Incremental commission incentive

[Paul j F]

We've decided to sell our WA property. So far with a couple of appraisals and REAs presenting their rates/commissions between 2.5-3.5% or a flat rate of between 10-15k, I am going to propose an incremental scale. 1.5% up to 590k then 7% between 590 and 620 then 10% above 620k. If they sell in the upper end of their quoted range they're better off.

I don't like flat rates as I don't see the incentive for higher sale price.

Is that a reasonable proposal? Has anyone used incremental commissions?

 

[andrew_de_a]

What's the house worth?

 

[Paul j F]

Quoted ranges varied... 580 to 650k. I believe around 630, with 650 being a good result. I will most likely adjust my % to find a sweet spot where REA and I both benefit....but you get the concept

 

[Joe D]

I have used them, but only for my own advantage in reducing REA selling fee. Works okay if you are aware of the issues below and the range in % age is not so large.

I don’t think this method of incentivising will work very well in the WA market. You are best to get a good agent (very rare, but some are out there) and then stage or present the property to maximise viewings and offers.

The only incentive for the Agent should be a reduced exclusivity period of say 4 weeks.

Your numbers have a problem which can only be seen if you put them in spread sheet form with the last column being the Net monies received (ie. Sale figure – agents fee).

At a sale price of $589,000 you will net $580,165. After this your net is reducing and you would need to sell for above $645,000 to make any additional amount.

Don’t try to be tricky unless you know exactly what you are doing, as the example you have quoted works entirely in the Agent’s favour, not yours for the range you are expecting to sell at!

 

[Paul j F]

Uh... I might not have made it clear. I'm only paying the increased commission on that component ie. REA only receives 7% on the $30k above $590k, then 10% on the amount above $620k.

If REA manages to achieve $650k then I pay them $8850 for the first $590k + $2100 for the next $30k +$3000 for the final $30k.

 

[Joe D]

Using the $650k sale price and your clarification on % ages, you end up paying fees of $13950 which equates to 2.15%.

At this Sale Price the lower end of standard commission is 2.2%, so where is there any incentive for the agent?

 

[John M]

A normal flat fixed rate shouldn't pose a problem if you make it clear to the agent what you want to achieve. You obviously have done enough due diligence to understand that 650k is a good result but you will accept 630k.

I would tell them you want at least $650k and see how it goes. It's not as if they can force you to sell below what you want to - and it should be in their best interest to get a good price regardless of commission, if they are good at their job.

Good luck selling!

 

[TheOnlineAgent]

Check out my website, I have a incentive structure which can be used for the NSW agency agreement. If you like it just get your solicitor to tie in the structure into the WA agreement. The maths doesn't change, just the way the agreement is structured.

 

[sanj]

What area is the property in and what sort of property is it?

 

[attrill]

I just sold a property. The agent had a fixed fee, but I knew the ammount that I would be quite happy to get and offered him 10% of anything above this.

He got an offer of $11K above so he gets an extra $1100.

Any sales job needs to offer a commission and bonus otherwise it is human nature just to do the minimum ammount of work to get the sale.

Try to find a car salesman who just works for a flat fee.

Just a thought..