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Steering? You Tell Me. I Say, BUYER BEWARE

Steering? You Tell Me. I Say, BUYER BEWARE.

Without breaking the Code of Ethics and calling out one particular firm/agent, I would like to voice my concern about a practice in our business that I feel is completely unethical.

I was recently at a listing interview when the seller asked me what form of compensation my firm is offering our agents to sell our own listings. Of course, that was all that I needed to hear to realize for whom my competition works!

You see, there is a local firm whose agents 'tout' at their listing presentations that their firm offers them a bonus to sell their in-house listings. This is disclosed to the sellers at the listing presentation--the sellers are led to believe that this will give them the 'edge' on the competition and don't always realize the backlash from this practice.

Steering to a firm's own listings My response to the sellers: "You're moving to Pittsburg, right? Well, how would you like to be taken on a buyer tour to see only the homes that your agent wants to show you because they're further compensated (beyond seller paid commission) to sell you one of their firm's listings? What would be worse than purchasing one of those homes only to realize a month later that your DREAM home was just around the corner and was not ever shown to you because it was not listed with your buyer's agent's firm?"

The sellers signed my listing documents right then and there, without hesitation! They said that they had never thought of it that way and were more than appalled that this practice was even LEGAL and certainly didn't want ANY part of having someone purchase their home that was steered to do so. They said that even if the practice were disclosed to the buyer, they felt that it was bad business--especially in our business.

Makes our blood boil! As it happens, the Commission is currently reviewing this practice and believe it or not, according the the Charlotte Observer, there are three REALTOR Associations who actually support it. Read this.

Here are the exerpts that just make my blood boil:

"We don't believe in-house compensation is a disclosure issue," said Jarrett, the firm in question's representative, who was to make a presentation to the commission at its monthly meeting in Raleigh yesterday.

And further, the writer stated, "Jarrett is supported by the presidents of Realtor associations in Charlotte, Greensboro and Raleigh, each of whom wrote letters on the issue in the past month to the real estate commission." Yet more, "Jarrett, argues... that a customer gains no benefit from knowing if a company is getting extra compensation by a third party, such as a relocation service."

WHAT? Let me get this straight--A customer / client who is being steered to purchase a property because of further compensation from that firm to sell within that firm does not deserve to KNOW about this compensation?

Let's define STEERING: To direct the course of; to guide; to govern.

Steering to a firm's own listings Here's another example that shows how these agents STEER: 90% of the time when I receive a call from a buyer's agent who wants to see one of my listings right then, I can almost guarantee it's an agent from the firm who offers compensaion to their agents for selling their in-house listings. Do you know why? The agents set the tour and the buyers ask, while they're on their tour, "Why aren't we seeing that house?" So, they call at the last minute to make the appointmet. I've had clients tell me that they have had this very experience; they were not aware of the practice until later talking with someone who was selling in their neighborhood who told them about this 'deal' that the firm offers. I'm completely shocked that there have not been multiple lawsuits about this practice--I'm also amazed that this is not REQUIRED dicslosure.

Giving our profession a black eye Do we reallly need any more black eyes in our profession? Why not simply ban this practice? Buyers deserve to be shown the homes that fit their criteria--NOT just the homes that fit the agent's criteria (or the firm's) for making a few extra bucks!

Disclosue, disclose, disclose...

What say YOU?

Charlotte NC Homes for Sale

(THE best Charlotte home search available - no kidding!)

Debe Maxwell, CRS/Realtor®/Broker
Broker@TheCharlotteScoop.com
Phone (704) 491-3310

Disclosure of material contained within.

Posted by Debe Maxwell - Search Charlotte Homes for Sale - Charlotte NC Neighborhoods on 02/14/2010 12:25 AM

Comments (175)

Buyer Beware in the Home Buying Channel

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175 Comments on Steering? You Tell Me. I Say, BUYER BEWARE

FEB

2010

Please let us know how it comes out with the commission. We all should be conscious of the decision.

I think this is an out and out violation of an agent's fiduciary duty to represent the best interests of their clients. How much more blatant does it have to be?

If I have a buyer I want to show them the homes that they might buy without regard to steering them to a particular property. I would rather have a smaller commission check sooner than maybe a larger one later. I don't think showing only in house listings makes sense for anyone, agents or clients.

Thanks! I know that many other local agents are dying to find out what they're going to do about it as well. With as many complaints as we hear about this, I'm completely suprised that these local Boards are in favor of this practice. It's BOUND to be a huge liability.

Debe, thanks again for bringing an important subject to us at AR. I personally think that this is completely wrong, it is an agents duty to show all that is available, please let us all know how this plays out...

Our office does not support that practice. Unfortunately , some do. I'm glad you posted this, becuase your presentation is a fantastic way to combat this when going for a listing.

Jane: I couldn't agree more! That is why I'm so shocked that both our local Board and the Commission has not done something about this practice.

Robert: EXACTLY! I'd rather have a commission check period--than none at all because I've steered someone to a listing just to make a few extra bucks for myself and my firm!!

Debe, You are 100% percent correct. It shouldn't matter who has the listing. If your client wants to see a home not listed by your company it should be scheduled. Selling with in for a bonus is crazy. I hope they get it corrected. We don't need more apples in our profession.

Gerry: Fiduciary duty, as Jane says, SHOULD outweigh that of an agent steering a client to particular listings for their own benefit--but, on a larger scale, a firm that condones this behavior is, as my clients put it, 'shady.'

Debe, I completely agree with you, the buyer never sees all that is out there and it comes down to chasing the buck rather then following our duty to look out for the best interests of our buyer/seller. It works both ways.

I have long suspected that this is also going on in many other areas as well.

Geoff: Every time that I've been faced with this at a listing presentation, I ask the same question and every time, I get the listing. Sellers WANT every advantage that they can have in selling their home but, not unethically. One seller even commented that the other agents probably don't want to show this firm's listings because of they feel that this is reflective of the way in which they do business. I don't hear that from agents but, I do hear complaints from agents who have last minute showing calls from agents from the same firm who have not put other firms' listings on the buyer's tour. Aside from the lost respect from the public, REALTOR relations are just as important.

Debe I flagged this for Featured and would like to reblog it tomorrow.

Ron: That's for sure--we've had enough bad apples to have to combat in this business!

