Replies to This Discussion

Permalink Reply by doughboy on July 15, 2008 at 11:40

I find 4% fairly reasonable. I recently listed a piece of real estate with a realtor at $925,000. If and when He sells, he is going to get 6%. That is pretty much standard in that industry. His commission wlll be $55,000.00.

$256,000 isn't chicken feed but in your example of 4%, that $256,000 is going to be paid on a sale of$6,400,000.00. I'm not advocating paying 4% if you're comfortable with who you are dealing with. I just don't think 4% is excessive.--- doughboy

Permalink Reply by lifesaver on July 15, 2008 at 16:01

I agree doughboy 4% is a very small price to pay.I do not know why some people would think it is.

Permalink Reply by RL on July 15, 2008 at 16:27

The difference is you don't need to have someone look for a buyer for you...there are several companies bidding against one another to get this rich piece of pie.

Oh, by the way doughboy, you can get a better deal on the commission on your property also. Some realtors will charge 6% up to a certain point, say, $500,000 then give a better rate on the remaining $425,000. I may have just saved you several thousand dollars! Any realtors reading this?

Permalink Reply by sesport on July 15, 2008 at 16:55

Okay, say those 320 acres are made up of 1/4 acre lots, that's 1,280 lot/homeowner. If they pay a flat $50 fee, the rep gets paid a flat $64,000. Or, a flat $100 fee gets the rep $128,000. He calculates how many hours of work should go into this. At the end of that clock, the rep tells the clients that's the best offer they're going to get. Not to mention, this fee will probably have to be paid out of pocket immediately on signing.

Now, using the percentage method (but only for % of bonus), I think the rep will be more inclined keep negotiating, urging the signing bonus upward, thus increasing what he/she gets paid. The clients get better service, and the money won't come out of pocket immediately.

Also, that the rep is probably working for multiple clients. One client is paying a flat fee, the other a percentage of the bonus. Which client will the rep be motivated to work the hardest for?

Surely even in your job you expect to be well compensated for working hard, and will work even harder if you're well compensated.

Permalink Reply by RL on July 16, 2008 at 2:39

Keep in mind that a group of many owners will be part of the deal and $50 to $100 each is nothing. The best representative is one that comes from the group...and most groups have attorneys, oil people, and really good negotiators in house. Just my humble opinion.

Permalink Reply by sesport on July 16, 2008 at 4:45

Keep in mind that money might be up front right now from the work that you sweated over doing last week. You don't sweat putting in hours to earn the % of royalty.
Also, it's a matter of personal choice. Do you choose to drive a Hummer and put more gas into it than say a Toyota? Do you choose to have a large family and pay for more groceries. Personally, I don't want to be told there's a flat fee to put gas in my tank no matter how much I need or what kind of car I drive. I don't want to go to Wally world and be told they're now charging a flat fee of $100 per buggy when I get $50 worth of groceries.

Think it through, make a choice, be happy with it, and accept that others may choose a different way because it's better for their situation.

Best of luck!

Permalink Reply by MARILYN RHODES on July 16, 2008 at 6:57

I agree with you. If that person also has acreage in that section, and the more he negociates for, the more he will get himself. There is a lot of work involved, but if I was relying on all of my neighbor's participating (since you do have to have a lot of combined acreage), I would not expect a percentage of the leases, as some will not have enough acreage as the other, or are elderly and on a fixed income. It would be difficult for them to come up with a percentage of their offer, as they probably aren't going to get any monies for awhile. Just wanted to inject my thoughts on this. I am in the elderly, fixed income group, but would be willing to pay $50.00 fee for some one to handle my negociations for me. There is also attorney fees to be considered. We do not have an attorney in our area that I know of to take care of our leases.

GOOD LUCK TO EVERYONE!

Permalink Reply by sesport on July 16, 2008 at 19:49

Thanks, you just made me think of something. I was assuming the percentage of the bonus would be paid once the deal was done & the bonus paid. I realized I didn't know if that percentage is paid before work begins or after the money is paid.

Will have to check with lifesaver. Will get back to you.

Permalink Reply by RL on July 16, 2008 at 9:45

Not sure of the Hummer or Wal-Mart analogy, but each person should do whatever he/she feels is right.

Permalink Reply by gary brannon on July 17, 2008 at 7:50

4% is a LOT to pay for someone who last month was selling baseball equipment, waiting tables or is a real estate agent. Unless you've worked as an oil and gas attorney or in-house landman you wouldn't have a clue. There are painfully small numbers of each in Louisiana that are available.

Permalink Reply by sesport on July 17, 2008 at 8:59

You have to do the math and decide what's best for you. If my neighborhood gets$15K per acre, my little townhome is probably hardly .10 acres. I'm thinking I'd get $1,500, and 4% of that is $60. The guy around the corner from me may have .20 acres. I'm thinking he would get $3,000 and 4% of that is $120. Is it fair that he paid the same for services as me, and ended up with more money?
Also, don't you pay property taxes based on the assessed value of your land & improvements, which is determined by how big the lot is and the square footage of the home? I wouldn't want to pay a flat tax the same as the guy with the big lot & home down the street.
And actually, in a real estate transaction I would have both kinds of representation, and agent that is paid a commission and the lawyer at closing who charges fees. I'm still in the work world and I can't wear all the hats I need to to get my personal business done. Better to hire someone.
Keep thinking, you may convince me yet!

Permalink Reply by RAY on July 17, 2008 at 9:01

I would be willing to pay a % on the amounts above what the O & G are paying out

if the going rate is $10,000
and a middleman can get me $20,000

I would be willing to pay % of the extra $10,000
I wouldnt pay on the whole $20,000

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