Inman

The truth about 4% buy-side real estate commission

Q: If I offer a 4 percent selling-agent commission, would that help get my property sold? –Genie

A: I’ve been known to answer a short, simple question like yours with a short answer and a long answer. Here’s my short answer to your question: Yes, offering a 4 percent commission to the broker or agent who represents the person who eventually buys your home definitely increases the chances that your home will sell.

Now, time for the long answer! But first, some real estate translation: the seller’s agent is also known as the listing agent; the selling agent is more commonly known as the buyer’s agent. Confusing, but that’s the way it is. From here on out, I’ll just refer to the selling agent as the buyer’s broker or buyer’s agent.

The more people who come to see your home, the higher the likelihood that you’ll get an offer. The more offers you get, the more likely you are to get into contract. And obviously, getting into contract is a prerequisite for selling your home. So anything that you can do to increase the number of prospective buyers who come to view your home boosts the likelihood that it will sell.

Nowadays, getting buyers to come see your home can be a challenge, as there is a significant imbalance in the number of homes available for sale and the number of qualified buyers out there actively viewing homes and making offers (more homes than buyers, obviously) in many local markets.

Given the declining home values of recent years, it can be difficult for an individual home seller in particular to position her home as competitive with the many low-priced short sales and foreclosures on the market also vying for the attention of the same few qualified buyers.

There are really only a few things a seller can do to increase a home’s attractiveness to buyers. Price and condition are the two most commonly tweaked.

Once a list price has been lowered to a certain point, it may be infeasible to lower it more (as where, for example, the payoff amount of your loan is barely covered by the list price), or ineffective to lure in buyers (as where there are still multiple, nearby, similar homes listed at or near the same price).

Similarly, if your home is already well-staged and in move-in condition, or you lack the resources to improve staging and condition, this can also be a tough element to change.

Probably the most rarely modified listing element by sellers — but one that potentially carries weighty significance in distinguishing the home from the competition and getting buyers in the door — is the commission that is offered to the buyer’s broker.

Many sellers fiddle with the commission they offer their own broker, usually in an effort to negotiate it downward from the traditional 3 percent mark down to 2.5 percent or thereabouts. However, offering an above-average commission to the buyer’s broker incentivizes buyers’ brokers to at least show your home.

It certainly won’t cause a buyer to buy your home if they don’t like it, but in a situation where there are 30 homes on the market that meet the buyer’s criteria and only five can be shown in a given buyer’s tour, a property offering a 4 percent buyer’s broker commission in a market where the norm is 2.5 percent or 3 percent will certainly have a better chance of being shown.

More than 90 percent of qualified buyers on today’s market are represented by a buyer’s broker. Anything you do to make buyers’ brokers more likely to show and want to sell your home, including offering them more money than the other homes are offering, will cut through the competition and improve your homes chances of getting shown — and sold.