Lennar Looks to Revive Florida Sales

Recent data show the South Florida real estate market, like much of the country, may be slowing down. Some blame the recent hurricanes, others blame the departure of speculators from the market. Either way, Lennar (LEN) hopes to boost sales in its Palm Beach division by raising its commissions to outside real estate brokers, after reducing them less than a year ago.

For its communities ranging from Boca Raton to Vero Beach, Lennar and its U.S. Home division are now offering a "3-4-5" program to outside brokers.

The program works as follows: If a broker sells one home, he gets a 3% commission; if he sells a second home, he gets a 4% commission; and if he sells a third home, he gets a 5% commission, according to a fax promoting the program that was sent to local brokers. Lennar's local sales offices confirmed that the program allows brokers to combine the sales across any of the nine communities in Lennar's Palm Beach division.

The move is a swift reversal from earlier this year, when sales were fatter and Lennar dropped its commission to real estate agents from 3% to 2%.

"They dropped commissions from 3% to 2% a year ago. They said we don't need realtors as much. ... Now that sales have dried, they didn't just go back to 3%, they went up to 5%," says Mike Morgan, broker-owner of real estate brokerage firm Morgan Florida. Morgan says other builders like KB Home (KBH) and Centex (CTX) always kept their commissions at 3%. Morgan -- who has shorted several homebuilder stocks -- holds the theory that Lennar dropped the commission last year when sales to investors were booming, and is now raising the rate because investors have mostly exited the market.

The new broker incentive comes a month and a half after Lennar tried to boost sales in its Palm Beach division by dropping its strict antiflipping clauses that had been inserted in sales contracts to deter speculators from buying its homes.