Nick: The first time I heard of it, I immediately phoned my broker to see if it were true. Evidently they've really been hitting this heavily on listing presentations in recent years and now the public is keenly aware. At first, I didn't know how to combat it because I didn't want to bash another firm to a client--I fight clean because I don't ever want another agent or a client to think that I don't play fair. Then, I realized, why not just ask the sellers to be a buyer in that situation. Smart sellers respond to this because they're in that buyer's position (now or when they sell) in another area or within the city and they don't want to be steered away from their dream homes!

Thanks, Nick! Re-blog away-- I'm honored!

It's interesting to see what folks come up with when things get a little challenging. Obviously anything short of finding a buyer to best available home for their needs is not OK. Money and/or sex - the two greatest sources of whacky behavior.

I'm still courious about where this "extra" money is coming from. The offices offering such "bonuses" to their agents must be on somekind of split. And the office takes less of split on inhouse deals?

I doubt you'll have to worry about it for very long - the brokerage will go bust and/or get into legal trouble and go bust.

Hi Debe - I agree, personally I think it is very wrong as we are supposed to have a duty to our clients. I would rather have clients for life then one commission! Please let us know how this comes out.

Debe: I'm going to play devil's advocate here. First of all... I suggest you not use the phrase "compensated beyond normal commission." As I am sure you know, all commissions are negotiable... as are all "splits" between agent and broker.

Also... nowhere in your post did you say that the other agent said he would only show homes that he would get his "higher split" on. But... the majority of the comments to this post... all talk as if that had been the case.

Brokers are free to establish whatever "agent splits" they want to... and if they want to expand that split to an agent if they sell a 'company listing'... it is fully their right to do so.

Although I understand what you are trying to say, and I also applaud you for your "comeback" during your listing presentation... I did not see anywhere where it was shared that the other agent said he would, or has "steered" his buyer clients only to his own company's listings.

I would also think that if he tried to do that... he would lose his buyer client very quickly... as buyers often have their own list of homes they want to see... regardless of who the listing broker is. Just some thoughts I wanted to share... hope you don't find them upsetting.

Dan: You're right--one day it WILL catch up to them and I hate to see it happen to them but, from the public feedback that I've heard, it's going to come back to haunt them. Yes, they're on a split and then additionally, they're offered a company paid bonus to sell their own listings.

Dwayne: Me too! I'm shocked that all of their agents don't realize this.

Karen Anne: No, I'm not upset--I corrected to seller-paid commission--I was trying to explain the 'program' and how it worked. Thanks for that.

Yes, firms can compensate their agents any way that they wish--however, when it's been demonstrated that they're using this form of additional compensation to steer clients to their own listings, that is just wrong. What about giving bonuses to agents who have the highest productivity in a month--any firms' listings? Doesn't that seem more above-board?

When we receive calls from the same firm, "We're right in front of your listing and would like to show it," and it's repeatedly the same firm, AND clients have stated that they had our listing on their list to see but, the agent didn't schedule it... To me, that's proof that this is what these agents are practicing--just for one extra dollar, and it's wrong.

Let me also say, every agent in this company does NOT practice this--I'm not making a blanket statement here but, if ONE agent is steering their clients for that added bonus, then it's bad policy on the part of the firm as far as I'm concerned. It opens the door to liability on their part and hurts only the clients.

It has been my experience that many agents will look at commissions to the buyer's agent before putting together a list of homes. Regardless if the home is listed in the same agency or not, how does an actual buyer know that he/she is being shown everything regardless if the commission is 1% or 3%?

Kevin: Exactly--why do some sellers offer higher commissions? They are aware that this is practiced by some too. It's a travesty but, those few agents wind up costing sellers more than they need to spend!

Interesting. Although I am not involved with your side of the housing transaction, I often wondered if there were some shenanigans going on behind the scenes...

Helping you help others live their American dream...

Selling bonuses have long been part of the Real Estate landscape. I have never thought they were of much benefit to an "ethical" Realtor....you know the ones that look out for their clients best interests and not their own pocket book.

Yep, it happens here by one of the main listing franchises in the area. Not only that, this same company offers unequal compensation to the buyer's agent, keeping more for the listing firm.

I worked for a brokerage here in Northern Virginia that had a policy of extra compensation for in-house listings. The "bonus" came in the form of an increased split for that sale. No one ever suggested that we show or sell within our brokerage listings more than other properties. The only way I would think you could prove that there was any "steering" going on was to examine the MLS for a period of years to determine if the % of sales within that brokerage was significantly higher than other brokerages.

Debe, I'm with you on this one. This smacks of dual agency implications and much more.

Debe, great thought provoking post as always. Steering is a bad practice. Keep us posted on what happens in Charlotte.

Happy Valentines Day,

Betsy

Debe.....great post and great response to the sellers. With these issues it never seems to end.

Debe - While you can lead a horse to water - you can't make them drink - The buyer makes the offer - desires the property - signs the contract.

With the buyers having all types of information at their disposable - Realtor.com, Re/max.com - and all the other .coms, .orgs - buyers know whats on the market sometimes before the buyer's agent does.

Sometimes people are driving around and see a sign and the agent calls to see the availability of the property because they missed it when doing their search -

It could be steering - and it could just be that they missed the property when they did the search -

You know the saying - "Garbage in - Garbage Out" the MLS search is only as good as the information the buyer's agent puts into the search criteria.

Debe I am glad that I am in the habit of reading other posts prior to making comments myself. I was inclined to agree with Karen Anne (post #17), but you brought clarity to your position in your response to her. Karen Anne still made some valid points with regard to "normal commissions" and "agent splits", but I wholeheartedly agree with you on your position of agents who actually DO steer based on compensation. Thanks for your always thought provoking topics.

Debe,

I haven't encountered this, so wonder if it is done by any brokerages in my area. Should it arise, you've taught me how to counter it! Very interesting post and comments.

This certainly makes the case for having the IDX available on buyer's agent's web sites. Buyers can ask, "Why aren't you showing me homes other than your company listings?"

One of the biggest brokers in my market does pay a bonus to company agents who sell a company listing. The only thing better for the agent's pocketbook (and the broker) is for the agent to sell their own listing and they take advantage of that when listing by giving the seller a discount if the listing agent also brings the buyer. As long as dual agency is alive and well, these practices will continue. Dual agency is the poison in the well. But, it's not likely to change in my lifetime.

