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The Real Deal Los Angeles

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

One LA seller said he got the idea from reality TV shows on home listing
June 14, 2017 03:30PM

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