With the market having shifted from a seller's market to a buyer's market, I have been running across listings that offer selling agent/broker bonuses in greater and greater numbers. The bonuses range from an additional $1500 to an additional 3 percent. Upon seeing this bonus advertised on a listing, you would assume that the seller is very motivated and trying everything and anything to entice someone to buy their property.
So why are most of the properties I run across that are offering bonuses priced higher than their fair market value? If they were motivated to sell, then they would price their property very competitively, not higher than market value, right? And which approach works better?
I know of several listings that are between 15 and 20 percent overpriced and offering 1 to 3 percent selling broker bonuses. The bonus on one I just ran across potentially adds up to an additional $46K+. But the property has been on the market well above the average days on market for a property in that price category and location despite the huge bonus, a sure sign that the property is overpriced.
It seems as though the seller and listing agent think that Buyer's Agents have that much control over their buyers and that buyers aren't informed. Buyers in today's market have access to way too much information to not know that a home is overpriced and what the comps are. And the bonuses bring up a whole different discussion that has been a hot topic for consumers and industry professionals as of late and buyer's agents are treading lightly (sure you can guess what that is, but that's for a different post).
You may think I'm crazy for saying that selling broker bonuses are not a good idea because I'm a buyer's agent and would profit from them. But with 95% of the properties in my area that have bonuses being overpriced and 75% of the properties in general being overpriced, I know, and my clients know, that there are plenty of other properties of better value available to them.
Maybe some sellers and listing agents don't think that buyers are smart enough to figure out that the property is overpriced. But I truly believe that buyers will know (and smell) when their agent is pitching them an overpriced home because of a bonus. Not only will the buyer not purchase the property at that price, but they will fire their agent and find another one (if they trust agents at all after that).
Based on the local real estate market in Northern Virginia, if a property is not priced correctly, a selling agent bonus won't help. So stick with pricing it correctly and rather than offering a $5K bonus to the selling agent, just adjust the price $5K down - it will get you better results.
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