Paying a realtor to sell your home faster

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Friday, March 21. 2008

I'm a big fan of the technologies shaking up the real estate industry. Though my perspective differs from the simple-minded view that agents simply make too much money and that technology will only cut the 6% commission to the bone. In fact, I've written previously that innovations in real estate may indeed help agents to charge a premium, to meet a particular need for a home seller -- if they want to sell fast or get a certain price, for example. Further, I've suggested that Redfin can save their business if they admit that some clients want a great internet home buying experience and are willing to pay a premium for a premium service.

Today Prashant Gopal at BusinessWeek has an article citing how these premium relationships are happening, even in this crazy bad market.

... [Seller] McCarty decided a year ago to give real estate agents an added incentive to guide buyers [to his] house about 20 miles outside of Minneapolis. He agreed to pay his agent an 8% commission, which would be split (55%/45%) with the agent representing the buyer.
...

"I wanted more agents to show the property," said McCarty "I was willing to take a little bit more of a hit and pay a higher percentage"
...

Frank D'Angelo, the broker for EXIT Realty Executive who represented McCarty, says he offers customers a transparent, tiered system of payment. For 6%, sellers get the typical menu of services. Sellers who agree to pay 7% get additional benefits, including a guarantee that if the home isn't sold within 39 days, he'll return up to $10,000 of his commission (2% of the sales price). For 8%, buyers also get free home-staging and a "media blitz" of advertisements.

Great stuff. The 6% should be fluid depending on your goals. Discountability is good, if that's what your clients want. Just remember that, especially in a lousy market, some are willing to pay a premium to move a home quickly.

A Look at Minneapolis Real Estate Trends

Just for kicks, let's look at the real estate data for the Minneapolis region to see if McCarty got a good deal. First lets look at the price trends for the Twin Cities.

Median home price in the Minneapolis metro area. Illustrated by quartile. Real Estate Data as of March 14, 2008.

McCarty's house was priced at about $325,000 solidly in the Second Quartile of homes in the Minneapolis region. What about the Days on Market for homes in that price range?

Days on Market trends for homes in the Minneapolis MSA. Illustrated in quartiles so you can see the trend in the sample price range. Data as of March 14 2008.

For homes priced around $300,000 to $400,000 in Minneapolis, the Second Quartile, homes are on the market for 3 - 5 months. McCarty's place went under contract in one. Based on that data, I'd say he got a deal!

Note: We haven't opened the Minneapolis MSA on our free research page yet,
but we're about to, so call us if you want the research report for
anything in the Twin Cities area.UPDATE: Our Minneapolis Real Estate Report is available now.

Posted by Mike Simonsen in Real Estate Agents, Real Estate Data, Real Estate Marketing, Technology, Trend Charts at 08:24 | Comments (3) | Trackbacks (0)

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#1 Real Estate Guru (Link) on 2008-03-21 09:32 (Reply)

Michael, we've considered offering different levels of service. Up until now, we've offered one level of service just to make our service easy to evaluate and easy to provide, but we know our customers would be willing, for example, to pay for more home tours.

But the idea that a higher-than-usual fee for the buyer's agent attracts more customers has not been substantiated by a year's worth of data in Seattle:
http://blog.redfin.com/blog/2008/03/real_estate_commissions_typical_is_boring_but_when_selling_a_home_effective.html

#1.1 Glenn Kelman (Link) on 2008-03-21 15:34 (Reply)

Glenn - I saw that post - it's excellent work. I'd agree that the buyer's-agent-bonus may not, in and of itself, be the driver for getting more offers. The BW article also cited an advertising blitz by the seller's agent. I'm not sure that's it either per se. (Seeing as much agent advertising is about building the agent brand and there's little evidence that home buyers respond to traditional advertising channels when finding a home.)

However I would without question negotiate bonus commissions for my agent to help me meet certain goals. Be they price or time-to-sale or something else.

So whether its buyer-agent bonus, advertising, perfect staging, pricing strategy, heck if the ceo of my broker has to go on 60 Minutes, whatever it takes to meet my goal. Do it and I have no problem comp'ing you for it. I think a lot of people would agree with me.

On the buy-side, you guys may be positioned better than anyone to provide a premium home buying experience. I'm looking forward to seeing how those services build your company.

#1.1.1 mike simonsen (Link) on 2008-03-22 12:21 (Reply)

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