Agent incentive to REALLY SELL your property.

In relation to my thread: www.somersoft.com/forums/showthread.php?p=459003#post459003
I have a real estate agent renting my unit which is attached to our PPOR.

I am selling my home and he has come up with the following idea. Our PPOR is worth over $1mil and has a "wow" factor.

We have a house that is hard to value, not to market though.

MY commission to the agent is 2.5% (incl GST). Not bad! As an incentive to get a higher price I am thinking of offering him 10% of every dollar over my reserve price. If he can get me 100k more (not impossible), he'll get an extra 10k.

I have chosen these agents mainly for the reason that the commission from the sale of the property goes to the agent that sells it. NOT the listing agent. I therefore have 16 realestate agents working to sell my property. USUALLY the agent that signs the Vendor up get's the commission or 60% of it if another agent from the same office sells it.

He is also my next door neighbor. He has a vested interest in the street and also is the Principal for the RE. Two of the agents he brought through live in the street also and in an adjoining street.

I hope that by offering the 10% extra, these agents will be falling over themselves to sell at a higher price.

Thoughts?


Regards JO

Don't do it. It makes no difference especially in an auction situation. The buyers will pay what the buyers will pay.

Twitch said:

Don't do it. It makes no difference especially in an auction situation. The buyers will pay what the buyers will pay.

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I had thought about this, but the incentive is to sell before auction.

Regards Jo

I don't like the thought of agents trying to "race" each other to get the sale through. A quick sale isn't always a good sale for the vendor and I certainly wouldn't want their main focus being to get me to accept an offer before another agent gets the sale.

I also agree with Twitch about the extra commision. Ask any agent worth our time and they will say it doesn't give them any extra incentive. Remember the agent is supposed to be working for you and part of that job is to get you the best price possible. If you are letting an agent sell your place that doesn't give 100% to get you the best price then you have made a wrong choice. Don't give away money for nothing!!

Hi Gools,

Maybe I haven't explained myself properly.

The agents have given me their idea of a "market value". This is near my reserve price. BY:

offering him 10% of every dollar over my reserve price.

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- I hope to give them an extra incentive to get a higher price. After all 2.5% of 10k more is only $250 to the agent. $1000 is a much better incentive.


In a tough market, I would HOPE that the agents get the best price, but would HOPE they don't just settle on a price for the sake of a buck in their pockets.

As you are an agent though, I take your advice on board. The thing is, this was suggested to me by an agent that is NOT selling our property, but is living in it with us.

Regards JO

josko said:

We have a house that is hard to value, not to market though.

MY commission to the agent is 2.5% (incl GST). Not bad! As an incentive to get a higher price I am thinking of offering him 10% of every dollar over my reserve price. If he can get me 100k more (not impossible), he'll get an extra 10k.

I have chosen these agents mainly for the reason that the commission from the sale of the property goes to the agent that sells it. NOT the listing agent. I therefore have 16 realestate agents working to sell my property. USUALLY the agent that signs the Vendor up get's the commission or 60% of it if another agent from the same office sells

Thoughts?


Regards JO

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JO,that's not something i would do,10% in money terms is a lot of money
at the end of the sale,if you have 16 agents competing against each other then you are a smart seller,but i still would not give them a extra 10% over your asking price,after all your name is on the title and you took the risk, all the agent does is talk and make a few phone calls anyone can do that,even you?....imho..willair..

Josko, it's a bad idea, pure and simple. I've seen people burned by this and it cost them plenty. You don't have thousands to throw around so I can't understand why you would go for this.

The incentive makes no difference to getting a good price.

The key to getting an agent doing the right thing is selecting a good agent, in a good agency, which agency has a good market share in selling your type of property, and staying in regular touch with the agent.

Jo,

I'm not an agent but are friends with a couple of the best agents in Adelaide. This topic comes up in converstaion at least every six months over dinner. If the agent is a good operator then they should be getting you the absolute best price they possibly can. You're paying them the 2.5% comm to do that!! My agent mates always say that they happily accept this offer from vendors but they note that it makes no difference to the sale price but the bonus is 'nice'.

It's just some advice. If they are a hard working agent then how would the extra money make them get you a higher price? What extra can they do to get you a higher price that they wouldn't do anyway?

If anyone can answer that last question with something other than 'nothing' then the agent you have in mind needs to find some more motivation and ask themselves why they are in the industry.

If you can only answer that last question with 'nothing' then the extra commision is just going to waste and won't be able to be placed nicely on your IP loans.

Purely just a suggestion. It may well work but it shouldn't if you have the best agent for the job.

Gools

Bad idea.

All you are going to get is agents racing each other to sell the property AT ANY PRICE. The 10% will make no difference as 10% of nothing (if they are not the one to make the sale) is a big fat zero.

The potential for rushing the buyer (and in this market scaring them off) would pose a bigger risk to you than simply getting the property up to the right price and massaging the buyer to follow through to the deal.

Cheers

Thanks Guys,

Handy, it won't sell at ANY price. I make the final call. But you are right that it could cause them to push TOO hard.

Right then....seems this might not be such a good move.

I just do not trust agents in our area. Everyone knows someone that has had bad experiences. My brother was one of them, with an agent listing his property at two dif prices on two dif websites, to sell it, as my brother was refusing to pay for any more advertising.