I lost a listing once because a mega broker agent told the seller that his company had buyers waiting to buy and he'd more likely sell with them than with me. First, they violated the COE by soliciting and active listing. But, that's just one of the ethical lapses of agents for that company. Of course, the seller should have realized that, if they had buyers, they could bring them on anytime, if they had buyers waiting.

When the owner called me about their contact, I relieased him immediately from my listing and wished him well. I secretly cheered them for getting that listing because they choked on it, never showed the property made a believer of the seller who contacted me for a year following and asked me to take the listing back. Thanks but no thanks. He eventually rented the property and it was eventually foreclosed.

Very interesting, would love to know what the commission final thoughts are about this practice. I have heard of this going on in other offices and have always felt like it was steering.

Debe, We hear about this all the time, and most firms will hide behind "office Policy" Vs. ethical licensing and compensation practices. The old "net Commissions" are off the books now and lingered for a long time under the guise of "office Policy"...until someone pointed out the the state commission that the practice was unfair to consumers and sellers.

When I first became a licensed Realtor I was able to join the top agency here in Auburn, whose underlying motto is 'if it comes down to making a dollar or doing the right thing, you do the right thing'... The success of this company for over 30 years is due, in part, to the daily practice of INTEGRITY, without exception. Sometimes If the seller wants to offer a "bonus," I'd rather see it be offered to the buyer in some way...the only real decionmaker for a property. This is an excellent post, Debe!

Amazing. There always have been and always will be those individuals in the business that find ways to make themselves more money regardless of what is best for the clients. Thanks for exposing another way.

No disclosure is the biggest issue I have with this. How in the world can a buyer make an educated and well informed decision about representation without full disclosure of something ohhhh itty bitty like extra compensation???

Debe, my first brokerage did offer extra compensation for selling in house listing. It never moved me because I just wanted to get my buers their dream home. The bonus never meant anything to me.

Debe,

I agree completely with your points.

Consumers should ask the individual agent exactly how they may be rewarded for selling the in-house listing.

Sometimes it is a significant inducement to the agent, and failure to disclose the additional compensation undermines transparency and integrity. We have to use the NCAR Form 770 to disclose additional compensation, unless it comes from our own firm? Bizarre!

"...what form of compensation my firm is offering our agents to sell our own listings." Smart consumer!

You know, I think I will reblog you on this one!

Good morning Debe,

Disclose, disclose..disclose..I love the comeback you gave the seller on your listing appointment. You placed the practice in the light it should have been given..the spotlight for unethical behavior!

While this in-house bonus compensation is probably more prevalent that we think, a more common problem is when an agent fails to show a buyer a home where the buyer agent compensation is below "normal" (isn't that the term you used?). I actually had an agent say to me that he would not show a home if the buyer agent compensation is less than 3% (I still cannot believe that he actually said that to me ... my mouth probably hung open for the better of a minute or so after he said it, but, who, where and when is for another story another time). Now that's rather silly in for many reasons because a lot of our properties are listed at 2.5% buyer agent compensation. So that would mean buyers he represents wouldn't see a large portion of the marketplace. Simply put, that's unethical.

On the other hand, if that same agent had said to me that he'd only work with a buyer if he's compensated 3% in total per the buyer agent agreement, then I'd be more comfortable. Then it is conceivable that he might show a buyer a home where the buyer agent compensation is 2.5% and expect under their buyer representation agreement that the buyer will kick-in an extra 0.5% to make a total of 3%. That's ethical.

So, although compensation shouldn't dictate which homes buyers are shown, it probably has more impact than we could ever imagine, from in-house bonuses to below-market buyer agent compensation.

Debe this is certainly not a good practice as it does not put the client's interest first but rather the agent's compensation. A black eye our industry does not need.

Holy CRAP. No, we do not need anymore black eyes in this professional, but I tell you Debe,there are SNEAKY SNAKES in nearly EVERY area. Stinks. Now the problem is, (and you're doing the right thing) THEY MUST be called out and reported!

Hi Debe, steering isn't even allowed in New York in any way. I'm glad YOU got the listing. Your clients made a very smart decision.

Debe:

This type of practice is most certainly unfair to a buyer who thinks he is being exposed to every home in the market. When I work for a buyer client they are always provided access to the MLS so they can actually see everything available.

Hmmm....

Debe, I really have top think about this. Just because a bonus is offered it does not necessarily preclude the agent from showing competing properties. I think that would be the key element here.

As far as disclosure, I think it's alway best to disclose bonuses but I can't say that the practice is patently unethical.

As shocking as that is there is a very large privately owned company in Westchester County who is paying a bonus to sell inhouse listings. I just find it shocking that a company would participate in such behaviour. I do not believe any of this is disclosed to buyers and sellers but I can't think of anything more unethical. It used to be that an agent would receive an individual bonus for each property that they sold in house. That practice was questioned and to get around that this company pays a bonus at the end of the year based on number of in house listings sold but not specifically related to a listing as if that makes it more ethical. i find it to be a disgusting practice. When I speak to agents in that company I have to ask wouldn't it be a cleaner and more ethical practice to give a higher commission split and get paid when a sale is made rather than let the company hedge their bets based on sales volume for the year.

I don't get why agents would tolerate this, but they do and even boast about how large their "bonus" is.

If we are to represent our buyers effectively, then we have to show all properties that meet their requirements, regardless of compensation. The worse thing for our reputation would be for our clients to come back to us to complain that we were not working on their behalf and best interests. Worse yet, they may complain to their friends. Do the right thing. It's always the best policy.

I am not aware of this in our market. We had a firm back during the boom that offered a percentage of commission back to the buyers if one of their listed homes was purchased and they were the broker for both sides. That firm is no longer in business ( at least I have not seen their signs in a long long time). That was totally disclosed and a selling feature to the buyers- kind of. Your scenario does not pass my smell test!

We had to disclose an inhouse bonus when I was with Long and Foster - makes sense to disclose - why look for future trouble. I also agree with Robert Machado

Hi Debe - I especially enjoyed how you turned it around to get the (now client) to think outside the immediate temptation. Great job standing out from the competition - and congratuations getting the listing!

Debe,

Well stated!

