Gary Smith, Home Seller in Houston, TX

offering 4% to buyers agent, is that a good idea

Asked by Gary Smith, Houston, TX Wed Jan 2, 2008

Ok, here we go, my wife and i are trying to sell our town home and had 3 people look at in December, so far we have one contract. We offered 4% to the buyers agent, do you see a problem with that.

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Congratulations on getting an offer! It sounds as if your property is priced appropriately. Generally I advise my sellers to use the commission to their strategic and competitive advantage, perhaps a 1/2 percentage point above what the competition is offering would entice buyer agents to show your property before those offering less. On the other hand if there isn't much inventory on the market and your property shows the best and is priced competitively, then you may not need to add extra commission to your competitive tool box to make your property stand out.
I'd advise that you separate the agreement with the agent from the offer of the buyers.
This is just to add what everyone else has answered here -- we Realtors are enjoined from discussing/publishing commission rates and fees since it is considered price fixing -- ultimately it is the market that determines the commission; and since we're talking real estate, everything is negotiable. Good luck!
1 vote Thank Flag Link Wed Jan 2, 2008
All commission paid to a buyer's agent must be disclosed to a buyer. Some agents, like myself, do not feel comfortable accepting more than the 3% standard. In the end, it is not the buyer's agent decision to purchase the home - it is the buyer's choice. Enticing an agent with extra commission may not lead to the most sound advice to the buyer.

Consider offering 1% toward buyer closing costs or a discount on the home.

HomeBuyingWIthSamantha.com
2 votes Thank Flag Link Sun Jun 21, 2009
you are offering 4% to the buyer's agent, however the buyer is responsible for ultimately deciding to buy your home, the buyer chooses, so it doesn't matter if you are offering a higher incentive to an agent. I don't think it's necessary. Use the money wisely to "Wow the buyer" make a good first impression when there's a showing.
1 vote Thank Flag Link Mon Mar 23, 2009
DOes not matter what you offer a buyers agent. Realtors are legally supposed to introduce every home on the market.
Remeber you want the buyer not the agent. Give the incentive to the buyers by either pricing it right, pricing in a search criteria that his 2 targets (ex. Never price a home for say 599,999 price it at 600k - it cdaptures 2 seperate targets), offering to pay closing cost for the buyer or a combo thereof.
1 vote Thank Flag Link Wed Apr 23, 2008
You have a contract after 3 showings? That's excellent. No problem here on the 4% to Buyers Agents. In fact, I think it's brilliant and obviously it worked to your advantage.

I am a listing agent myself and when I have a person or family who needs to move quickly or the home is located in a neighborhood with lots of selling competition, I recommend an above average buyer agent commission (BAC).

Congrats on the contract! Don't you love it when that happens?
1 vote Thank Flag Link Fri Jan 4, 2008
I would have to say you are very generous at 4% .. most listings fall between 6/7% and the buyers agent and listing agent split that.

Depending on the area and how long the home has been on the market, I would think 2.5/3% would be just about all of it ... remember, most realtors are looking for work right now.

Also, I wouldn't be timid with offering a cash bonus to a qualified contract at closing ... you know what they say: "cash is King"



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1 vote Thank Flag Link Thu Jan 3, 2008
Price is the primary factor in determining how fast a home sales, Commission is not a determining factor for myself when working with buyer clients. I look for is does the home fit the clients needs, other factors are Location, Condition, Curb appeal. So offering a better commission to the buying agent may bring more attention, however offering a better commission to the selling agent may allow the agent to spend more money and time marketing your home.
1 vote Thank Flag Link Thu Jan 3, 2008
Were you selling on your own? Its not a problem...but shouldnt be necessary....3 should be plenty...but obviously if you offered 4 and his clients buy...then you have to honor it


