Suppose you're trying to sell a townhouse that looks much like many other townhouses in the neighborhood. You do what you can to perk up the place, but there's little to distinguish it from the competition.
How do you get an advantage?In real estate, money is the answer to most problems. You can lower the price substantially, making sure you're asking less than others with comparable property.
But a potentially less costly alternative is to offer a financial incentive to real estate agents to sell your house rather than the one down the block.
This practice offends some sellers, some buyers and even some real estate agents. But in areas where there's a glut of houses on the market, or when sellers are trying to unload a very expensive property, selling incentives do appear.
Probably the most popular incentive is straight money - the seller offers an additional 1 percent over the usual commission to the agent who sells the house. Thus, if commissions in your area are generally 6 percent, you might offer 3 percent to the listing agent and 4 percent to the selling agent.
That 4 percent will stand out in the computerized multiple listings and will encourage some agents to go out of their way to show your house.
Some inventive - perhaps desperate - sellers have even offered Caribbean vacations to any agent who comes up with a buyer. Depending on what's offered and the price of the house, this actually could be a relatively inexpensive sales tool for the seller.
Incentives have become common enough that the trade publication Real Estate Today recently brought together five agents to discuss the practice and the ethics involved.
Gene Gallagher of ERA-Gallagher & Co., in Bethesda, Md., said bonuses for real estate agents are "quite common" in his practice.
"We see a wide range of incentives, from small cash bonuses to Caribbeasn cruises, which many of the sellers who list with our company offer," Gallagher said. "I just received a flyer from a builder offering a $25,000 bonus plus commission for the sale of a $695,000 condominium."
Gary Jarrett, a broker with Moore & Co., in Evergreen, Colo., said sellers in his area generally don't offer incentives when the house is first listed, but some turn to them after a month or so if the house is still unsold.
But Gallagher and Judy Myers, an agent with Century 21 in Walnut Creek, Calif., both said they have sellers who put the incentive in the contract at the beginning, when they list the house.
"You get the most activity on a listing when it's new," Myers said. "If you're going to offer an incentive, you want to promote it during the broker tour."
Myers said the incentives come not just on hard-to-sell properties but from homeowners who are especially eager to sell. "It usually has to do with the urgency factor," she said. "The sellers might be in a situation in which they have a contingent offer on another property and they have to close by a certain date."
Arlene Carozza, manager ofPrudential Florida Realty in Winter Park, Fla., said, "I have a real problem with bonuses. If you're a professional and you're being compensated and if you have the house priced right, that should be it. And we have 14,000 homes on the market, so don't talk to me about distinguishing listings."
Jarrett said he knew a lot of people who shared Carozza's doubts. But he said he's comfortable suggesting bonuses to sellers who ask what more they can do to get a house sold.
Carol Greco, an agent with Weichert Real Estate in Fairfax, Va., said she used to have doubts similar to Carozza's.
"But a lot of my friends who are top producers began encouraging their sellers to offer bonuses a couple of years ago. And guess what? They starting getting their listings shown and sold, and they claimed it was because of the bonuses. So I've learned."
Do buyers know when they're being shown a house that has a bonus attached?
All the real estate agents said that they do reveal the information to their buyers and Myers said that California law requires it. But in states where there's no such requirement, agents may choose to keep such information secret.
How far will agents go to get a bonus? Gallagher offered an extreme example:
A real estate agent was trying to show a basement condominium in Washington, D.C., but the key was missing from the lockbox so he couldn't show the potential buyer the property.
Nevertheless, he prepared an offer on the property - contingent on the buyer getting in to see it. Gallagher asked why he was in such a hurry since there were thousands of similar condos for sale in the area.
Well, the seller was offering a cruise as an incentive and the agent said, "I've never been on a cruise and it sounds wonderful."
The buyer, when he finally got into the condominium, found it satisfactory. The agent got his cruise.