This has long been a problem, but it's not limited to in-house listings! The worst offenders are new home builders, but even resale home some times offer bonuses! The most common is just a higher than average commission or split between offices. This is the fallacy of "agency" the seller is still paying the buyer's agent.

There is a solution, a true buyer's agent acting as a buyer's fiduciary and paid by and only paid by his client! After all would you want your attorney to get a bonus from the other side?

Bill

I have always shown properties regardless of commission or bonus. When I was trained I thought they said show the buyers what meets their criterion and budget - not what meets my budget!

Debe, great post! I see in the remarks many times, especially lately, bonus to selling agent. On a smaller home, why not give the 5000 back to the buyer in the form of a price reduction. A bonus will never entice me to push one listing over another as I personally feel it is unethical. I don't want to push one listing over another for any reason.

On a side note, I have been told on more than one occasion that there is a firm who actually tells people at the listing presentation that if they don't list it, they won't show it. People get scared into listing, thinking that if they don't, they will knock off a percentage of perspective buyers. I would love to have this info backed up in the form of an email....

We have been with a couple of large real estate franchises and neither offered more to sell an in-house listing. I think your answer to the seller was a good one.

However, you can compare the practice you describe to the offering of a special bonus or higher than average broker commission by a seller and the listing broker and think about it this way: We might show the house with a larger commission, but we never try to SELL the property. If the buyer likes it great, but if not we show until we find something that they DO like, even if it is a LOWER commission than we would want.

Sarah in Nashville

Debe, I ran into this when I was trying to find an agent to sell my property in Florida a couple of years ago. They all bragged about how they sold their own listings. I wanted someone to make it available to everyone so we would have more agents showing it.

Debe,

I can actually say that I have never heard that on the listing side. HOWEVER I cannot tell you how many buyers I have picked up because the agent they "were working with" only showed them homes that their company listed. I am with you it is just so wrong and not doing the best for you client to put blinders on them.

Debe, I agree, this is wrong and illegal (or at least unethical). I guess I'm surprised they have the power to do this. I mean, my buyers send me the listings they want to see. I would be in a tight spot to only show them my company listings. Don't buyers go online there and see all the inventory first?????

Debe - There is so much of this type of thing going on right now with the MLS system. If a property is put up on MLS and the status is ACTIVE, it should be available for all to see and if the property falls within the criteria, buyers should be made aware of it, whether it is their own firm's listing or not. However, I've seen REO agents discourage showings - no key in lockbox, wrong combination, etc. The situation you are describing is a subset of the problem of our MLS system not being a level playing field. Shame on the REALTOR associations in your area. Their stance undermines the principle upon which the MLS system is based.

Your example is perfect. I know someone whose buyer agent did not inform her that the home of her dreams was on the market two doors away from the home she purchased. She has never forgiven her agent for this and guess who is marketing her home now? It pays to put your clients' interests first and not think about the impact on your commission. A short-term focus on commission destroys trust and our long-term business success.

I can't say that I've heard of it in my market but anything is possible.

It appears to be a poor business practice in my opinion. If a brokerage was going to raise the commission split for selling an in-house property, that's not illegal, but I don't think I would run around advertising it as a benefit either. It's a mistake to not show other brokers listings as it seriously decreases the pool of available homes to show a prospective buyer.

I'm not sure it's a violation of the Code of Conduct. Steering was designed to insure compliance with equal housing opportunity and related issues. If the brokerage only lists in a certain part of town and not others it might be a constructive form of steering.

What if the client wants to see a FSBO and the seller is not offering to pay you for your services. Do you show the home and remind the buyers that they will be paying the commission? Same question with an REO or Short Sale that is paying less than the amount agreed to in your buyers representation agreement? If the client avoids homes paying nothing or less than the "agreed to" amount because they don't want to pay for your services--is this a form of steering?

Interesting case. We'll have to watch this one to see how it turns out.

Tom

Edited for clarity.

Years ago I experienced the opposite. I showed four homes, then they said great, now that you have showed us yours what do the other guys have? I said folks, Did you not notice the signs in the yards? Not a one were from our company.

Wow. This is a great topic for Active Rain. Many years ago I worked at a firm that practiced this method, although I do not think it did them any good. But, I do not think that you are required to disclose this in California . . . I better find out. We do not do this, so perhaps it is a non-issue.

Wrong without a doubt, just like the agents that push a listing to their buyer clients with a higher commission or a bonus to the buyers agent.

Debe, this is right in line with agents who discriminate on properties because of the commission offered. I am shocked to think an agent would not show listings that were perfect for their Buyer because of an 'inhouse' bonus. That should be serendipity if it happens, not a calculated plot on the part of an agent. Not good - a law suit waiting to happen.

This is very interesting ! Am curious how it plays out. In our market, a buyer agent bonus is very common, but I have not seen a bonus just for "in-house listings". Or maybe they exist but you just do not hear about it. I think if there is a bonus that is available to all agents, that is a much better practice. That also benefits the seller for that opens doors to all buyer agents instead of just the in-house agents.

Another post slamming agents when you should be calling into question the damn broker. It all comes back to the broker who is responsible for the agents whose license hangs on their wall.

Debe - I have to say that when I first read your post, I was confused. Although I agree that agents should never steer their clients, my confusion was that it was remotely possible in today's market! My clients are intellent, well-read and well-researched. They almost always have made their OWN list of properties to view. My website has IDX, and they search right along with me!

I think this issue gets down the fact that we are all individual and our integrity levels unfortunately differ. In my experience, clients "sense" our level of professionalism much, much better than we think. I'm sure there are people that could completely be "hood winked" by an unscrupulous agent, but I think that number is small.

You would not believe the number of times I have been told things from clients about other agents that make me cringe. They know, and they usually keep searching for an agent that feels right to them - for whatever the reason. Those agents they dropped are probably telling their friends & coworkers that "those people just weren't loyal"!

In Oklahoma, we do have to disclose commission to a buyer if we represent them, and if a bonus is tied to the listing we have to ask permission to accept it. On the selling side we have to disclose not only a bonus, but the terms for it. I company who paid their Realtors a bonus for in house sales not disclosed as a practice in MLS is an ethical violation. I would also like to make a case for anothger ethical dilemna. This encourages a Realtor to possibly creat a sale that would deny representation to a buyer. Overall I think this type of advertsing this company does is dumb and does nothing to promote goodwill to the public at a time it is sorely lacking..