Tony Camero
281-935-7839
Keller Williams Realty
Web Reference: http://www.camerohomes.com
0 votes Thank Flag Link Thu Jun 18, 2009
Ok - bottom line. There are a lot of homes on the market. Buyer's agents can't possibly show everything to their clients and some homes will get passed by. Offering a higher commission would certainly get the attention of most buyer's agents. That will create more traffic. More traffic = more offers. BUT the buyers have to like the home in question.
0 votes Thank Flag Link Mon Mar 23, 2009
there is definitely not a problem ..its a good thing...but I show propertyies to buyers based on their wants and needs......its basically a nice bonus if there is a higher commision or btsa....but it wouldnt sway me ....I might avoid a property that only offres 2.5 % but if that is what my buyers want then that is what I do
0 votes Thank Flag Link Mon Mar 23, 2009
I understand when someone says spend the money on consessions, but I will tell you that a BTSA works. Now this is a little different than an extra point or so to the Buyers Agent. Some Buyers Agents have a 50% or 60 % split. Don't even thimk that these agents have less going for them than the 90% t0 to100 % KW agents. Quite often these agents are with a Old Time Company or Franchise owner that still believes the Broker should be involved with nor only the listings and contracts in their office but also the marketing cost.
If you pay 1% more to the buyers agent - this falls under the Company split. If you Pay a Bonus to Selling Agent this should 100% go to the selling agent.
Regardless of the fact that the agent is supposed to be imparcial and show properties in the best interest of their client - This BTSA - Usually $1,000 will get their attention and get your property shown faster.

If you have a property that needs to bring the higher price than the norm in your area you need to put a BTSA on it. This way it will be shown, people will see it and then see the value.

And for y'all that say where did you dig this old one up. I just found it and any good question has answers to more than one person.

Marg
0 votes Thank Flag Link Fri May 16, 2008
I feel if you have extra money you should use it to lower the listing price to compete with other homes in the area. Or as others said, purchase a home warranty or offer the money at closing to help with the buyers closing cost.
Web Reference: http://www.bigdrelo.com
0 votes Thank Flag Link Fri May 16, 2008
You should offer closing cost assistance to the buyer, a home warrenty, or hold an inspection prior to someone purchasing it to make your home stand out from the rest.
0 votes Thank Flag Link Thu Apr 24, 2008
"Professional Realtors will show their clients and customers ALL of the available real estate inventory that matches the needs of their clients." I tried to do this, but after about 50 houses the client yelled at me. "STOP SHOWING ME SO MANY HOUSES! " " I can only buy one house, and I want to move out of the apartment!"
0 votes Thank Flag Link Wed Apr 23, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
This is a "buyer's market" and incentives offered from the homeowner should be favorable to the buyer of the property .. and not to the selling agent. Professional Realtors will show their clients and customers ALL of the available real estate inventory that matches the needs of their clients.
0 votes Thank Flag Link Wed Apr 23, 2008
Offering a 4.0% commission to a buyer's agent is a nice incentive for any agent, however, a better place to offer that incentive is to the buyer! Offer to buy down the buyer's loan, pay some of their closing costs or reduce the listing price by 4.0%. The buyer does not know how much you are paying in commission and if you want to selll, I believe you should do whatever it takes to entice that buyer to buy your home because you are willing to help them purchase it. The homeowner's house that may be competing with yours may not be willing to do this and this could make your home more attractive to buyers. Make sure your agent promotes the fact that you are willing to offer some incentive.
0 votes Thank Flag Link Wed Apr 23, 2008
Gary,

I have always been a firm believer that lowering the price is the best option for sellers...At the right price (as deemed by the Buyer), the property will sell.

However, your market may be different in that you may need to do something "extra." To know if a bonus to the agent is effective in your marketplace, I would suggest having your agent pull all of the pending and closed sales since your home was listed to see if any of those were offering a bonus, higher commission or if they were just the lowest price.

Here in Florida, many of the builders are offering to pay buyer's closing costs, build them a pool or even give them a car with the home purchase...and those same builders offer agents bonuses that match or exceed the commission as well...As a result, we are seeing the new home inventory dropping.

