Here’s a controversial subject that has been raised by some of our seller clients whose homes have been on the market for awhile without drawing any significant buyer interest: While marketing our property, should we offer an extra incentive to buyers’ brokers?

It’s not a far-fetched question, however, it cannot be answered with a simple yes or no, in my opinion. The idea would be to offer buyers’ brokers an extra incentive, over and above the advertised coop compensation rate in the MLS, to motivate them to show the incentivised property to their buyers. What most sellers and many agents don’t realize is that this very question of incentives could potentially trigger a business ethics debate, in which the unethical don’t wish to participate, and the majority may have differing views, based on their past experiences.

The ethics question may surface when considering that an extra incentive to the buyer’s agent may conflict with the fiduciary duties that the agent owes to his/her buyer client. The buyer’s impression of her agent could potentially be that the agent is only showing her properties that have an extra incentive attached for the buyer’s agent, hence the agent is not looking out for the buyer’s best interest. On the other hand, market transparency issues clearly belong to the past, as evidenced by statistics from NAR, showing that the overwhelming majority of buyers nowadays start their property searches online, before they even contact a Realtor.

According to Chicago Agent magazine, the venerable Donald Trump recently announced to Chicagoland brokers at a sales event that the commission on sales of condominiums at Trump International Hotel and Tower at 401 N. Wabash would be raised by 1.5%. Was he hoping that the cooperating sales armies would immediately reach for their cell phones to dial up their ultra-wealthy buyer clients to place mass calls for action? Is it conceivable that these wealthy buyers were not yet aware that the Donald was in the midst of building an ultra luxurious hotel-condo building right next to the Wrigley building, and buyers needed to be informed of the upcoming availability of real estate at that location? And what if they had already been presented with models of the finished product? Was the professional crowd at the Trump event, dollar signs twinkling in their eyes, supposed to forcibly persuade their clients, to proceed with a purchase at TIHT? Perhaps, Trump wanted to speed up sales of his units before undecided buyers would collectively jump the fence and opt for units at the Calatrava Spire, assuming that it will be built (Trump doubts this, of course). No one but the Trump organization and their representatives knows for sure.

But here is my take on the subject of incentives: In most neighborhoods of the Chicagoland real estate market we are experiencing a buyers market. Furthermore, it is rather safe to assume that most serious buyers nowadays have a pretty good idea of the existing inventory of properties that would meet their search parameters, either through their own research on sites like realtor.com, or through venues like Trulia, Craigslist etc. If they are working with a Realtor already, they have a complete understanding of all available properties for sale, due to automated MLS listing mailers. As a seller, who is contemplating offering an incentive to buyers’ agents as a motivation boost, why not consider reducing your asking price by the same amount, instead. At the end of the day, your property will be relatively more competitive price-wise, and I am willing to go out on a limb in predicting that the vast majority of buyers’ agents will be happy to know that they have guided their clients towards suitable properties at competitive prices, rather than holding out for that extra vacation trip to Hawaii that they could have gained otherwise.

Popularity: 1% [?]