This practice goes back to other posts encouraging agents to DO WHAT IT TAKES to be successful. Our industry promotes that mindset and in tough times it takes on a whole new meaning. I still say I would rather do the right thing (legal DOES NOT equal ethical) even if it costs me money.

Ross,

I agree with you that the broker/brokerage sets the policies. If the policies are illegal or unethical, the agent needs to find someone else to sponsor them. While I firmly believe in the power of branding, it's still the agent who is hired to provide services. If the brand is hurting your ability to find clients, it's time to find a new brand.

I serve on a committee with the Texas Real Estate Commission on broker responsibility. The goal is to suggest changes to rules and laws that will strengthen broker accountability in the state.

Tom

Because Lyon Real Estate is the largest independently owned real estate company in Sacramento, we list a lot of homes in Sacramento. I often end up in transactions with agents who work at another Lyon office, but I don't know them. That's still dual agency. However, we don't get any extra bonuses or additional compensation for closing in-house transactions.

The C.A.R. purchase agreement discloses dual agency on page 7. I would presume that the offers you use disclose agency relationships as well. Buyers don't know how much each agent earns on a transaction, so I can see why some Board of REALTORs would support this form of extra compensation, but personally, it seems somewhat questionable to me.

Great Post (like always). Real estate, cars, boats, just about any big ticket item or being a agent with different suppliers steering will always be apart of the process. All you can do is report if you can and go on

Debe, I liked your blog so much I reblogged it. This happens here too. One of our large mega broker offices locally offers bonuses for agents that sell their companies listings. I think they sell more of their own listings only because they are bigger than any other company locally and have more listings than other companies, it's just a law of numbers. However, they surely aren't doing their sellers or buyers any favors. Then there are those companies that pay their agents salaries to sell homes, I can't see how that is doing their clients any favors either - what is the incentive?

@ Tom in # 60: I suggest that discussing about REOs that are paying "less than the going rate" is inviting a phone call from the Justice Department. This is NO such thing as a going rate. Sorry to be a "brat" here... but this kind of wording number one is wrong, and number two... it reeks of commission "price fixing." Just trying to keep the Justice Department happy.

Good point and I agree with you...but, I guess for now, all you can do is promote the fact that you will let anyone and everyone see your listings and you will show any buyer any listing they want...hopefully the competition will go bye bye!

I'd never think about doing such a thing - heck I even approach FSBOs if i think their homes would be of interest to my clients.

But the paycheque often drives agents and with the system the way it is, it just allows the bottom-feeders to thrive.

It's time for a system where we need to pick sides and be paid only by that side. A line should be drawn.

If I'm a buyer's agent then my soul responsbility is to that buyer - meaning the buyers pay me to show them what they want to see and what they should see.

If I'm a seller's agent then my soul responsiblity is to help that seller get his home sold, and the sellers pay me.

And get rid of the commission structure. Being paid for exactly what we do and have that outlined on a monthly invoice would increase full disclosure and make everyone accountable.

Pam.

Debe, I don't believe this goes on in this small town. I love you comeback question to the sellers, I will definitely use it if I am ever asked "What form of compensation my firm is offering agents ......

We should put the clients first.

Our commission or fee's should be discussed and agreed to with the buyer (with a signed buyer/broker agreement) before showing homes. So it doesn't matter if it's a REO, Short, FSBO or any other.

Those the show strictly for precieved benefit to themselves first need to find another career.

It's common practice here for some of the offices to hold their listings off the MLS for the entire week allowable in order to attempt to first sell it in house. I've always maintained that this was NOT in their clients' best interest. But what you describe is outrageous!

Thanks for your nice post! I'm not aware of any companies offering this bonus in my area. Thank God! The potential for ethical violations is obvious....and its disappointing to hear that there are real estate comissions that don't see that. The burden is on them to protect the public, and they should know that this would be nearly impossible to prove in court, unless a buyer kept records of all comments and listings shown. Thanks again for your post!

Greed is not a virtue and it will get you nowhere. Shady business practices like this will certainly have a negative effect in the long term. Honesty and integrity will lead to better business, I'm sure of it!

Great Blog, The very first word that comes to mind is Fiduciary. The second is Ethics. When ever I have a concern about business ethics and practices I ask myself " Would I announce it to the world"

Can you imagine this agent on Superbowl Sunday saying "Work with me, there are approximately 100 homes in your price range but I am going to show you the eight that my company has listed because I will make a bonus".

What he or she is really saying is "My needs come first before your needs, and that really isn't a good way to live your life or run your business.

If you are a representative of the seller you better be showing your inventory first, the companies second and MLS third. We show in that order regardless but after the initial showings we continue till they write. That being said if it happens to be the first one we are not going to say WAIT you haven't seen everything yet.

I am a firm believer you cannot sell a home to anyone if they don't want to buy it, regardless of price, bonuses, or influence.

Debe...it disgusts me about how some companies stoop the lower levels of the gene pool for the sake of sales profit...it puts a mark against the integrity of the whole of the profession...Stoop or steer...Cherise

I don't subscribe to the idea that a "bonus" is going to sell a house. But, I don't know where it is written that I must show every house on the market to every buyer. A salesman steers a customer by asking and answering questions and by their comments during a showing and the subsequent inspections. I think the COE is supposed to be for protecting the public not one salesman from another. I may use your listing as a bouncer to sell the home I think is ideal and the best house for the client - are you going to call my Board on me?

Karen,

I edited the post for clarity. I was actually trying to avoid using a specific percentage while still making my point. I think you'll find the edit better gets this across. Thanks.

Tom

Hi Debe:

Even though I've never heard it mentioned during a listing interview, it is a practice done here in NJ with some brokerages.

I guess the same could be said with listings that offer a "bonus incentive".

It's always best to disclose any incentives...

Joyce I hear what you are saying as a representative of the seller, but if you take on a client as a BUYER agent then you have shifted your fiduciary duties to the buyer. Now if you tell your buyers that your policy is to show your own personal listings, then company, then MLS listings then that is fine, but if you don't, then I think you are breeching your fiduciary duties to your BUYER.

