Why offering a higher commission won't help sell a house these days
Filed under: Real Estate
Any real estate agent who's serious about earning a living will try to bargain with the seller for the highest commission possible on every listing he gets.Many will make the argument that offering a higher commission to the buyer's agent will make the home sell faster by motivating other Realtors to show the home to their clients.
The listing sheet seen by agents in the MLS shows the commission breakdown and, the theory goes, if he sees two identical homes with one offering 2% to the buyer's agent and one offering 3%, he'll show the home that offers him 50% more money.
There was a time when that logic made perfect sense, but that time has passed. It used to be that real estate agents had monopolistic control over the inventory in their market. The only way to get detailed information about properties for sale in your town was to go to a Realtor who would dig through the big books that were delivered each week to pull out listing sheets and then copy the ones he thought most interested you.
Now the balance of power has shifted. Eighty-seven percent of buyers use the internet to search for a home, according to National Association of Realtors data.
With aggregators like Realtor.com and local sites, buyers are now in a position to tell the agents what houses they want to look at.
With real estate agents now having so little control over what houses buyers look at, there's really no need to offer an especially high commission to the buyer's agent -- 2% or 2.5% will do just fine. Of course real estate agents don't want sellers to know that, but it's the truth.
Reader Comments (Page 1 of 1)
8-31-2009 @ 11:25PM
Jules said...
I won't necessarily disagree with your conclusion but your reason for coming to it isn't completely true. It IS true that most buyers these days start their search on the internet. They often end up using the listing agent who has the house that they think they want after looking at realtor.com or another similar site. The facts are though, that after talking to a client, an agent usually then goes through the MLS and picks out some others possibilities to show to the prospective buyer. Rarely does a buyer actually buy that first house that they saw on a website, it's usually something brought to their attention by an agent.
All other things being equal, you'd better believe that an agent is going to send a house with a 4% split to a client over one with a 2% split. In the real world, all things aren't equal and the ultimate goal is to find a place that a buyer likes well enough to actually buy. That's where the playing field sometimes levels again.
As a seller, if you have a great house in a great neighborhood at a great price, you don't need to offer a higher commission. On the other hand, if your house is in the middle of the pack in terms of desirability, one thing that might induce an agent to put your house in front of more eyes is a better rate of pay.
Reply