Where do mortgage and sale-back brokers get their money? Who should pay the commission?

The answer is that the compensation should come from the party that agrees to hire or is legally obligated to pay according to the agreement, which could be the property owner or the investor, but it must be clearly disclosed before the transaction. There is no general rule that the commission for mortgages or sale-backs must always be 3% or 5%, and receiving compensation from both parties may lead to conflicts of interest if not disclosed or contrary to the duties accepted.

For brokers, long-term income does not depend on charging the highest commission but rather on their ability to facilitate safe, transparent, and trustworthy transactions between property owners and investors.

What is the role of mortgage and sale-back brokers?

Many people understand that brokers only need to introduce property owners who need money to investors.

If we look only at this step, the brokerage work may seem simple.

However, in reality, mortgage and sale-back transactions involve more details than just introducing two parties to each other.

Property owners need funding within a specified time, want to maintain their assets, and need to know the net amount they will receive.

Investors require verifiable collateral, appropriate risk, and the likelihood of receiving payment as per the contract.

Thus, brokers have the duty to bridge the information gap between the two parties.

Examples of value-adding tasks include gathering documents, verifying preliminary information, coordinating property appraisals, explaining registration procedures, and following up on conditions before signing contracts.

However, brokers should not certify legal accuracy or appraisal values on behalf of experts without qualifications or supporting information.

Good work means knowing what responsibilities one has and what should be verified by experts.

Are the commissions for mortgages and sale-backs the same?

Both transactions may involve paying compensation to brokers, but the nature of the risks is different.

A mortgage involves using real estate as collateral while ownership remains with the property owner.

In contrast, a sale-back involves transferring ownership to the buyer with the right to redeem within a legally specified period.

Brokers handling sale-back transactions must be particularly careful in explaining the implications of ownership transfer and redemption terms.

Sale-backs should not be presented as a form of mortgage.

For sale-backs of agricultural or residential land under the 2019 Land Sale-Back Protection Act, specific requirements regarding contracts, duration, and redemption rights must be checked.

Charging fees or deducting expenses cannot be used as a way to circumvent legal restrictions.

How does the law regulate commissions?

The Civil and Commercial Code, Section 845, states that the party agreeing to pay the broker's fee is liable for payment when the contract is fulfilled due to the broker's introduction or management.

If the contract has conditions that must be fulfilled first, it must be considered whether those conditions have been met.

Expenses incurred by the broker can be reimbursed under this principle when there is an agreement for compensation.

Section 846 addresses cases where circumstances indicate that the work is expected to be compensated and cases where the amount of compensation is not specified.

Thus, it should not be understood that failing to write the commission rate means the broker has no right to claim in all cases.

At the same time, claiming that a rate of 3% or 5% is legally mandated is incorrect, as it must consider the agreement and the facts of the transaction.

Section 847 is also important in cases where brokers work for external parties or receive promises of compensation in a manner that violates their accepted duties.

Receiving compensation from both parties should not be viewed as risk-free just because all parties are doing business together.

These legal principles can be verified from the Civil and Commercial Code, Sections 845–849. 法律人 LawPlayer

Who should pay the commission?

The most appropriate answer is the party that hires or bears the compensation according to a clear and lawful agreement.

If the property owner hires a broker to find funding sources, it may be agreed that the property owner will pay.

If the investor hires a broker to find deals that meet criteria, it may be agreed that the investor will pay.

If there is an agreement involving both parties, the roles, benefits, and verification of compliance with the broker's duties must be disclosed.

What should not happen is for the property owner to understand that the investor is the one paying, while the broker deducts compensation from the amount the property owner will receive without prior agreement.

Conversely, the investor should not later find out about additional costs that were not disclosed before making a decision.

Transparency must occur before the registration day, not after all parties arrive at the land office.

What is the difference between a 3% and a 5% commission?

Assuming there is a mortgage deal for land worth 3 million baht.

If the agreed broker's fee is 3%, it would amount to 90,000 baht.

If agreed at 5%, it would amount to 150,000 baht.

The difference is 60,000 baht.

For property owners needing money for business operations, this difference may be significant.

For brokers, the compensation must reflect the work, responsibilities, and actual costs incurred.

For investors, it must also be assessed whether all expenses result in the debtor receiving significantly less net money, affecting their cash flow and debt repayment plans.