One agent was entirely negative and said he would "knock the place down." I was told later by other agents and friends that he is a "buyers agent". He deals with the top end, talks the vendors down and gets the job done quickly.


I do feel though, for the reasons I mentioned above, that I have made the right choice with agents.

SO....not a good idea!


Thanks guys.

regards JO

OK

Here's an idea out of left field. I thought of it because its in line with my changing career direction.

If your PPOR is really good, then why not create a website to sell it.

You can get a good photographer to take lots of photos (as many as you want) in day and night, you can have a guided tour, even voice over video of each room. What about a webcam on the views (if you have them).

You can write as much as you want about the property. You're not limited to the space on re.com.au or the newspaper. List every single possible benefit of the house, from where the power points are, to why the roof is a certain height, to why the granite in the bathrooms is so good. I mean, go nuts!

You can advertise it in a paper or re.com.au if you want but make the link the prominent way of selling it.

People go online to sell all sorts of stuff that wont make any where near as much as your >$1m house. If I had that kind of money on the line, I'd be doing this in a flash. And you could do away with the agent all together and it would only take a fraction of their commission ($25,000+) to do this instead. Plus I bet you'd get a much better price.

^^ not sure if it's exactly the same thing, but I noticed a home was being sold in my street on owner.com.au, but I'm not convinced that it's being advertised enough to generate demand that will sell the place! That's my only caveat about advertising your own place...

Josko

I would not do it either. And 2.5% is plenty to pay. I have never paid that much. They will do the same work as lower end properties and get higher commission if you think about it.

I would focus on getting the best agent and if you want to improve your chances maybe consider professional photos to attract the buyers. The best agent is not necessarily the one suggesting you will get the most money. They are often just the best at getting listings )

It's a nice idea, but I don't think it will work.

The book "freakonomics" has a great bit on real estate agents (in the US) - the authors checked whether real estate agents did anything different when selling their own, or relatives houses. The agents of course said no, they sell all houses as best they can etc. In reality, houses being sold on behalf of agents or relatives of agents tend to be on the market 10 days longer, and fetch a 3% higher price.

This suggests, to me, that the agents in the study do a "better" job (measured by the final sale price) when it is their own property for sale.

Both those numbers (3% and 10 days) are important. Here's why:

2.5% of $300k: 7.5k
2.5% of $309k: 7.725k

So that's a difference of $250, in commission but a difference in sale price of $9k!

As shown above, however, to fetch the extra $9k .. you'd be looking at an extra 10 days on the market.

Now, from the agent's perspective .. is it worth $250 to keep it listed, keep taking calls .. etc .. or is it better/easier to condition the buyer and vendor?

I think no matter what you do, the agent business is about turnover, not about getting the best value. It's a systemic problem that I don't think the vendor can solve. Even your generous bonus rate isn't going to come close to the commission of just selling another house.

Josko

I heard or read the following somewhere and it has been filed in my long term memory.

The first month a property is listed is the golden month.

You have buyers who are ready to buy because they have looked at everything on offer - so if the property is priced right they will buy!

That is why REA want exclusive listings.

A good property sells itself.

REA agents know this so are prepared to negotiate their price down a bit for a good exclusive listing property.


IMHO - 16 REA will think - I am competing against 16 REA (100/16 = 6.25% of selling to get commission).



Regards
Sheryn

Sheryn said:

Josko

I heard or read the following somewhere and it has been filed in my long term memory.

The first month a property is listed is the golden month.

You have buyers who are ready to buy because they have looked at everything on offer - so if the property is priced right they will buy!

That is why REA want exclusive listings.

A good property sells itself.

REA agents know this so are prepared to negotiate their price down a bit for a good exclusive listing property.


IMHO - 16 REA will think - I am competing against 16 REA (100/16 = 6.25% of selling to get commission).



Regards
Sheryn

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Thanks guys, Thanks Sheryn,

I have also thought that the first two/three weeks is the most important.

I don't know if I agree with your 6.25% of selling.......that is the number but I don't think the agents will look at it like that.

I've been told by agents that are friends that they don't go out of their way to sell another agent's listing if they are only getting a portion of the commission. If the agent knows they'll receive the full 100% for the property, which is over 15k, they'll try and sell it first! I would!

Regards JO

The agents will get what they can , the buyers have to be their too!, i am in a similer position and we got 1.5% commission , ie due to the over a mill thing, in this market every $1 you get now is worth $1.50 tomorrow, good luck.

GoAnna! said:

Josko

And 2.5% is plenty to pay. I have never paid that much.

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Are city commisssions always less than regional areas? We pay a standard 3.3% in my area.

What are you paying in Lismore Sheryn?

Josko,

Your idea of extra 10% commission over reserve price *won't* work for you. This is a typical thinking found in non-experienced sellers.

If you haven't signed up with any agent, get hold of the book "Real Estate Mistakes" by Neil Jenman and read up the section on Selling your house.

In essence, you need to ask all agents with the question "How can you get me the best price?" and see the way they answer it.

The book also shows what agents think and how you can make them work for you.

Thanks guys,

As mentioned, I decided not to go this way - even though, funnily enough it was mentioned to me from a realestate friend.

As far as the commission is concerned, I negotiated it down. I had 3.3%, 2.5 + GST, and settled on 2.5% inclu GST.

What's this QLD business of 5% on the first $18000 and 2.5% + GST after that?

Regards JO