Which Incentive Is Better: $10K to the Agent or $10K to the Buyer?
Let's assume for the sake of discussion that there is a house listed for $200,000 and that the offered commission to cooperating brokers is 3% of the purchase price.
Other incentives for selling the house aside, such as lowering the price, improving the property, staging the home, and so on, let's focus on two particular incentives.
The first incentive is to offer, beyond the 3% commission, a bonus to the selling agent of $10,000 for a settled transaction.
The alternative incentive is to offer $10,000 in closing assistance for the buyer of the property.
Which one is more likely to lead to a faster sale of the property?
There are agents who look for bonuses and there are agents who try not to show properties if the commission is less than 2.5% to 3.0%. However, most agents who are working with buyers are, also, the representative agent of that buyer, and, hence, should be looking out for the interests of the buyer and not themselves. Additionally, in a slow market, which is when an incentive may be needed, many agents are happy just to get a sale regardless of the commission. On the other hand, in a slow market, every additional dollar is very important.
In the alternative, it is the buyer who will be making a decision to purchase a house or not purchase a house. The $10,000 bonus to the agent does nothing to make them more apt to buy any particular house, while $10,000 towards their costs directly impacts them. Most buyers when searching for a house are looking for a house that meets all of their search criteria, including a certain price range, but generally they do not look for house listings which state that closing assistance will be given. Their thinking is that they will find the house of their liking in their price range first and then they will worry about negotiating closing assistance into the contract.
So, does one incentive work better than the other?
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