These figures are merely examples of calculations, not standard rates or guarantees of legal collectability in all cases.

Case Study: Mortgage of 3 Million Baht Land, Who Gets What?

Assuming a business owner needs to mortgage land to raise 3 million baht.

The land has a hypothetical market value of 7 million baht and has no existing mortgage obligations.

The broker helps prepare information and coordinates with the fund provider until terms can be agreed upon.

Assuming the contracting parties agree on a broker's fee of 2% of the amount, and the property owner is responsible.

Additionally, assuming there are registration fees and document costs totaling 30,000 baht.

To illustrate cash flow, assume an interest rate of 12% per year, paid monthly, with the principal repaid after one year.

All figures are hypothetical for study purposes only. It is necessary to verify the actual fee rates, the characteristics of the lender, and the legality of all types of compensation.

Net cash flow calculation table.

The calculation can be verified as follows:

Brokerage fee = 3,000,000 × 2% = 60,000 baht

Net cash = 3,000,000 − 60,000 − 30,000 = 2,910,000 baht

Annual interest = 3,000,000 × 12% = 360,000 baht

Monthly interest = 360,000 ÷ 12 = 30,000 baht

LTV = 3,000,000 ÷ 7,000,000 × 100 = 42.86%

These figures do not include taxes that may relate to the broker's income or other expenses based on the facts.

If the lender is an individual, it is necessary to consider interest rate limitations and laws prohibiting excessive interest, as well as to verify whether any compensation or expenses may constitute hidden interest.

If the investor pays the brokerage fee, how does the net cash change?

Let's use the same example but change the party responsible for the 60,000 baht compensation to the investor.

If other conditions remain the same, the property owner will receive an increased net cash of 2,970,000 baht.

However, the investor's cost of capital will increase.

Thus, changing the payer does not eliminate economic costs; it merely shifts the burden to another party.

If the investor imposes additional financial conditions based on this cost, the legality of all conditions must be verified.

The appropriate solution is to show the actual costs and agree in advance, rather than shifting expenses to another name to make it seem like there are no costs.

Can a broker receive commissions from both parties?

This matter requires special caution.

Receiving compensation from both parties does not automatically mean it is legal or compliant with duties in every situation.

It is necessary to consider what role the broker plays for each party, whether interests are disclosed, and whether receiving additional compensation constitutes a breach of duty.

For example, if the property owner hires a broker to find the best financing terms, but the broker chooses to recommend an investor who offers higher compensation to themselves without disclosing important information to the property owner, this could lead to conflicts of interest.

In such cases, the broker should disclose relationships and related compensation before presenting options to the contracting parties.

Disclosure is a key condition for transparency but does not guarantee that all types of agreements will be legal.

Are envelope fees the same as brokerage fees?

These two terms should not be used interchangeably without explanation.

Brokerage fees are compensation for facilitating or arranging contracts as part of brokerage work.

The term 'envelope fee' refers to certain types of business expenses but is not a category of fees under the law that can be automatically charged.

It must be verified who the money is paid to, for what service, and whether it relates to the loan.

If it is money collected by the lender or related parties to provide the borrower with funding, it may need to be considered whether it constitutes interest or benefits from the loan.

For a sale and leaseback, the applicable laws regarding the type of property and transaction must be verified.

The property owner should receive a net cash flow table before signing the contract and should not accept deductions that lack clear explanations.

What should a good broker do to justify their compensation?

A value-creating broker must do more than just pass along a phone number.

They should verify the property owner's information and preliminary documents, assess the deal's readiness, coordinate collateral inspections, and help all parties understand the terms clearly.

If the property has existing mortgage obligations, this information must be clearly communicated.

If the property owner has no regular income, they should assist in gathering verifiable income information, not just guarantee that money will definitely be received.

ควรตรวจสอบข้อมูลเจ้าของทรัพย์และเอกสารเบื้องต้น ประเมินความพร้อมของดีล ประสานการตรวจสอบหลักประกัน และช่วยให้ทุกฝ่ายเข้าใจเงื่อนไขตรงกัน

หากทรัพย์มีภาระจำนองเดิม ต้องแจ้งข้อมูลดังกล่าวอย่างชัดเจน

หากเจ้าของทรัพย์ไม่มีรายได้ประจำ ต้องช่วยรวบรวมข้อมูลรายได้ที่พิสูจน์ได้ ไม่ใช่รับรองว่าจะได้รับเงินแน่นอน

If it is a sale and leaseback, it is essential to understand ownership and redemption.

