Brokers Offer Cash, Prizes to Rekindle Housing Sales
In August, when television producer John (“Real People”) Barbour put his four-bedroom house in Toluca Lake up for sale for $1.2 million, he figured it would sell in a breeze. The house has a pool, a Jacuzzi, is close to the studios--and three months later it’s still looking for a new owner. “It’s taking a little longer than we thought,” Barbour said.
Nobody is more eager to find a buyer than Barbour’s broker, Sol Taylor of Jon Douglas Co. in Studio City, who figures to get a hefty commission when it finally does sell. The problem is that the housing market in the San Fernando Valley has slowed considerably. The inventory of houses and condominiums for sale is up more than 50% from a year ago, while the number of houses and condominiums that sold last month was down 20% from a year earlier.
What to do? Sellers and real estate agents are increasingly using inducements to entice brokers who represent buyers to see their properties and get them sold in a hurry.
Taylor plans to pay some of the closing costs for the buyer of Barbour’s house, plus a cash bonus--he won’t say how much--to the broker who brings the elusive buyer in. Last week Taylor held an open house at Barbour’s house--the fifth since it went on the market--and used free food and refreshments to try to lure brokers. Only nine brokers turned up out of the 200 invited.
But it was a start, Taylor said. “If you get a dozen agents to show up, it’s a success.”
“People got spoiled when the market was faster,” said John O’Rourke of John O’Rourke Realty in Northridge. “Anybody could sell anything. This is more of a normal market.”
These days sellers and their listing agents are offering everything from lottery tickets, Hawaiian vacations and cash bonuses ranging from $500 to $25,000--depending on the size of the transaction--to higher commissions for brokers who deliver a buyer for a certain price and by a certain date. They are also putting on open house parties, sometimes with bands and valet parking, and giving away door prizes, all to try to get brokers in to see houses for sale.
Taylor also has a Woodland Hills condominium he’s trying to sell. When he held an open house at the condominium last week, he handed out lottery tickets.
But the biggest inducement is to fatten the agent’s commission if somebody sells a property. In most housing transactions, the listing agent and his agency--who represents the seller--and the selling agent and his agency--who represents the broker--split a 6% commission. As recently as last spring that tradition still held. But in the past few months, some homeowners have offered to pay a bonus to the selling agent who represents the buyer.
A case in point is Michele Petit, an independent Chatsworth real estate agent, who is trying to sell her house in Chatsworth for $269,900, and she is offering a 1% commission bonus to an agent who finds a buyer.
“It makes a difference,” Petit said. “It gets the selling agent more motivated.”
Some homeowners say the incentives work. Alicia Stevenson, a sound effects specialist, put her Sherman Oaks condo on the market in August and offered a $500 bonus to any agent who found a buyer. The condo sold for $152,000 in two days, compared to the average wait of about 90 days. After she offered the bonus, the traffic of real estate agents and prospective buyers increased. “I was making a profit off my place anyway,” she said, “and I got a good price for it.”
Ray Carlos, a Coldwell Banker broker in Simi Valley, is offering to pay for a trip for two to Hawaii for the agent who brings in a buyer for an Encino Park house that Carlos listed for sale at $209,900 six weeks ago. “I might get less money,” he said, “but something is better than nothing.”
Bruce Mosk, director of Mike Glickman Realty’s condo and townhouse division in Woodland Hills, recently bought a Las Vegas slot machine to use at open houses. He hands out tokens to brokers, who get free pulls on the slot machine and a chance to win trips or other prizes. He has also floated a helium-filled blimp the size of two cars outside a house and ran a bubble machine at another. “It’s just for them to have fun and see the darn property,” he said.
These incentives are creative, but why not just lower the asking price on the property? Brokers say that isn’t enough. “There’s so much inventory, agents can’t see everything on the market. At least if you have a bonus, the agent is going to show that house,” said Sheri Wegand, a broker at Montelone & Associates in Sherman Oaks. Wegand is following her own advice. She’s offering a $10,000 bonus to an agent who brings in a buyer for an Encino estate that she’s listed for sale at $1.395 million.
Wegand recalled the case of a North Hollywood house that wasn’t attracting any offers, probably because it was next to an apartment building. After a few months, a bonus was offered and suddenly there were several bids for the house, and it sold.
“I’m not saying it was because of the bonus,” she said. “But it definitely got a lot of agents over to see it.”
Not all brokers are keen on the idea of incentives. “Incentives are good, and they can work, but they’re not a guarantee to sell a property,” O’Rourke said. “The best way is just to market it well.”
James R. Gary, who runs his own realty company in Woodland Hills, said he discourages brokers working for him to offer or accept incentives other than higher commissions. “What I object to . . . is they tend to hurt the buying agent’s credibility with his buyer. So I don’t believe in special inducements,” he said.
But many real estate agents, such as Joan Knox of J.R. Taylor & Associates in Woodland Hills, say luncheons, lottery tickets and bonuses are here to stay--at least as long as the market is slow. “I see nothing wrong with that type of thing,” Knox said. “I’m not saying brokers are lazy and don’t see anything. But if it’s not seen, it’s not going to get sold.”
