Do Buyer Agent Bonuses Help Sell a Home?

by Steve Crossland, REALTOR in Austin TX on May 21, 2006 · 3 comments

I just received a voicemail message from the listing agent of a home I previewed a couple of days ago for one of my out-of-town buyers. The message from the agent was “just want you to know that we are now paying a $2,000 Buyers Agent Bonus on a full price offer!”.

Does this motivate me in any way to try harder to find a buyer for that property? Should it motivate me to try harder to find a buyer for that property? If it just so happened that my Buyer has decided to write an offer on that house before I received the message, should I encourage a full price offer, knowing it could earn me an extra $2,000?

To all of the above, the answer is absolutely not!

The influence an agent has over helping a buyer choose one property over another, and on deciding a good offer price, ought to be based on the buyer’s needs and market conditions – not a commission bonus. We won’t keep Buyer Agent Bonuses offered on properties we sell. Instead we pass it through to the Buyer in the form of reduced closing costs or reduced sales price. This eliminates any question of why we might be recommending one home over another. I think all agents should do the same, otherwise it creates at least the potential impression that an agent might be motivated by reasons other than the buyer’s best interests when selecting homes for buyers to consider.

Does the agent bonus really work though? Does it help a property sell faster and/or for a higher price? I see enough agent-to-agent flyers offering a bonus, and enough New Home Builder bonuses encouraging agents to bring buyers to new subdivisions, that I must assume the bonus is effective at least some of the time. But let’s see if that’s true.

Currently, out of 7783 Active listings for single family homes in the Austin MLS, 219 of those (2.81%) offer a bonus to the Buyer’s Agent. The bonus-paying listings have been on the market an average of 105 days. The non-bonus listings have been on the market an average of 90 days. It doesn’t appear that the bonus helps – bonus properties have been on the market a lot longer.

Of the 8408 Single family homes that have sold via the Austin MLS since Jan 1, 2006, 205 of those (2.43%) sold with a Buyer’s Agent bonus being paid. The bonus-paying properties sold for an average of $204K in 127 days. The non-bonus paying listings sold for an average of $235K in 84 days. Again, I don’t see any evidence that the bonus helps or makes a difference. The bonus-paying listings took 51% longer to sell than listings that didn’t offer a bonus.

So, if offering a bonus to the Buyer’s Agent doesn’t produce a positive benefit for the seller, why do more than 1 out of 50 listings offer a bonus? I haven’t the foggiest idea. If a Seller asks me about it, I’ll say the money would be better spent on home improvements, staging the listing, or just lowering the price.

{ 3 comments… read them below or add one }

1 Jon Boyd November 10, 2008 at 8:58 pm

It is good to know that when you represent buyers that you disclose and rebate/refund/credit the bonus back to them.

Some of the brokerages here in Ann Arbor offer their “designated buyer agents” a larger split when they sell an in-house listing . This can be an extra 25% for the agent that steers the buyer.

Does it always work? Of course not. But I’m sure they wouldn’t still be doing it if they didn’t think it worked sometimes.

Unfortunately it is never in the buyer’s best interest.

2 Ramona November 12, 2009 at 1:14 pm

The reason the homes with bonuses are on the market longer is probably not that bonuses don’t work. It’s probably because people only start offering these incentive bonuses when their houses are failing to sell. After a home is on the market with no sale, people start dropping prices, offering bonuses, or anything else they can think of to move the home more quickly.

3 Steve Crossland November 13, 2009 at 10:47 am

Hi Ramona,

Good point.

Steve

Leave a Comment

Previous post:

Next post: