Do you see a disadvantage to offering an increased buyers agent commission for a limited period?

Question

My wife and I are selling our home FSBO.  We live in a market in which homes do not sell that often and therefore the buyers agent take on our list price will be very important to our sale.  We also recently purchased the home, did many renovations and are offering higher now...so it looks like a flip.

I would like to encourage activity and offers on our house by offering 3% buyers agent commission for the next week instead of the normal 2.5%.  I plan to state that any offer submitted prior to a certain deadline will receive 3% commission, afterward it will move to 2.5%.

Do you see any pitfalls from this strategy?

Joel Owens · Answer

Buyers brokers/agents typically do not like to work with FSBO's. The reason is you end up doing twice the work for the same commission of just the buyers side.

It can also put the broker/agent in an implied agency position with the seller. The seller will try to do some stuff on their own but the reality is through the transaction without an agent on their side they will lean on the buyers broker/agent to pick up the slack and help it close.

It can cause legal issues for the buyer broker. Also I do not like limited time we will give you XX and then it goes away. Before the broker/agent even shows the property it sends a message from the seller that they are out to screw the broker/agent in some way already stating an out with their offer. That doesn't give a broker/agent the warm fuzzies about bringing buyers to show your property.

You need to make sure your price is right for the market regardless of the commission. The improvements you did or didn't make have nothing to do with the broker/agents commission. Brokers/agents are there to do a job and not fix the possible mistakes the sellers have made over the years financially.

Will Barnard · Answer

I would not go as far as saying that it is a slap in the face. In fact, many of my listings are for 5%, 2.5% for each side and that .05% on a $3M sale price is a significant amount ($15,000!) it does depend on your market, the conditions of your market, and the values you deal in. For listings under $100k, the .05% is nothing. Yes, an agent provides a service, but I have always operated under the opinion that basing their commissions off of sales price is not proper ( though standard in the industry). When an agent sells a home at $1M and makes 3%, they are paid $30,000. Should they have a wage increase to $60,000 simply because they sold the $2M home? I doubt their advertising costs and time were all that much more to constitute such an increase and therefore, my opinion that % is not the way it should be. Just the same, should an agent only make $1500 on a home they sold for $50k (3%)?. I think not, hardly worth their time and effort.

Will Barnard · Answer

I personally don't like your strategy. First off, the standard in many markets is 3% for each side. Going FSBO already limits your exposure and if you really want to "incentivize" buyers agents, offer 3% with an additional increase if they bring a buyer that closes by X.

Your biggest incentive is proper pricing!

Mark Updegraff · Answer

IMO it is best to pay a good realtor the going rate to handle your sale.  ESPECIALLY if you're in a slow market.  There are many reasons why.  If you're in a hot market, it doesn't matter as much as long as you're not over valuing your house.  You're loosing out on agent-to-agent networking.  As a seller's agent, I'm talking to everyone I interface with (with an emphasis on other agents) to find a buyer for the property.  Who are you talking to?  Are you talking to all the best agents in your area regularly to see if they have anyone that may fit?  I do.  And I do it over and over again with the same professionals until they start to remember that house, me, and all the awesomeness I've been saying about it.

Just saying, IMO people are better served not trying to do it on their own when they have a good seller's agent.

If you want to try your strategy pull out the stops.  More than half the normal commission so you're still saving a bit, but you're actually motivating some people to work for you.  If you're offering the normal co-op broker fee, and your FSBO... agents probably try to avoid your house because you're over priced and more work.  I know I would stay away unless a client INSISTED to see your house even if you were .5% above the co-op norm.  Why?  Because the majority of FSBO's are delusional about their value to begin with and a complete waste of time.

Joe A. · Answer

thank you for the thoughts

Rusty Scott · Answer

I have to agree with everyone else...first 3% is pretty standard...so I don't see that as a bonus.

Way more importantly though, you say the market is slow....so going FSBO is really limiting you. 90% of buyers are never going to come across your property...plus buyers agents aren't going to like dealing directly with an owner.

John Thedford · Answer

Right on. I talked to a FSBO today. He is easily 60K overpriced. I asked where he got the price and he could not tell me. Then he went off on some wild tangent trying to "appraise" his property. I spent a good 30 minutes on the phone with him. He stated he had a few agents come to the house but none listed it. Good for them. There is no sense living in fantasy land. If you like fantasy, go to Zillow. Look up your value, call them, and ask them to buy your house:) If the market is slow, a professional agent may indeed be a benefit. Many FSBO's do convert to listed properties and the main reason is overpricing. If someone wishes to FSBO AND get it done, they need to price it right, market it, stage the property as best they can, and know how to deal with buyers. This should be what you get if you hire a good agent.

James Loisou · Answer

I agree with @Mark Updegraff regarding the importance of a good selling agent.

That being said, if you still decide to list it yourself, the most important factor is going to be the price that you list it at. As a buyer's agent, from my personal perspective, I have a duty to find the house that the buyer wants and to negotiate the best price for that house. Whether 2.5% commission or 3% commission is offered to me will not have any impact on my duty. I would show the right house at the right price regardless of that extra .5%.

I do not know what is customary in New Jersey, but in eastern Massachusetts for example,  you can sometimes get away with even giving 2% to buyers agent and at that point even if you hired a solid seller's agent for an additional 2%, you would only be .5% above what you initially wanted to spend and getting the best of both worlds. These numbers might be completely inappropriate for your particular market in New Jersey, but it is food for thought. I would advise that you at least speak to a couple sellers agents and see what they have to say and what value they could add.

Do you see a disadvantage to offering an increased buyers agent commission for a limited period?

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