Buying Your Home

[Cynthia]

We received a question on our blog that might make an interesting discussion here ... or for a future real estate scientist study.

Laurence Tamkin said:

I was curious if anyone knows if there is any data regarding whether a seller offering a higher buyer’s agent commission than is typically being offered in the area by other sellers, or an agent “bonus” of some kind, results in a higher priced and/or quicker sale.

Home building companies do this all the time and it seems to work for them.

http://blog.redfin.com/blog/2007/01/its_all_about_location_location_locution.html#comments

[Glenn]

Good bust Cynthia! Let's see what Mose has to say...

[rolamin]

I could see it working for new housing where they deal with a commodity product at fixed prices.

But selling unique properties on redfin, the challenge seems to be getting the outside agents to even be interested in working with redfin at all.  Mostly just because the agents aren't sure if redfin is "for real", able to efficiently complete the deal.  When I was selling with redfin I was originally going to offer 4% instead of 3%, figuring that after all it's the buyer's agent that closes the sale.

But after speaking with a few agents about whether it would help, a consensus seemed to develop that offering over 3% would send a signal that there was something wrong with the property, or at the minimum would send a signal that I as seller was desperate to sell and perhaps willing to entertain lowball offers.

I wouldn't want to go lower, because that also would send a signal that I might be hard to work with.

3% worked for me.

[Cynthia]

Hi Rolamin,

I'm glad you received good advice from your Redfin team, and congrats on your sale!

Update to the original post (thanks to Rolamin for the reminder, and for further validating our findings!):

In March, we did a study of more than 22,000 Seattle home sales and found that setting a higher commission to get better results doesn’t work. The most interesting finding was that homes that offered a 3% commission took 68 days to sell, while homes that offered a lower commission took about 30% longer, and homes that offered a higher commission took almost twice as long. You can read all about it here: http://blog.redfin.com/blog/2008/03/real_estate_commissions_typical_is_boring_but_when_selling_a_hom...

Regards,

Cynthia, Redfin

[FranklyRealty]

Yeah, but it might have taken 30% longer to sell, but it got 99.9% of list price.

Sometimes stats don't tell everything.

Frank

[Venturion]

Or you're not collecting or paying attention to the right stat (like final vs list as opposed to DOM).

If the data supported a higher buyer's agent commission actually having some positive benefits, it would completely contradict the starting premise that the agent has the client's best interest in mind. 

[RealShe]

I'm also wondering about the results of Cynthia's question. Will it really motivate the agent to make a fast sale?