It is not in your buyers best interest to see homes in that order. That is in your seller's best interest.

I also agree with Ross. The broker sets the policies.

This is a bit of an outrage. One would hope the commission would stop this from happeneing. If not, maybe it need to be public knowledge!

Steve: On or off the books, this is unethical. My rebuttal here--just as we're not allowed to steer clients to particular neighborhoods, why would it be okay to be compensated for steering them to one of our firm's listings, regardless of the form or time of compensation?

Tom: Compensation is discussed with the buyers upon signing of buyer's agency. I've had agents phone me to ask why, as you say, the 'normal' compensation is not offered by my sellers! I am ALWAYS shocked at this and often HOPE that this agent isn't the one bringing my sellers the buyer--Do we even HAVE a 'normal?' If they're only worried about their (the agent's) bottom line, I worry that it's going to be a rough transaction! Buyer's agency is about a fiduciary duty to our buyers, not our purses. I'm glad that you're serving on the Texas Board and keeping them straight down there!

Ross: No, this is about the FIRM--the agent's who fall prey to this practice is not an all-iclusive group of agents from this particular firm. As a matter of fact, I've had MANY successful transactions with agents from this firm and have fantastic relationships with many of their agents. It's the few, select agents who are doing this but, it's the FIRM who is to blame for offering this unethical carrot to their agents.

Mark: Regarding additional bonuses offered--I put those to good use for my clients--they receive the benefit of the seller offering the bonus. I make arrangements to transfer the additional bonus to help cover the closing costs of the buyer--AFTER the contract is negotiated for them. It's shown on the HUD-1 as seller paid closing costs and my commission is reduced to the original amount without the bonus. So, my clients don't mind if I show them properties with bonuses! If it turns out to be their dream home, they love it!

Larry: You know, I've had the SAME thing happen--"The agent only showed me listings from their own firm and I knew that there HAD to be other homes that fit my specifications out there!"

Bev & Bob: I'm in agreement with you but, that doesn't always happen. Just as Larry Story said, we still get buyers from agents who continue to show only their listings and their firm's listings. Perhaps they explain that the homes don't really fit the buyer's criteria--they've previewed them--who knows but, it is still done.

All: I agree that we're taught in school to show our own listings first, then those of our firm, then all the others. I can honestly say that I show my clients homes that fit THEIR criteria, PERIOD! That is my fiduciary duty, PERIOD.

Terrific post, Debe! I'll be anxious to hear how this comes out in the end.

Toula: I combat the possibility of the additional 'bonus' by giving it to my buyer in the form of seller-paid closing costs. I've actually had buyers turn this down--saying that I worked for it! But, for the most part, it just goes to the buyer and they love it!

Hi Debe, Certainly savy buyers would catch on quickly!? The practice of additional compensation is not wrong, the practice of purposefully putting the agents pocketbook above the needs of their buyer definitely is.

Debe, what is interesting is the extra commission will not make that buyer like the house. He is going to buy the one that appeals to his or her personality.

Don't know how you would prove this though. If the company offers an incentive for selling it's listings, how can you prove that the agent didn't show other listings.

Debe,

This is a critical point you are making. To steer clients based on compensation is crazy. You are not going to be able to build your referral base as clients realize you are not after their best interest!

I agree with you wholeheartedly. If it's a great best house for your client, wonderful. But to leave others out of the showings makes no sense!

Bad for all in the long term. Not living up to the Realtor moral code of ethics if nothing else!

All the best, Michelle

So many of my buyers are telling me which homes they want to see, having located them on the internet first. I don't care whose listings they are; if they are a good possibility for my clients I want them to see them. Doing the right thing works out best for everyone.

Debe - seems to me this is a violation of the agent's duty to the client. And I don't see how not disclosing this practice would not be a problem, either ethically or legally. I have not heard of this happening here but it may be and I am not aware of it.

Steering clients to property YOU want them to see and not what they want to see is an issue without the added compensation, in my mind.

Jeff

Debe. O moved in 1994 with a company relo and was assigned an agent. I did notice that most of the listings I was shown were in house listings and I later found out they do pay more if an agent sells in in house listeing..Bad Company..Bad, Bad, Bad.

My duty is to my client first and foremost. I think the lifetime value of the client is worth more than a bonus. I have never steered someone towards one house over another because of the financial reward.

Hi Deba ~ You must have read my mind. I was thinking about this just this morning. We have acouple of companies around here who practice this too and it blows my mind that it seems to be an accepted practice.

In your case I found it interesting how the agent of the other company was able to use it in their pitch with your sellers and it was only when you put on a "buyers hat" did they realize the ramifications.

Also interesting is the fact that we do have a code of ethics that forbids steering and yet this up until now is not considered steering. I'm glad to hear the Commission is reviewing it and look forward to the outcome of that.

Great, thought provoking post.

Denise

Hi Debe.

I don't discuss compensation. However I have come across a few sellers who mentioned this. All I can "say" is that I fully disclose. Like Dick and Dixie above in Florida we fully disclose. This is included in the Seller's Estimated Expenses and a copy of it is given to the seller. On the buyers side we have the Buyer's Estimated Expenses and a copy of it is given to the buyer. Florida rules are very clear and align with full disclosure which IMO is a good thing.

Jane's comment (#2) is exactly on point "I think this is an out and out violation of an agent's fiduciary duty to represent the best interests of their clients." I foresee lawsuits in the future for those brokers.

Debe, great post, I reblogged it and as I did it occurred to me that is a listing agent has two offers on a property and one of the offers is from an agent in her office don't you think they might push to take the in house deal since she will get paid more? Again most agents wouldn't be effected however you would never know if the best deal won or the inhouse deal won because of the bonus.

I know of a case just like yours, except it was the SELLER who wanted to save on the commission in this way. It actually put that broker in a spot after agreeing to the terms. When an offer came in the seller screened out the ones by other agents. Needless to say the seller missed out on some excellent offers. And, oh, then the market took a tumble and now the listing has been reduced several times and is still on the market.

I agree that this practice is unethical and should be banned. Thanks for another great post.

Interesting. Not sure that I care one way or the other regarding how the firm compensates their agents - BUT - I certainly care about this being a "hook" for unwary Sellers. Realistically, does it matter which Broker brings the Buyer as long as the property gets sold? Any Seller falling for this line from a Listing Agent needs to be educated!

