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Sunday, December 5, 2010

The Limits of Sales Incentives

Overpriced + Fat Payout = Overpriced

Can a whopper of an agent bonus move what appears to be an overpriced listing?

This South Minneapolis duplex (pictured above) would certainly seem to be an excellent test case.

Listed Friday for $430,000, what jumped about the listing -- besides the modest curb appeal and aggressive asking price -- was the $7,500 agent bonus being dangled in the "Agent Remarks" field.

Agent to Client: 'Buy THIS One!?!'

Unbeknownst to many prospective Buyers, MLS actually has two fields with descriptive information: the "Public Remarks" field, viewable to everyone; and the "Agent Remarks" field, intended only for agents.

Given that the standard, 2.7% payout being offered to the Buyer's Agent comes to $11,610 on a $430,000 property, a $7,500 bonus is certainly eye-catching.

Will that bonus goose showings?

Probably.

But when prospective Buyers arrive, they'll see a modestly-sized (2,400 square foot) property with an asking price that's almost $200,000 above the tax assessed value of $231,500.

That's a helluva premium, even for a duplex that's been completely updated, as this one is supposed to be.

Which is likely to prompt the prospective Buyer to ask, "what on earth are they thinking??" -- followed in quick order by this one, addressed to their Realtor, "exactly why did you want me to see this one so badly??"

That's why I make a practice of always providing my clients with the (unabridged) "Property Full" report from MLS.

In other words, they see what I see.

Standing Out From the Crowd

None of which is to say that I'm a critic of Realtor sales incentives.

Far from it (see, "4%!").

In fact, prospective Sellers who face scads of competition from other, near-identical homes would be well-advised to consider hiking the Buyer Agent payout from the standard 2.7%, to 3.15%.

Money motivates, and nobody (that I know) is selling real estate for the sheer thrill of it.

And yet . . . .

Sales incentives work best in conjunction with an otherwise well-priced, well-marketed home -- not as a substitute for those things.

Going back to the duplex discussed above, if the Seller were really serious about selling, they'd price at something like $299,900 and offer a 3-point-something payout.

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