Raising Commission Paid To Buyers Agent May Sell Your Home
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If I were to sell my home tomorrow I think I know how to do so. Instead of going on the cheap on the commission with a discount broker trying to save some of the difference in housing prices from the peak, I would go the other direction and prey on human nature. I would offer a higher commission to the buyers agent.
Now there are some nay sayers that will say, “Tom, you are such a homer for the real estate agents, of course you will say raise the commissions.” And you would be completely off base.
When the real estate market was rocking I was calling for lower commissions. Selling a home was like shooting fish in a barrel and thus commissions should be lower. But the real estate world is not rocking, it is hurting. Hurting bad as they say in the south. There are real estate agents waiting tables like actors it is hurting so bad.
So sellers should prey on human nature. If a real estate agent is having a bad year but has a buyer, don’t you think their is the slightest chance they may look in the MLS and sort homes for sale by buyers commission? And if your home has an extra incentive in it for them that they may just happen to show your house even if it is not the perfect fit in a down market? I have never seen a home sell without a buyer, have you?
I am not glorifying the real estate agents with this post, but I am recognizing they are human. And if it takes a little motivation to get your home shown in a down market, then good for you. Here is an example of this from an article in the St. Petersburg Times.
With home sales less than half of what they were during the 2005 peak, you would think commissions would shrink. Underemployed agents are chasing a dwindling number of sales. But just because you can bargain hard on commissions doesn’t mean you always should. Think of it this way: A commission is prize money. All things being equal, a buyer’s agent will show a home paying a 6.5 percent commission to one paying 4 percent.
That’s why I sweetened the pot by offering an extra 0.5 percent for the buyer’s agent. Compared with other homes for sale in my neighborhood, my commission was the highest. Less than two weeks after my agent and I signed the contract for 6.5 percent, we had a deal on my house. An acquaintance living nearby who offered 4 percent hasn’t sold his house in a year.via SF Gate
Now for a little math to help you decide this may be the right way to go. Let’s say you are selling a $250,000 dollar home. The commission at 6 percent is $15,000. If you added a 1% bonus to the buyers agent the commission would be $17,500, a difference of $2,500. But it would also put you at the top of the chart on buyers commission paid in your community and odds are you house would be shown a great deal more than others in your price range.
If you sold the home a month quicker you would be very close to breaking even at a 6.35 percent mortgage and typical utility and tax costs added in. And you would have a home sold in a down market which in itself is no mean feat.
So my advice to motivated sellers. Sweeten the buyers agent commission. Prey on the greed of the real estate agents. You are not being taken by the real estate cartel by offering a better commission. Instead you will be putting yourself ahead of the other homesellers and may have a better chance in selling your home in a down market.
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Comment by Christina Ethridge on 28 October 2007:
Thanks for sharing this Tom. It most definitely needs to be said. It does take more to sell a home in today’s market. The DOJ doesn’t know what they are talking about when they say: It should cost less to sell in today’s market because there are more homes on the market. Very obviously, they have chimpanzees writing their comments. More homes for sale does not = lower commissions.
As a listing agent I’ve seen a lot of different ‘gimmicks’. The fact is, the home absolutely must be priced right and the sellers must offer enticing compensation to the buyer’s agent. Bonuses just aren’t great enticements - but consistently higher commissions are. In other words, every single one of the listings I carry offer a specific minimum commission. I will not take the listing if it doesn’t. Secondly, over half of my listings offer .5 - 1.5% higher commission to the buyer’s agent. I consistently have agents calling us with their buyer’s needs, just to see if we have what they are seeking (yes, before going through the MLS!)
The facts speak for themselves. The homes sell faster (significantly) than their competition. I’m also seeing buyer’s agents assisting their buyers with some (or all) of the additional commission offered to them. It’s an added enticement - feed the buyer’s agent - allow the buyer’s agent the ability to assist their buyer without going broke themselves.
Comment by Swim Upstream to Wealth on 28 October 2007:
I think you give realtors too much credit. It isn’t a lack of incentive that prevents one from selling his/her house. It is the lack of buyers and affordability of homes. Banks have finally started to demand buyers have solid credit and that the home is appraised reasonably and honestly.
The market hasn’t slowed due to the discount brokers. I think folks need to realize the agent is only as good as the macro (or local) market. Sure there are some agents who are better marketers than others, but it comes down to the MLS.
Comment by Robert Coté on 28 October 2007:
More homes for sale does not = lower commissions.
But then again fewer homes for sale did not = lower commissions either.
At some point Realtors® need to come up with a model that gets the product and services to the customer for less cost. If not it will be done for them.
Comment by Tom on 28 October 2007:
Actually I am giving very little credit to Realtors or real estate agents except recognizing potential greed. A real estate agent should place their buyers in the best possible house for them, but I know that a real estate agent having trouble putting food on their table will most likely go towards the higher commissions, not the best house.
This post was all about appealing to a Realtors basest instincts, not their best.
Trackback by Rocket Dollar on 29 October 2007:
Trouble Selling Your Home? Bribe Selling Agents…
A disturbing post over at Real Estate Bloggers, offering advice on what to do if your home isn’t selling as quickly as you’d like….
