Top 6 Questions You Have About Finder’s Fees

When you hear the word matchmaker you likely think of couples. However, you can be a matchmaker for a variety of different businesses. If you help facilitate a professional transaction, you may even be paid for your services. The compensation is called a finder’s fee. You may have questions, but finder’s fees are part of a fairly straightforward relationship.

What Are Finder’s Fees?

Finder’s fees are commissions presented to a facilitator for bringing two parties together for a transaction. In short, the facilitator is paid to “find” a willing buyer or seller. It is presumed the buyer and seller would not have come together without the facilitator’s involvement. Because finder’s fees are not legally binding, they are often seen as a gift.

What Are the Terms?

Afinders fee agreementshould be used to spell out the terms of the transaction. The agreement is entered into by the finder and the payor. The finder should understand the pay structure and what they must do to receive their compensation. Signed agreements prevent the finder from being cut out of the deal. The contract should also protect the payor by clarifying how long they are obligated to entertain the finder’s services in exchange for compensation. If the payor is looking for a quick transaction, they may only offer compensation for a short amount of time.

Who Pays the Fees?

The payor should be stated in the finder’s fee agreement. Fees may be paid by either the buyer or seller. That party can be an individual or a company. The incentive is most often given at the time of the transaction’s closing. However, in rare cases, the fee may be paid as soon as an agreement is initiated.

How Much Is Paid?

The amount of a finder’s fee varies by the deal. Most often, the fee is a floating percentage. The Lehman formula may be used for large transactions. As the price bracket of the deal’s value increases, the percent gifted decreases. Fees can also be one set percentage, a flat fee, or a monthly incentive. Overall, you can expect a higher return for larger deals.

Who Benefits?

All parties involved benefit from finder’s fees. The facilitator obviously benefits through compensation. The buyer and seller benefit by closing their transaction. Without the facilitator, the transaction may not have happened as quickly or at all. Remember, the facilitator does not get rewarded for simply bringing an interested party. The party must actually partake in the deal.

What Are Examples?

A finder’s fee can be used in any transaction. Real estate transactions are a very common example. Sellers, landlords, or even real estate agents may offer compensation for bringing buyers or renters to a property. Another example is business mergers and acquisitions. A facilitator may bring the business owners together.

If you are looking to play matchmaker for profit or own a company that needs to close a deal, consider entering into a finder’s fee agreement. The terms of the agreement can be flexible and benefit all parties.

If you have any questions, please ask below!