Reduced commissions can backfire on seller

By Rober J. Bruss

A reader asked recently whether real estate listings agents awould reduce their customary sales commissions rate for expensive homes.  He cited the example of a $1 million house sale, which, he says, doesn't include much more work for the listing agent than selling less expensive homes.

I replied that some successful realty agents would reduce their sales commissions on expensive homes.  But the bid drawback of reducing the commission rate, I hastened to add, is that many buyer agents who are member of the local multiple listing service, or MLS, will show a home with a low commission rate to their prospective buyers last.

According to the respected Real Trends Website, the national home sales commission rate is about 5.1 percent.  However, this survey was taken during the recent home sale sboom, during which virtually any realistically priced home sold easlily.  Today witha glut of new home listings in most communities, the situation is rapidly changing. 

WHEN HIGHER SALES COMMISSIONS PAY OFF. During  a recent Midwest trip, I met with a friend who is a longtime, very sucessful real estate agent.  As I usually do , I asked her, "hows the home sales market?" She told me she has too many listings and not enough buyers.  So I had to increatse my sales commission rate, she said shocking me.  She now encourages her sellers to offer 7 percent sales commissions rather than the 6 percent sales commissions customary in her community.  The result is that buyer's agents show her listings first because of the higher commision.  When she gets really desperate to sell a listing before it expires, she said, she includeds an incentive trip to Hawaii for tow to the buyers agent who sells the home.  A trip to the Caribbean or Mexico just doesn't work anymore," she added.