This was going to be the big test.
The controversial local brokerage in Los Altos was offering a measly $10,000 commission to the buyer-agents on their listings, most of which were $4,000,000 and up. They listed a similar house on a quiet street about a mile away for $2,988,000 and then marked it pending a week later.
So I followed their lead and priced my listing at $2,995,000 even though mine needed EVERYTHING and was on a heavily-traveled street.
My video tour of my listing HERE.
I wanted to prove that paying 2.5% commission to the buyer-agent would cause a better result.
Theirs closed for $4,200,000 (and was put up for rent for $2,900/mo).
Mine sold for $4,200,000 too, but then our buyer-agent volunteered to cut 1.5% of her 2.5% commission and deduct it from the sales price. In those cases, the lender has to get the appraiser to re-issue their appraisal at the revised price – but she forgot, which delayed closing for another week. I’ve never prayed so hard for an earthquake not to happen!
I don’t know if the agent on the other sale only got paid $10,000 to support her buyer with paying $1,200,000 over their list price, but she deserved more.
But combined with my buyer-agent being so generous, and the other comments at open houses, the agents around the Silicon Valley are so desperate that they are begging for business. The amounts buyers pay over the list prices indicate the same.
I still think my result was better than the $10,000 guy due to our harsh condition and busy street. But I can’t say that the 2.5% made any difference at all.
We can probably come to this conclusion though. In a scorching-hot entry level market, you don’t need to pay much to a buyer-agent, if anything at all. If the buyer-agent is smart, they will have their own agreement with their buyer to cover it.
In areas where the actives-to-pendings ratio is 4:1 or higher (Rancho, I’m looking at you), paying a reward or bounty to a buyer-agent is worth considering. Is that steering? No, it’s America, where paying incentives to get what you want should be legal and encouraged.
Things can change.
I remember at the end of the the .com days when tech homebuyers ended upside down when the stock market blew up and they couldn’t afford their house.
It will be interesting to see if buyers agents come back if the market flips.
Personally I’d use a buyers agent no matter what. If they’re good they’ll pay for themselves.
If it were easier to find a good buyer’s agent, it would help.
If I were in charge, I’d make it mandatory that every agent had to run a blog. Let’s see what you have to say.
These kind of detailed insider stories are why I have been reading for close to 20 years. Thanks, Jim!
Good grief, has it been 20 years? It was September, 2005, so….yep!
Thanks for checking in Josh!