I actually just posted a blog about this very same thing...you might find the "realtor" responses worth reading at:

http://activerain.com/lashawnnorden

With that being said, I think it's safe to say you should know what your competition is doing and beat them at it! Good luck!

LaShawn Norden, PA., REALTOR, ALHS
RE/MAX Central Realty
(321) 377-0157
1135 Town Park Avenue, Suite 1105
Lake Mary, Florida 32746
0 votes Thank Flag Link Wed Apr 23, 2008
There is no problem with a strategy to increase a selling agents incentive to show your house over what might be a long list of inventory in your neighborhood. However, my personal opinion would be to discount your asking price by that amount you considered offering the selling agent. It will be, after all, the buyer who will signing the purchase offer.
0 votes Thank Flag Link Wed Apr 23, 2008
Lowering the price is certainly one way ...

Paying the closing costs is another ... giving a $4,000 interior paint credit .. or "X" amount of $$ towards kitchen/bathroom upgrades or remodel .. we once gave a $6,000 credit card at Home Depot, another time we gave a $5,000 granite top credit with the work being done 2 hours after closing ..

We even paid the moving expenses on 3 homes I sold, one move was $8,900 .. so that item has always been a success ...

Anytime the buyer can see an feel an immediate return or bonus in their favor, it gets and keeps their attention ...

Paying extra commissions has the attention span of an Asparagus ... you want the buyer excited, not the agent ..


: ^)
0 votes Thank Flag Link Wed Apr 23, 2008
I also agree that offering an incentive to the buyers like closing costs would be more attractive to help sell your home. Or you could lower the price which will help your home stand out to the others who are a bit higher priced.
0 votes Thank Flag Link Wed Apr 23, 2008
This is the way it works if you want a full service agent in this market you have to offer them 6%. Then this agent will be able to give the the full service. Marketing, Open Houses, Advertising, etc. But for 4 % you are asking them to put it on the market and let someone else sell it.
0 votes Thank Flag Link Wed Apr 23, 2008
I have found in the current market place. The buyers are in control. This is how we earn a living however if the buyer likes the house the agent can ask for a commission they are willing to work for...The 4% is a bonus
0 votes Thank Flag Link Wed Apr 23, 2008
Offering 4% to the buyer’s agent is not something I would recommend doing. Realtors will shoe their clients the properties that are available in the neighborhoods and price range they are looking for. If you house happens to be one of those homes, the agent will take the buyer to see it.
Realtors have fiduciary relationships with their clients and it is part of our code of ethics to find our clients the house that is right for them, not the house that will get us the most commission money.
Hope this helps.
Juan Carlos
Web Reference: http://www.har.com/jch
0 votes Thank Flag Link Wed Apr 23, 2008
Of couse i love it when i'm on the receiving end of a 4% commission, but the reality is it's the buyer that ultimately has to fall in love with the home, not the agent. It's not like we can pull off some used car salesman tactics and talk someone into making a 200k purchase. If you are serious about taking 1% away from your commission you should reinvest that into the house to overcome some of it's shortcomings to help it sell faster, and make the home irresistable to the buyer. Same thing with BTSA's if you are going to give your income away at lleast do so with giving the house the best chance to sell to the buyers not their agent, unless of course i'm showing the home and you want to give me an extra 1%, and my buyer already loves the home :-) !!!

Best of luck to you!
0 votes Thank Flag Link Wed Apr 23, 2008
"Higher than normal commissions do not make the house sell quicker " EXCEPT WHEN IT WORKS.
0 votes Thank Flag Link Wed Apr 2, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Higher than normal commissions do not make the house sell quicker because ultimately it's the buyer who choses the house, not the agent. The buyers have to like the house and if the house is priced right and shows well it will sell.
0 votes Thank Flag Link Wed Apr 2, 2008
I come down in favor of the above average buyer agent split. Here is why:: a good agent who needs to quickly narrow a search of a 100 comparable competing properties to show a buyer just 3 or 4 of them on any given Sunday, can use that search field to determine the sellers level of motivation.