Comment by Metrowest MA Real Estate on 29 October 2007:
The commission should not have any bearing on making a home sell quicker. The are two major reasons for this. Realtors are no longer the gate keepers of information - the internet has changed that. Most buyers suggest to the Realtor what homes they want to look at, not the opposite. Most buyers today are signed up for IDX MLS access and know in advance what they want to view.
Secondly, you are suggesting that most agents are looking out for their own pocket book and not the best interests of their client. I am sure there are some agents that opperate that way but I would hope it is not the majority.
Comment by Tom on 29 October 2007:
Metrowest
I also hope and assume that most agents are ethical. But the temptation to steer a buyer into a higher commission listing has to be tempting when business is slow than when the market is roaring.
Comment by Robert Coté on 29 October 2007:
nothing disclosure won’t cure. Buyer’s Agent: “Look, I think this is a good house at a good price. The seller appears to be motivated and has told me that I can earn and extra 1% to get the deal done. I’ll give you half and use the other 1/2% to get you the lowest price i can now that we know their situation.”
Pardon as I don’t hold my breath.
Comment by Rich on 29 October 2007:
…and at the top there were waiters doing the jobs of real estate agents. Full circle!!
Pingback by The Feed Bag - Vinyl is Stealing! on 29 October 2007:
[...] The Real Estate Bloggers with Raising Commission Paid To Buyers Agent May Sell Your Home [...]
Comment by dean on 29 October 2007:
Tom,
It just brings me back to when I had every strand of hair and getting out of bed was a breeze. . . “greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. . .”
If it was good enough for Gordon Gecko it’s good enough for mom and pop Realtor.
My parents are attempting to sell their suburban Chicago home; I will pass along this strategy in hopes that they take heed.
Thanks for the written support
dean
Comment by Sundream Estate on 30 October 2007:
This is a hamster weal..
The interest goes up.
The market goes down.
The constructers/building companies sell less, but they are sitting with there high expenses. Which they can’t not do anything about.
They offer higher commission to the agent.
The broker /agents sell less, but they also are sitting with to high expenses, which they also can’t do anything about.
Of course they run for the highest commission.
I’m sorry, forget moral and ethic codes when its comes to money.
Comment by deansguide on 30 October 2007:
Sundream,
“I’m sorry forget moral and thic codes when its comes to money.”
That sums up a majority of the business people in this country. If you evaluate the best business people, best Realtors, and best bloggers one thing seems to be a common thread.
All of these successful people believe in the law of abundance. They believe that there is more than enough business to go around for all.
They also believe that providing answers through information without compensation attached is a fantastic method of bring back positive responses.
The Realtors that are bitching now are most of the same people who thought that selling was just throwing a contract on the front lawn for the home starved masses during the rush.
The real sales begin when there are very few customers. The real character is revealed when things are not going your way.
dean
Comment by Tom on 30 October 2007:
Dean
I agree with you. And in this instance if I was selling my home it would be the combination of having your cake and eating it too.
You can behave ethically and at the same time provide a lure to attract others who may be tempted by a higher commission.
While it is not ideal, it is also practical and can attract new potential buyers in a slow market.
Comment by Frank Borges LL0SA- Broker FranklyRealty.com on 30 October 2007:
Frankly, that might work for some, but we work for a predetermined percentage, and we don’t accept bribes.
We give back anything above what we agreed to work for. (but that goes both ways, if the offered rate is short, the buyer has to come up with the difference).
Frank
Comment by deansguide on 1 November 2007:
Frank,
Quality deserves quality compensation. No argument on that concept. As a former resident of Reston, Tysons Corner, and Leesburg, Va I can relate to the area I believe to be your area. Although I have been gone for 10 yrs, I remember the climate in No Va real estate to be one dominated by home builders who were willing to give nearly anything in order to get the deal done.
As my former boss used to scream : “It aint braggin if you can do it.” Simply put if you can represent a buyer or seller more effectively than your competition then you deserve your commission in full.
dean
Comment by deansguide on 1 November 2007:
Thanks Tom!
I believe that it is not a crime to leave money on the table if it is done in such a way that will generate revenue, create good will, and maintain integrity.
If any of these elements are lost then you are just “taking one for the team” and over the course of time you must be able to live with the deal.
dean
Comment by Karen on 7 May 2008:
I’m a seller considering increasing the commission simply because my home is on acreage and off the beaten path. I am merely looking for a way to bring in more traffic. I’m willing to pay the buyer’s agent for taking the time to research the property and expose it to buyers, who will end up with a great property at less money in the long run.
Comment by 2% Commission Realtor Rebate - Cash Back Buyer's Agent - Atlanta, Georgia GA on 28 May 2008:
That approach might work for some agents; however, a good buyer’s agent will not focus on the amount of commission being offered.
For home buyers, rebates are beneficial, inasmuch as they lower the cost of a real estate transaction.
Comment by Buyer Broker - Agent | GA on 30 July 2008:
As a buyer’s agent, this kind of incentive would not induce me to “sell” the home to the buyer. I would critique the home just like any other.
Comment by Seanster on 3 October 2008:
Well, this could work for some agents. With a higher commission, your property will be offered and shown more to buyers than other properties.