Debe - once again, you have a great dialog going on here. I show my clients any and all listings that meet their criteria. Ethics and foremost my conscience would not allow me to act otherwise. My integrity is worth more than any bonuses or higher commission offered for listings.

I have to disagree (respectfully) with your blog. Here are some points I would like to make:

1. The commissions belong to the broker, not the agent. So if the broker wants to give the agents an incentive to close in house listings, that bonus does not need to be disclosed anywhere. As far as the seller is concerned, they are paying the broker the agreed upon amount from the listing agreement. Nothing more needs to be disclosed in regards to monetary compensation.

2. What you describe is not considered "steering". As long as the properties shown are not to "steer" someone to or away from a certain protective class, then you are fine.

3. In matters of dual agency, you will need to follow your state laws. In my state of California, dual agency is perfectly fine as long as it is disclosed.

So what you explained to the seller was the disadvantages of dual agency. I might have approached it differently, but your method worked for you!

Great blog and discussion.

Have you struck a cord. And some good dialouge with different scenarios being played out. #108 makes a good example.

My firm does not pay an incentive for selling one of the company's listings - exactly for the reasons you have spelled out. Unbelievable what goes on . . .

Yes, that's GOT to be a violation, and even if it weren't that's the kind of thing that damages our collective reputations as agents. Disgusting.

Debe,

We have to disclose ANY bonus we receive whether it is our listing, our comapny's listing or new construction to the buyer at the time we are sriting the contract. It has been my practice to show ALL listings that my buyer requests to see and in no particular order. It is not now or will it ever be predicated on whether it is my listing or not and whether it has a bonus or not. I disagree with the practice and think that it opens us up to legal action.

Have you taken your opposition to the practice with your Association President and CEO? If not I would let them know your discontent with their position on the issue. I would hope the NCREC would have a clear head and see the larger issue with this practice.

Wow, what a slipperly slope some agents will go down. Certainly not worith it.

Miriam: EXCELLENT point and one that I had not addressed--multiple offers did not come to mind when assessing whether or not I feel this practice is unethical. The implications all around should be cause for concern on the part of the firms who practice this.

Satar: I do acknowledge that the compensation DOES belong to the firm and if they wish to give the agents whatever percentage they choose, that is their prerogative. However, as a firm, would you open up yourself to unnecessary liability brought upon your firm should just ONE of your agents be desperate in these times and take just ONE buyer to see only your firm's listings? Should the buyer file charges, would your 1-time incentive be worth the consequences of this rogue agent's actions? As the owner of a firm, you can't be in the minds of each and every one of your agents--you have NO control of their actions, frankly--why woud you jeopardize your firm's good standing in the community with this practice?

All I'm saying is disclose, disclose, disclose to your buyers and all possible liabilities will be covered for your firm.

Don: I do believe that many before me have complained about this practice. However, at this time, I don't think this specific topic is what is being addressed--many agents in the state WANT it to be though! They are currently addressing non-disclosed compensation by builders and this should fall right in-line with that topic. We shall see...

Debe

Paying an in house commission is a policy issue and should be in the companies policy manual, and is not an violation of the Code of Ethics and will not require a disclosure.

In house commission doesn't effect the public, the relationship is between the broker and the independent contractor.

Good luck and success.

Lou Ludwig

Debe - Oh do I know to whom you refer. And I think an exception proposed to the rule is purely politics and not in the consumer's best interest. I feel confident this will fail as a rule change. I completely agree that the process of disclosing all compensation has to be transparent. We have to show the public we are not the swamp salesperson of the past. I'm not completely sure it's steering as there is so much available online. Perhaps it falls into a new category. Hot Topic here !

I used to work for a firm that practiced that form of compensation. However, I always disclosed it.

For my buyers I always ran a search with them in the room so they could see that NO home was left out that met their criteria.

I took that even one step further by showing them what the payout was on every listing they wanted to see.

Great post Debe. I can see why it was a featured blog!

Lou: I respectfully disagree with you--any form of compensation SHOULD be disclosed to the consumer. It may not be a 'legal' implication but, surely an ethical one that definitely needs full disclosure. The example that I sited in #119 should cause bring pause to anyone practicing this.

Claude: My client's best interests are FIRST and foremost in the manner in which conduct my business. I know that MOST of their agents DO do the right thing but, again, if there's just ONE who is not...

No, it's not 'steering' in the form of steering which we are absolutely prohibited doing but, steering in the sense that they are 'guiding' the buyer to homes that will further compensate the agent.

Oddly enough, I was with a buyer yesterday and did happen to show one of our listings--we're NOT offered any 'reward' for selling our own listings but, I brought to their attention that per our earlier conversation about dual agency, this particular home fell under the umbrella of 'dual agency.' It wasn't MY listing and I barely know the agent who had it listed but, it IS dual agency should they decide to purchase the property and I have to let my buyer know that.

In my opinion, we can never disclose TOO much to our clients. I want to be their REALTOR for LIFE, not just during this transaction and I want them to know that I am completely above board about everything so that I WILL be. I know you and Jane are the same way.

As always, thanks for stopping by!

Wow. This is a complicated issue.

We have a brokerage near ours that won't even allow us to show his listings. He won't answer the phone, or put lock boxes on the doors. He mainly does rentals...but still. He wants to keep the full commission "in house". I can not imagine why anyone would list a property with this brokerage, but they do. It makes us nuts in our office. We WANT to do the right thing and show any and all properties to our clients, but this particular brokerage is so closed that we really can not show their properties. I think they are under investigation, but I don't know for sure. I do know they are not doing well. They just lost their office space, and now work out of the broker's home. It is so wrong on so many different levels. They certainly do not cooperate fully, which is against the MLS rules.

I sure wish I had a client fall in love with one of those houses with an excellent bonus to the agent. It hasn't happened yet. It's not something I concentrate on. I figure good business pracitices brings more good business. So, I'll get compensated one way or other.

NAR - Code of Ethics:

Duties to Clients and Customers

Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS^® pledge themselves to protect and promote the interests of their client.