This is a proper criteria for the buyers agent to take into consideration. A seller offering the bonus has signaled that they are more motivated than the average seller to do what it takes to move the property.
Knowing this is in the buyers favor (and in the buyers fiduciary interest) as it signals that the seller is most likely to cooperate on items such as inspections, lender required repairs, closing and occupancy schedules, perhaps even on closing costs.

It is up to the buyer if they like the houses they see. The bonus makes it more likely they will see the house.

Even if an agent is motivated by the carrot of increased income, and unaware that the representation of their buyer is improved by arranging a tour that is favoring the bonus house over (all other things being equal) - competing houses, they are providing improved service by adding the bonus house to the tour.

After a buyer has been exposed to houses that they like, they will offer on the house that they like the most

At that stage of the sales cycle the increased bonus has little or no effect as the decision to buy or not is mostly in the buyers control,.

If you have already offered 4% to the buyers agent that you have a contract from, you cannot retroactively withdraw that commission offer to that agent or to any of the other agents that showed your house.
0 votes Thank Flag Link Fri Jan 4, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Just lower the price of your house. Buyers are looking for a well priced house.
0 votes Thank Flag Link Thu Jan 3, 2008
Great answer Keith! I agree with you. Commission is not a determining factor when showing property unless of course its 2% or lower, then its a factor. Not that it has stopped me before but it is a factor.

With that said, there are some agents out there that do not do their clients justice and will only show 3% or HIGHER so I always recommend to my clients that you have to capture as many in this market as possible, even to those bottom feeder agents that look out for their pocket book before the needs of their clients. Those types are in every business field. I never recommend my clients to offer less then 3% to the buyers agent.

Keep in mind that most of the sellers these days can barely keep their home afloat, let alone pay over and above customary fees to get it sold.

But you also have to compete with new home sales that are offering 5-6% or other sellers that are offering 4%. The higher commission you go and the lower price you can go, the more market you will capture.

It's a tight rope that you must walk on to capture the most audience with the least amount of dollars left on the table.
0 votes Thank Flag Link Thu Jan 3, 2008
I think it is a good idea as long as you have it listed with an agent who will prominently advertise that feature in the MLS. I think if you are trying this on your own, you just don't get enough exposure for it to make a difference. If it is listed I normally like to put this info in the Agent only remarks and you could even have them put it in the private remarks to make it stand out. If you don't have it listed yet, please call me and I can get you a recommendation for a great agent in your area.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Wed Jan 2, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
Commissions like sales price are always negotiable. If you are selling your home without an agent and only paying a buyer's agent commission at 4% that seems reasonable if the agent is doing their share of the work. If you are having to show the home, draw up offers, etc. I would not pay 4% to an agent. Typically buyer's agent in your area receive 3% commission. Again though commission in negotiable.
0 votes Thank Flag Link Wed Jan 2, 2008
A great deal depends on the area. Commissions are of course, negotiable. But some areas are known for lower commission rates. In our area almost NO ONE offers that much - but splits in our area are notoriously skimpy - agents from other parts of the country are usually very surprised at how low our splits are. Further, commissions appear to be headed back up because it is taking longer to get a deal from buyers - so remember that "standard rates" can be a moving target.

My advice is to find out what is typical for your area and then go a bit above and beyond if you want that extra edge.

Disclaimer: Please note that any discussion of splits and commissions is purely for educational purposes.
0 votes Thank Flag Link Wed Jan 2, 2008
In my area the builders are offering 5% to buyers agents so to be in the ballpark I currently recommend to my cliets that the offer 4% to buyers agents. This does not mean we will get an offer but it does produce more showings. This marketing move should produce a quicker sale because people will not buy the property if they do not see it.
0 votes Thank Flag Link Wed Jan 2, 2008
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