Mastermind for November 26th. Do Incentives Really Work?
We had a rather interesting debate during our Mastermind yesterday about offering a buyer agent incentive as a way of generating more activity to a listing. We had a pretty big crowd and I was surprised to see that there was no general consensus on the matter. In fact opinion was split right down the middle, 50-50. So, looking for some more input on the matter (read tie-breaker) I did what any manager would do, I consulted the great oracle itself…Facebook. More specifically one of the several groups I belong to. While I got some great stories there, I didn’t find the tie-breaker either.
One side of the argument seems pretty clear. Price the property well, work hard, don’t leave any marketing stone unturned and generate exposure. It’s a simple theory…as long as the property is “saleable” you don’t need to offer any incentives to the buyer agent. This side of the discussion felt that incentives might add fuel to the consumer’s potential belief that agents are greedy or that offering more commission only generated interest from the buyer agent and not the buyer.
The other side argued that offering a higher commission got their properties more showings. More showings meant more competition which lead to a better price to the seller and a faster sale. One agent said that it worked particularly well when there were a number of comparable properties in the area or in situations where the property had some serious disadvantages, like deficiencies in the reserve fund. I can remember a condo building downtown that had an unusually high special assessment on all the suites. Sellers would agree to pre-pay the fee down in order to make their properties more attractive. Much like buyer incentives for a new condominium project, this is somewhat different as it is not an advantage geared toward the buyer agent, more just a marketing tool.
I especially loved some of the stories from the naysayers who told of sellers throwing in fast cars, cash bonuses, and even a free massage (but I think they might have been kidding about that one). Now, when we sign a Buyer Representation Agreement (BRA) we specify the commission that we would like to receive so if the offering is more than that amount, are we duty bound to return the difference to the buyer? The short answer is that it depends. One agent fills out the commission portion like this…”X% or as offered by the MLS Agreement, whichever is greater” while another credited the extra commission back to the Buyer.
Finally, I would caution everyone to remember their fiduciary duties to their Buyer clients. When in doubt….disclose!
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.