What would be a better way to pay commissions to real-estate agents than the current way with bad incentives?

Question

The current system is flawed, because an agent can make more money by selling your house fast and moving on to the next listing. So the incentive is for them to sell your house faster and for less money. How could we re-structure the system to give the agent fair reward but a stronger incentive?

Answer 1

I agree, it' s all about the ebb and flow....one reason that the idea put out there by spiffydude won't work is that then people will overprice their house, knowing a lesser price will come in and the agent will almost always be at the low end of the commission spectrum.

If there is a system like this, then there should also be a system in which the seller would have to price their home at a specific point to have a reasonable chance of being able to achieve the higher end of the commission bracket. In fact I think it would drive realtors to suggest even lower prices to be sure to obtain the maximum commission.

Remember as realtors, we only suggest the price point at which you list your house. The final decision on that is yours. If a realtor wants to list your home lower than you feel it's worth, find another one, you'll eventually find a realtor that will take the listing.

However the reason that we suggest the prices we do is to sell your home in a reasonable time frame under current market conditions.

Statistics show that when a home is priced reasonably from the beginning, the end result sale price is higher than if it is overpriced initially and has to be reduced over time to sell. All those reductions make consumers wonder what's wrong with the house that it didn't sell...most time's it's nothing other than being overpriced in the beginnng, but they'll never know that because they don't come to see it after all the reductions scare them off.

I'm not saying that the current system is perfect, but there are also alot of companies offering lesser services than the full service companies, so if you want less and want to control it all yourself, and pay less commission, you have that option in todays market.

We also spend alot of time with both sellers and buyers who never complete a transaction, we make not a dime, all the time and money spent for this is not reimbursed by the buyer or seller. (for example the circumstances of the buyer change or the seller insists that the home is worth much more, so you give it a shot, and it never sells) There is alot of time and effort that never gets truely compensated, so should the realtors be paid for this time as well, and who should pay for it?

There's alot more that would go into determining this than just how quickly a home sells....should we charge a trip fee every time we take clients on showings?? Bill by the hour like a lawyer does for paperwork and phone calls? and then take a percentage of the net proceeds as well? If you break down the commission received for the money and time spent with clients, the hourly wage of most realtors would be embarrassing to admit.

Hope this is taken in the spirt it's meant, just to open up the discussion more, and give more food for thought....

Answer 2

How is this a flaw? It's all about supply and demand in the current market. There are times when realtors can sell houses for more money just as fast. The current market is heavily skewed toward favoring the buyer. Not long ago, it was a sellers market. There's no way this can be controlled on the realtor level. It's just the ebb and flow. Best thing to do is get a surfboard and enjoy the ride.

Answer 3

A sliding scale would change the incentive somewhat. Figure an optimal price based on comps & research (your own research as well as the agent's). The closer to the optimum, the bigger the percentage; the farther below optimum, the lower the percentage. Over the optimum should get a bonus or premium. Good data and diligent analysis are essential to making this work, most people are not willing to make this kind of effort.

For example:

AMT RCVD // COMMISSION
Listing price // 5% of listing price
98% of list // 4%
95% of list // 3%
92% of list // 2.5%
90% of list // 2%
Over list // 10% of amount over list PLUS 5% of list


Percentages not sacred, just for illustration purposes.

Good luck.

Answer 4

If you signed a agreement with the primary agent you should still be required to pay her fee, as a rule those contracts are for six months. Review your purchaser agent contract and spot what the directions are. I suppose she has each correct to be disappointed and wish her fee.

Answer 5

your realtor should show you his..committment before signing any agreements..
if you don't like the realtor try another

so what about a gold/silver/bronze level
at bronze level ..you do all the work...and the realtor only writes the contract..does not travel..or qualify or advertise..you go into the realtor's office and sign the papers...if the deal collapses you sign papers ..that you were working on your own..the realtor..did nothing..but write a contract??
no problem.....just the cost of writing the contract ..and witnessing..and in this release..you can not sue the realtor for not doing his job properly...because you did all the work...the realtor has done nothing..but write a contract and sit in an office..

Answer 6

You could offer a strong bonus to the agent for a full price offer. Or a bonus to both agents for a full price offer.