Sellers are offering tiered commission structures to make brokers “hungrier”

Los Angeles /
Jun.June 14, 2017 03:30 PM

Sellers of the some of the country’s most expensive homes are increasingly negotiating broker commission structures to include incentives that push agents to sell for higher prices.

Luxury home owners are resisting paying the usual 5 to 6 percent commission on sales in favor of a tiered commission structure. 

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 Wall Street Journal reported.

The idea is to make brokers “hungrier” to sell homes for a higher price, according to the Journal.

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.

When Ari Mahller listed his 4,000-square-foot spec mansion in L.A.’s Rancho Park, he persuaded his agent to accept a 2 percent commission and the buyer’s agent to accept a 2.5 percent commission on the home’s sale price. But Mahller’s agent pocketed an extra 5 percent commission on the difference between the asking price of $2.7 million and the final sale price, which was $2.8 million, according to the Journal.

Mahller ended up paying $135,750 in total commission – $6,750 less than he would have paid using the typical 5 percent commission, which would be split between the seller and buyer’s agents when a buyer’s agent is involved.

Mahller told the Wall Street Journal that he got the idea from reality TV shows on home selling, adding that he understands it’s not always so black and white.

Richard Schulman, an L.A.-based broker who works with the real estate website UpNest, said tiered commissions are also becoming more common as a way to encourage a speedier sales. For example, an agent may get a 5 percent commission if the home is sold within 90 days with the percentage decreasing with time on the market. [WSJ]Miriam Hall and Subrina Hudson


Related Articles

arrow_forward_ios
Brookfield CEO Brian Kingston and 725 South Figueroa Street (Google Maps)

Brookfield lands $305M refi for Ernst & Young Plaza in DTLA

Brookfield lands $305M refi for Ernst & Young Plaza in DTLA
Interest rate drops spur loan requests from multifamily borrowers (Credit: iStock)

Multifamily owners rush to refinance their mortgages

Multifamily owners rush to refinance their mortgages
Best of TRD 2019 promo

Coming soon: The Real Deal’s Best of 2019

Coming soon: The Real Deal’s Best of 2019
2201 Rosecrans Ave in El Segundo

Continental snags $55M refi on El Segundo office portfolio

Continental snags $55M refi on El Segundo office portfolio
From left: Gavin Newsom and David Chiu (Credit: Getty Images and iStock)

Will rent control dent the multifamily market? Lenders, investors weigh in

Will rent control dent the multifamily market? Lenders, investors weigh in
East LA Community Corporation President Isela Gracian, CIT Bank President Robert Rubino and the two projects

East LA Community Corp. lands $55M in loans for affordable housing projects

East LA Community Corp. lands $55M in loans for affordable housing projects
Acres Capital CEO Mark Fogel with a rendering of project

Chateau Group scores $44M bridge loan to build Marriott-branded hotel in Arcadia

Chateau Group scores $44M bridge loan to build Marriott-branded hotel in Arcadia
Colony Capital's Thomas Barrack

Tom Barrack’s Colony Capital snags $1.7B refi on healthcare properties

Tom Barrack’s Colony Capital snags $1.7B refi on healthcare properties
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...