Home buyers are scarce and hard to find these days. The word is they soon may be declared an endangered species, by the local Realtor Association if home sales don’t increase soon. As inventory levels increase, many real estate agents will inform clients that they must increase the amount of commission offered on your property. In other words, you need to dangle a carrot out here as an incentive to sell your home. The question is “Does paying 6% insure your home will sell any sooner?”

Fact or Fiction?

It does appear after many months of decreasing commissions; rates are beginning to rise again. And why not, fear is a great motivator. Real estate agents are convincing clients they must pay more in a declining market in order to increase the likelihood of a sale. Sales commissions have usually been split 50/50 between the listing and selling agents. In a seller’s market commissions declined due to more competition among real estate brokers. Many new business models flourished and the real estate industry offers few barriers to entry. These same companies that did well in a seller’s market are finding the going much tougher when overall sales decline by 50%. As a result, the well established companies that have been around a while and are considered the more traditional models remain despite the market dips.

I last looked at commission rates in our area last June. Based upon the search results below, there has been a trend for consumers to pay more to sell their homes.

While the majority of homes sold continue to offer a 2.5% commission, the number has declined to 56% of the homes sold compared to 70% almost a year ago. Property owners offering a 3% commission increased to 40% from 24%.

Do Homes Sell Faster Offering a Higher Commission?

This is the $64,000 question. I compiled Pasadena home sales from October ‘07 to March ‘08. While it appears that properties offering a 2.5% commission outnumbered those offering 3% by a margin of 4:3, it took those homes 7 days longer to sell, comparing the median days on market. However, analyzing the average days on market the situation was reversed, selling 8 days sooner. Based upon this analysis, I would have to say increasing the commission offered, begets no real advantage. While extremes do exist, a competitive commission reflective of the area will present your home in a positive manner.

Selling Your Home

The number one key to selling your home is getting it priced correctly. End of story. Now there are supplemental factors consisting of condition, timing, amenities, location and competition. Noticeably absent is THE COMMISSION. With 75% of home buyers beginning a search on the internet, the commission offered to the selling agent is no where in sight. I don’t know of any agent that has ever called our office saying they were working with a buyer who only wanted to buy a house offering a 3% commission. And if 3% was sacrosanct, wouldn’t you think licensed real estate agents would offer 3% on their own properties? We will have to keep an eye on this.

In a market where values are declining and the median price of a Pasadena home is $675,000, a savings of 1% or $6750 is an advantage. As with any category, price is determined by market forces. No agent or brokerage company is going to change that. After all it is your equity.

And now for the usual disclosure “The amount or rate of real estate commissions is not fixed by law. They are set by each Broker individually and may be negotiable between Seller and Broker”.

Tags: pasadena california homes, Pasadena Real Estate Agent, pasadena reale state