires after an agreed deadline. By statute, the EDA must have an agreement with a broker in order to legally pay a broker fee. Sometimes the EDA will pay half of the broker’s fee and the developer will pay the other half and other times the developer will pay 100% of the broker’s fees. There are many ways to negotiate and structure the fees. Discussion: Gregory Rance of Keller Williams Commercial has contacted City staff and is asking that the EDA consider entering into an exclusive agreement to market to developers and find users for the Skyline Motel redevelopment site. Essentially, KW would help to market the site and if the EDA chooses to sign a purchase and development agreement with one of the developers that KW brought forward through their marketing efforts then the EDA would be obligated to pay a percentage of the sale of land to KW.