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April 08, 2008


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I agree that just a flat higher commission isn't necessarily the best route. I like your idea of an extra percentage if it is sold at or above a certain price by a certain day. I will have to keep this in mind because we might be trying to sell our house at this time next year.

I agree with Kristen!

We have been trying to sell our house outside Columbus, Ohio for a year and we have finally decided to get serious and admit that we are going to lose money on this house (a lot of money). Many agents are making their money by taking on more buyers rather than sellers because the buyers have all the power right now - so doing something to attract a buyer's agent is a great idea I think.

We have decided to offer the buyer's agent a bonus commission that is not tied to any date (as you don't really control the buyer's agent and you want to keep people coming in to see the house). We have also decided to offer our agent a bonus that is tied to selling the house in the first 90 days. We assume that he will use all his possible contacts to sell the house within that time period.

We are also dropping the price to 10% below what we paid for the house in 2000 despite the fact that we have have put a lot of money into improvements over the years. We are losing lots of money every month by keeping this house and it is time to do what we need to and be done with it. We will most likely need a small loan to payoff the house we no longer own, but at least we can move on.

So I am hoping the bonus strategy will work for us! I want to go back to having only 1 mortgage so I can get on with my life plans. On the bonus side, I love my new job which is the reason we moved in the first place.

If it works, in this market? Certainly worth it.

We tried to sell out home in 2006 when it was quite slow. Our realtor offered an extra 1% of his cut to buying agents (which was quite common at the time). Also, when we came into a minor disagreement on an offer we had on another home, the realtors gave up some of their commission to fund the difference. We had only shopped in HOT markets before, so I appreciated that they did what they needed to, to get the job done!

If you're upping from the traditional 5-6%, you definitely want to incentivize with a progressive scale. For example, if list price is $300,000, selling prices up to $280,000 get 6%, from $280,000-$300,000 get an additional 2% on that increment, and anything over $300,000 gets an additional 4%.

Remember that the agent's personal take with a 5-6% commission usually winds up being 1/4th of that amount, i.e. 1.25-1.5%. Too often they're quick to push a low offer for a quick sale--a difference of $20,000 in selling price to you may be fairly substantial, but it's only $250-$300 out of their pocket.

If you up the ante, then that extra $20,000 of your money suddenly takes on much more value to the agent, and they (theoretically) won't be so quick as to push a low offer at you. All of this assumes you're realistically priced for market.

Great topic, esp in this real estate climate. I like the idea of doing SOMETHING different to sell your house in this market, and a bigger commission might be a nice motivator for real estate agents. Or would it? In the book Freakonomics, the authors make the point that agents would rather sell MORE houses at lower prices (and lower commissions). The volume of sales is what truly drives their incomes. This makes sense. Would an agent rather sell three $200,000 houses at 6% or two at 8% ($36K vs. $32K)? Hmmm.

So what to do? Well I just finished a year long process of selling my father in law's house. And I have some learnings. We started off trying to sell it without an agent. That turned out to be penny-wise and pound foolish because, yes, we would have saved on real estate commission, but ultimately we were unsuccessful in selling it, and we wasted a couple months. Next we hired a family friend to be our agent. And this was just dumb. We wasted 8 months with him. Turns out he's a great guy, but not much of a real estate salesman. We couldn't sell the house, and we may have ruined the friendship. Plus he had us lower the price a couple times--he kept saying, "We'll just bring it down, _,000 and that's really where it needs to be to sell." Stupidly, we listened to him, even though my spider sense was telling me that we were priced correctly and that wasn't the problem.

So finally, I decided we needed a fresh start, and that meant a new agent. This time I wasn't messing around, so I did a little research and sought out the best agent in town--and by best I mean the one who sells more real estate than anyone else. Nothing speaks like results, I figured. So I found a list of the top selling agents in town, interviewed three of them, and chose one. We made the switch, had an offer within three weeks and were closed three weeks later.

So what did this agent do differently? She doesn't charge any more. But she does understand that getting this done quickly is in EVERYONE's best interest, oh and she actually markets and doesn't just hope--what a concept.

So my $0.02 is to skip directly to this step. In my market, the Business Journal has a list of top selling angents, so finding them wasn't hard. Unlike in many parts of the market, it won't cost you anymore, and the results will likely be much better.

Your readers might be interested in reading all the pieces by the Freakonomics guys. I first read about this in the book, Freakonomics, but they go on and on in their blog about the value (or lack thereof) a real estate agent brings to a transaction...worth the read. Here's just one of their posts:

Well by my calculation, on that asking price, the sale ended up costing him an additional $6480, so if you think that he could have gotten the same kind of attraction by offering the house at $317,500, then it had no advantage. If you think he could have gotten the same attraction by offering the house at more, then it was a bad investment, but if he would have had to slash prices even more to get the interest, it was a good investment.

I am leaning toward it being a novel, and possibly good investment. I would have definitely made it a tiered system though based upon either sold price or more likely, speed to sale.

Interesting idea. Might work in the sellers favor to provide a bonus to the realtor if and only if they sell the property faster. I wouldn't just offer them a blanket 8% commission unless theres conditions attached.

Personally I'm not much of a fan of the 6% commission system for real estate or the whole structure of the realtor system. I don't have anything against the individual realtors of course and I understand there is value in what they do.


As a RE investor and defense contractor that moves around frequently, I've sold many houses, and learned this lesson the hard way. IT WORKS.

The biggest bang for the buck is on the Buyers Agent side. Ask your listing agent what the going rate is in that area for buyers agents, then up your buyers agent commission by one half to a full point above the going rate. Above that is probably excessive, and brings diminishing returns. The typical buyers agent is usually on the lighter side experience-wise, and the extra commission could mean a lot to them. When they pull a list of homes for the buyers to see, your house will be near the top of the list if the commission is extra in most cases.

On the Listing Agent side, it's important to be at the going rate, but not really above it. The agent you select is probably going to use his/her existing marketing program. Do some research, find the listing(selling) agent who is the Superstar in your market. They make a lot of money, and usually are not going to work any harder for an extra half or one point commission. In a slow market you don't want to undercut them, but paying the extra isn't likely to change much here.

You can try the conditions as others have mentioned with dates and prices, but I've found Superstar agents are EXTREMELY BUSY, and do not want to be bothered or spend the time on it. Upping the Buyers Agent commission is simple, takes only a minute and they usually don't have a problem with it.

One similar note, I've had good luck with (I have no affiliation with them, just a customer). It let's you list your house and pay NO LISTING COMMISSION. It puts your house in MLS the same as an agent, the buyers agents will call you for showing instructions. You can set the buyers agent commission to what you want, I recommend putting it a little above the going rate for your area. See the site, it has all the details.

Tim Wells

Kristen raises a good point, this is an ever fluctuating environment, and i think a compromise wont really work as people will look at it as a negative for both parties, i suppose a higher rate would mean motivation on the estate agents part at least.


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