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A friend of mine a house that he would like to list for $3MM ($3,000,000). He was thinking that most homes around here sell for $500,000 with 3% buyers agent commission, which works out to about $15,000 for the buyers agent. If he offers 1% buyers agent comission for the $3MM house, the agent will get about $30,000 or double the average.
Would that appear offensive to real estate agents on MLS? He doesn't want to offend, but also doesn't want to overpay commission.
I think what the question is - is it the number of percent for comission that's important or is it the actual dollar amount? The actual dollar amount sounds more important to me, but I work as an engineer and not a real estate agent.
A friend of mine a house that he would like to list for $3MM ($3,000,000). He was thinking that most homes around here sell for $500,000 with 3% buyers agent commission, which works out to about $15,000 for the buyers agent. If he offers 1% buyers agent comission for the $3MM house, the agent will get about $30,000 or double the average.
Would that appear offensive to real estate agents on MLS? He doesn't want to offend, but also doesn't want to overpay commission.
It is not offensive.
Quote:
Originally Posted by bigtrees
I think what the question is - is it the number of percent for comission that's important or is it the actual dollar amount? The actual dollar amount sounds more important to me, but I work as an engineer and not a real estate agent.
My 1099 indicates a dollar amount, not a percentage.
My grocery store asks me for dollars, not a percentage.
I would show the home.
But, there's more than one way to skin a cat...
The compensation amount is not necessarily removed from the transaction, since many-to-most Buyer Agency agreements have provision for the Buyer to compensate the Agent to a specified level if offered co-broke is below that level.
Ergo, your friend is considering transferring the balance of your area's common BA commission percentage from his side of the HUD1 to the Buyer's closing costs for a significant portion of his target market.
The net cost for the home purchase may remain the same, and may just require more cash out of pocket for the Buyer.
Not offensive.
But will it be productive? Maybe, maybe not. And that is the real question.
Last edited by MikeJaquish; 10-19-2008 at 06:49 AM..
I would suggest that he offer a competitive rate. Find out what others are offering and get close to what they are doing. 1% may be competitive and totally fine. Know your competition is rule #1 of marketing.
Money is a percentage. $90,000 screams louder at agents than $30,000. I don't care because I do buyer agency agreements and my clients make sure my fee gets paid.
Out here we have a 5 year inventory of luxury homes. Make sure buyers aren't excluding your friend because they have to pony up the rest of the buyer agent fee. Money talks to buyers as well.
Home A: $2,750,000 @ 2.5% Commission = $68,750
Home B: $3,250,000 @ 3% Commission = $97,500.
Home C: $3,000,000 @ 1% Commission = $30,000.
From another agent's perspective, I think it would be really hard to convince them to try to sell Home C, when they can make double, or even triple that amount by selling A or B. On the other hand, if the majority of $2M-$4M homes in your area are listed at 1%, then 1% is a fine number. It's OK to be 1/2% lower than the competition, but you can't realistically be 1.5% or 2% lower. Just my take.
A friend of mine a house that he would like to list for $3MM ($3,000,000). He was thinking that most homes around here sell for $500,000 with 3% buyers agent commission, which works out to about $15,000 for the buyers agent.
Bigtrees...if the majority of homes in his area are selling for $500K...will he have hardship selling at $3MM? What constitutes the difference .... acreage, quality/rep of builder, commercial location or other? Are hugh swings the norm there ... here that would be financial bust... unless it was location/acreage driven.
Seattle's a big area and there are homes at all price points, from $100,000 clear up to $30,000,000. Bill Gate's house is here (not for sale) and assesed at $100,000,000.00. This one happens to fall at at the $3MM mark. (500k is average for all of Seattle, not just the neighborhood surrounding this particular place.)
My question wasn't about how to price the property but to get feedback on a 1% commission.
Seattle's a big area and there are homes at all price points, from $100,000 clear up to $30,000,000. Bill Gate's house is here (not for sale) and assesed at $100,000,000.00. This one happens to fall at at the $3MM mark. (500k is average for all of Seattle, not just the neighborhood surrounding this particular place.)
My question wasn't about how to price the property but to get feedback on a 1% commission.
My opinion is to interview 3 to 5 agents to see what they say.
That's about the only way you'll know since real estate is local.
I use a Buyer Agency Agreement that states the percent commission I work for so it doesn't matter to me what the listing agent/seller is offering. If the split offer is less than my agreed upon commission then the buyer is responsible for the balance. If the split offer(including any buyer agent bonus) is more than my agreed upon commission then I will negotiate that the 'extra' commission(and/or bonus) be deducted from the house price. So, to answer to OP question, offering a lower commission to the buyer agent doesn't influence me. However, it may influence my buyer since they would have to make up the difference.
Home A: $2,750,000 @ 2.5% Commission = $68,750
Home B: $3,250,000 @ 3% Commission = $97,500.
Home C: $3,000,000 @ 1% Commission = $30,000.
From another agent's perspective, I think it would be really hard to convince them to try to sell Home C, when they can make double, or even triple that amount by selling A or B. On the other hand, if the majority of $2M-$4M homes in your area are listed at 1%, then 1% is a fine number. It's OK to be 1/2% lower than the competition, but you can't realistically be 1.5% or 2% lower. Just my take.
Level 10 is on the mark. Here in NJ the inventory of homes is so high, agents are going to show properties that make them the most, given the home has what the buyers are looking for.
Anyone remember Foxtons?...Need I say more?
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