Luxury home sellers using incentives to push brokers to sell

Some clients will no longer pay the standard 5% to 6% commission

Jun.June 14, 2017 01:50 PM

Sellers of the some of the country’s most expensive homes are increasingly negotiating broker commission structures to include incentives, in order to push agents to sell for a higher price.

Luxury home owners are resisting paying the usual 5 to 6 percent commission on sales, agents told the Wall Street Journal. Instead, they opting to negotiate a tiered commission structure or to offer incentives. In some cases, brokers are agreeing to a lower commission in exchange for a percentage on the difference between an asking price and a sale price.

The idea is to make brokers “hungrier” to sell homes for a higher price, according to the newspaper. However, it’s not a practice that is widespread just yet: only 22 percent of sellers successfully negotiate agents commission, according to a survey from the National Association of Realtors. Fees are also decreasing overall. In 2016, the average rate was 5.12 percent, down from 5.26 percent from a year earlier, data from real estate research firm Real Trends show.

In New York City, most sellers pay 6 percent commission, Douglas Elliman broker Frances Katzen told the Journal. Properties over $15 million usually get a 5 percent commission, according to Katzen, while in the over-$20 million market 4 percent or less is the norm.

However, Katzen said she advises her clients against structuring commissions with incentives. “I don’t want them to feel like it will change my efforts [because] it doesn’t,” she said.

Broker incentives are becoming increasingly popular in new development sales, with some sponsors desperate to sell condos that have been sitting on the market. Last year, Toll Brothers also rolled out a year-long broker incentive, giving brokers an extra 0.5 percent commission for each subsequent deal in a Toll building.

In February, Extell Development said it will advance 50 percent of commissions on new sales at One Manhattan Square on the Lower East Side, 70 Charlton in Hudson Square and the Kent on the Upper East Side.  [WSJ]Miriam Hall

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