Is this a crazy idea?

Question

I'm not even sure if this is legal or how much this extra motivation may actually produce results but thought I'd throw it out there to get some expert opinions.

Let's say I have a property that I would like to sell for $1M and if I were to get that amount I would achieve the returns I was hoping to get for it. My realtor thinks it's worth between $1M-$1.2M for it. Can I write the listing contract with this agent to read something like:

Comission to be paid on first $1M @ 5%
Comission to be paid on any amount over the first $1M @ 25% for any contract brought in the first 90 DOM
Comission to be paid on any amount over the first $1M @ 15% for contracts brought in between 90 and 180 DOM
Comissions to revert back to 5% for any contract brought in after 180 DOM

So if it sold for $1,100,000 within the first 90 days I would pay a total of $75,000 in comissions. From there I don't care how he pays out the buyers agent whether they split the 75,000 or if the buyers agent would get the standard $27,500 they would normally get. I would prefer my agent take the lions share here since this is my incentive to him to sell it faster and for more money but I don't know if that's legal either.

My fears in this are:
First of all is any of this legal
Secondly would he have to disclose this information to the buyers agent before they make an offer because just disclosing this information to the buyers agent would signal to them that my goal is $1M for this property.

My thoughts are this would really motivate my agent to really push this property and get it sold quickly and I don't mind sharing the fruits of this extra labor.

It's just a thought at this point. I'm sure I'm not reinventing the wheel here so if it's allowed to be done I'm sure it's been tried and I'd like to hear what kind of results others have seen from an approach like this.

James M. · Answer

I would have to agree with what others have already said; you are only putting extra commission for the realtor in writing. Another thing to consider is no matter how absurd or crazy you think a contract may be, if the recipient signs it, you have yourself a legally binding contract. They would have had every opportunity to question or not sign the contract, but they did which signifies their agreement with your terms.

In terms of your situation, I honestly would be surprised if more people are not doing things like this with their realtors...

Account Closed · Answer

Toby's point about extra incentives to the buy side is spot on.

You want the other agents pushing your deal. They need to see an upside to putting your property first. At a minimum you want to offer the traditional gap between listing and buying so they are not disadvantaged if they bring you a deal compared to keeping it in-house.

Pay for performance. Just be upfront and clear so that there is no dispute later. Buy the performance you want.

Toby Munk · Answer

1. You can offer whatever commission you feel fit.
2. I would offer the commission to the selling agent (the one that brings the buyer) as co-op
3. Chances are much bigger that someone other than listing agent will bring the buyer.
4. If the property is overpriced no amount of commission is going to get a savvy buyer to buy the property just because the realtor gets more money.

John Geddes · Answer

In contract terms it is called a sliding scale and they are placed in all types of contracts in a variety of industries.

If this than that.....is the essence of a contract. You are just defining the terms.

Account Closed · Answer

YOu can offer bonuses to your listing agent. I will say that you want to do your homework on your agent prior to listing. Look up and find the one that has had the most listings that CLOSE!!.

I can say I had 100 listings last year, but if I don't close many, what good is it. I can go around getting listings if I tell people their properties are worth more than they really are.

So, look for performance of agents. Find out if they really have a few of the following things.

1. Existing clientele base to buy
2. Use past clients to network for new buyers
3. Proven track record
4. Pre-developed marketing techniques (some agents just dump the property in the MLS and that is it)
5. Contacts with Stagers, appraisers, etc. Joint markets with mortgage companies.etc.

Just a few tips.

Hope to see you round the water cooler soon!!

Eric Foster · Answer

I don’t see any reason why you cant do that… Simply put, you are just offering a higher commission (as a bonus) for a quicker sale.

And no, the selling agent would not be aware of this. The listing agreement is a document between the listing agent and the owner. The listing agent simply puts in the MLS what the selling agent commission is.

At least this is the way it is where I am.

Chad B. · Answer

Thanks Eric,

I like your new aviator (sp?). Makes me want to come up with a better one for myself. I will have to work on that.

Eric Foster · Answer

O yea…

I would go off of “closing” dates not “offer” dates. You care that it “funds” and “closes” by a certain dates, not just an “offer”. By doing it this way, you will also give motivation to your agent for it to close on time too.

Is this a crazy idea?

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