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Agent Incentives

J. Andrew English J. Andrew English

Seller A listed her home for $600,000 and offered a co broke of 3% to a buyer broker procuring a buyer. The seller called me and asked if she should consider raising the co broke to help increase traffic. We responded by letting her know that she might be better served to pass the savings along to the buyer by dropping her price. Our reasoning was that the compensation she was offering was already very competitive with other competing properties in her area. The seller chose to increase her commission to 6% and also increase her price to $650,000. The thinking for the seller was that the increased commission will lure a buyer agent to her home and help convince the buyer to pay a higher price for the home.

So when does a seller start to see diminishing returns on compensation being offered to another agent? First, I can tell you from my own experience, I have yet to ever see a seller successfully sell their home using the strategy above. Buyers are too savvy for this and agents run history reports on properties prior to submitting offers. What could the seller have done in this situation to help sell the property? I would have left the commission at 3% and dropped the 600k asking price by 3%. On the subject of diminishing returns, there is no right answer to this as it will vary by market. However, my own opinion is that a seller should offer a co broke they feel comfortable with while taking into consideration competing properties and what they are offering. Look at it this way, if raising the commission offered helps sell the property more quickly but results in a small loss with respect to your net gain, is it worth it? Maybe, Maybe not…

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