Those interested in learning about the work of real estate brokers can view the broker page of PK HOME INVEST, which is a page set up on the website for brokers.

However, this page is not evidence that the company provides services for finding investors or recruiting mortgage–sale brokers under any specific conditions.

Why must property owners know their net cash before signing a contract?

Suppose the property owner needs 3 million baht to purchase goods for the store,

but after deducting expenses, they only receive 2.7 million baht.

If the money is insufficient for the intended purpose, incurring debt may not solve the business problem.

Therefore, property owners should ask from the beginning how much money they will actually receive, what they need to pay, and how much they must repay when due.

If you want to understand the differences in transactions, you can study the article How do mortgages and sale and leasebacks differ? which appears in the list of recent articles on the website.

Checking net cash and debt obligations is more important than just comparing the approved loan amounts.

What benefits do investors gain from quality brokers?

Investors may have funds ready to invest, but that does not mean suitable deals will always come their way.

Knowledgeable brokers can help filter properties and reduce the time needed to verify preliminary information.

For example, brokers gather information about property location, land size, title documents, obligations, and the purpose of using the funds comprehensively.

Investors will be able to assess more quickly whether to pursue the deal further.

However, having a broker does not absolve investors from the responsibility of verifying collateral and counterparties themselves.

Investors still need to assess property value, repayment ability, legal risks, and the appropriateness of the loan amount.

Before agreeing on the broker's fee, what agreements should be made?

The agreement should specify the names of the parties, the broker's role, the type of transaction, and the conditions that entitle them to compensation.

The amount or method of calculation should be clearly stated.

If it is a percentage rate, it must specify what the percentage is calculated from.

Responsibilities for compensation and payment dates must be defined.

If there are multiple brokers, compensation sharing should be agreed upon before starting the process.

If there are travel or document costs, it should be specified who is responsible and when they can be reimbursed.

No one should deduct money from the transaction amount without an agreement or supporting evidence.

For mortgages or sale and leasebacks involving large sums of money, legal experts should review the documents before signing.

If the deal fails, does the broker still get paid?

According to Section 845, the right to claim broker fees is related to the success of the contract due to the broker's referral or management.

If there are mandatory conditions, the success of those conditions must also be considered.

However, the right to claim expenses incurred may differ from the broker's fee if there is an agreement for reimbursement.

For example, if the broker travels to inspect the property and incurs expenses for preparing documents,

if no agreement on expenses was made, subsequent claims may lead to disputes.

Therefore, it is advisable to separate the broker's fee upon deal completion from operational expenses clearly.

In summary: A fair broker fee must ensure all three parties understand each other.

Property owners must know how much actual funding they will receive.

Brokers must know when they are entitled to compensation and what responsibilities they have.

Investors must know the total costs and ensure that paying the compensation does not create conflicts of interest or legal risks.

There is no single mortgage–sale broker fee rate suitable for all deals.

Compensation agreements should consider the actual work done, complexity, responsibilities, and relevant laws.

A good broker is not the one who deducts the most from the deal, but the one who makes property owners and investors feel that the compensation paid is valuable and justifiable.

You can study more information about real estate at PK HOME INVEST and follow articles through Facebook PK HOME INVEST

If you want to inquire about website information, you can use the contact channels of PK HOME INVEST, but you should check the actual services and conditions before submitting personal information or title documents.

Frequently Asked Questions

1. What is the legal percentage for mortgage–sale broker fees?

There is no general rule that states every deal must charge 3% or 5%; it depends on the agreement and relevant laws, including Sections 845–847.

2. Can brokers receive commissions from both property owners and investors?

It depends on the roles assumed, disclosure of benefits, and limitations under Section 847; receiving compensation from both parties is not automatically legal.

3. If a mortgage deal fails, does the broker have the right to claim a commission?

Generally, it must consider the conditions under Section 845, while operational expenses may be recoverable if there is a supporting agreement.

4. How do bag fees differ from broker fees?

Broker fees are compensation for brokerage work, while bag fees must be examined for purpose and recipient on a case-by-case basis, as they may relate to interest restrictions or sale and leaseback laws.