Standard of Practice 1-12

When entering into listing contracts, REALTORS^® must advise sellers/landlords of:

1. the REALTOR^®'s company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities; When entering into listing contracts, REALTORS^® must advise sellers/landlords of

Standard of Practice 1-13

When entering into buyer/tenant agreements, REALTORS^® must advise potential clients of:

the REALTOR^®'s company policies regarding cooperation;
the amount of compensation to be paid by the client;
the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties;

(I think #3 should strike the word "other" and then it would include the compensation offered the buyers' agents within listing offices)

Craig: Thanks! I think that you handled it JUST the way you should have--your integrity ALWAYS shines through. I have to say, during this economic time, unethical behavior is impossible to avoid for some who would otherwise be above-board. I would think that firms who practice this would avoid ANYthing that could, perhaps, bring litigation upon them.

Amy: I agree with you--WHY would anyone even LIST with this firm--knowing that they don't allow other firms to show their listings?? I hope the investigation turns out beneficial to the sellers and they make them halt this practice immediately--especially NOW! Every seller deserves EVERY advantage to get their home sold.

Thanks for your post. I was going to write a post the other day on this exact topic and still want to. We just lost a sale of a home because the listing agent pushed for an inhouse sale. The title company down the road from them told me they (the other firm) do it all the time so they can get the sale inhouse.

Carla! You ROCK! I should have known you were out investigating this! So, like Larry said, why do we continue to get clients who tell us that their agent was only showing them their own listings? The next time it happens to me, I'm going to ask if this company policy was disclosed to them. I'm curious to know for sure and there's no better place to get that information than from the consumers lips!

Thank you for bringing this to our attention.

Debe ---- my friend, you have done an exceptional job with this post -- this is a real sore point with me, too. I am definitely going to share this post with my agent-owners. Thank you.

Hi Debe - In concept, I find nothing wrong with it in my state. That is because we have dual agency and it is disclosed. So I do not see any issues with an agent that would show only their own company listings.

This might be one of those times when my 13 year daughter would snort, "geez mom, are you so naive as to think they aren't doing that?" Adolescent disdain aside, am I naive? How could an agent pull off steering? 90% of the buyers today use the internet, 100% of all clients I work with are on automated searches, and virtually all listed properties have signs. How in the world would you pull off steering -- showing only certain properties -- even if you wanted to? Drive only certain streets in subdivisions? "Nope, no homes for sale on that street, look, there's Elvis", or "Nope, that house in the search, it's really not for sale, just a misprint". Naive or not, I can't see how to control what your client is going to look at and buy.

The required disclosure is I think to the seller, not the buyer except as it relates to dual agency

What you describe is not steering ie the funneling of home buyers to a particular area based on the desire to keep the makeup of that neighborhood the same or intentionally change it. And my guess is there is no compensation beyond what was agreed upon in the listing agreement. In an office where the agent and the broker split 50/50 If a property is sold in house; the broker would get 50% the sellers agent 25% and the buyers agent 25%. I suspect the bonus is that the buyers agent will get a a little more and the broker a little less. Does this have to be disclosed to a potential buyer.. I dont think so. Do you tell your clients that you wont be showing them any FSBOs?

Leslie: This IS done--and like you, I don't know how they manage but, it IS done. What I've heard from buyers who come to me and say, "I fired my agent because they showed me only their company listings," is that the agent sets the 'tour' and the buyer has given them their criteria. I've had several buyers recently who did not use my Gateway because they never get on their computer or don't even have one. It's RARE, I know but, it IS possible.

Hmmm wow

My agency actually does this. I have never, truly ever shown any favor to showing our listings over any others. I show homes ONLY based on what my clients want, even if they offer LESS for me.

But I will bring this to my brokers attention. VERY INTERESTING...

Wow, such an excellent post covering so many things that are wrong with the scenario. Our associates show any and ALL listings that fit the criteria of buyers and I personally do NOT take bonuses offered by any entity other than a builder and only then with full disclosure. Way back when we had MLS books, I worked at a firm that had associates who tried to only show properties that were offering a bonus to the agents. To make sure there is NO conflict of interest, when I am writing an offer that has an agent bonus, I negotiate everything and then ask that the bonus be deducted from the price OR used toward reducing my buyers closing costs!

I hope you had a wonderful Valentine's Day and I;m looking forward to seeing you next Tuesday!

I totally agree with you as well, Debe. Very unethical, not fair!

I recently lost a listing due to this objection. But, it is not accepted practice in our area. My broker was livid when I told him, but there is not really much that we can do to prove this.

There are definitely agents who are doing this -- they have a lot of listings and only show their own. Not right -- but it happens.

In Florida, it is not uncommon for an agent to offer a slightly lower commission if the buyer is also a client of his/hers. But this must be disclosed in the mulitple listing sheet at a "variable rate" commission. That way the other agent knows up front that there could be an advantage to the seller if both offers are the same, but one is from the listing agent's buyer and the other from another agent (even one in the same office). As long as this is disclosed up front apparently no one has an issue with it down here. Some agents do this, some do not. No set rule of couse, and the amount of the commission/fees is never set in cement.

But do keep in mind, using your premise we would only show homes at the highest commission levels. While one office may offer a bonus, another may offer a commission that is still higher. Or they may not charge fees so the compensation is better. Whether we like it or not, the contract an agent has between his or her broker is there business. Code of Ethics affects our relationships with customers, public, other agents, etc. I am not aware that it governs compensation agreements within offices under the same broker. I am not an attorney, but my guess is that it does not.

Also, "steering" as you are defining it does not appear to be the same as when HUD refers to steering in regard to protected groups under the law. I am not saying that compensation should be the main reason you show a home, but I am not sure that it falls under the legal definition of steering that I was taught in my law class.

Have not run into your situation Debe, but am seeing alot more commissions where the listing agent is not offering a 50/50 with the selling agent. Never use to be that way in our area. Leaves me with a bad taste in my mouth and a bit lower opinion of the listing agent. I know it is legal, but I do not like it.

Hi Debe- I have been associated with a broker who has 'in house' bonuses since before I joined up with them 18 years ago. Did it make a difference to my joining? No it did not. Have I sold an 'in house' listing? Yes I have but only because it was the right home for the buyer. Did the buyer know I was compensated? Yes they did. Disclose, disclose, disclose. I am not sure how the broker in your area runs their business compared to my broker but in my neck of the woods it was never considered 'steering' to sell an in-house listing. As a matter of fact my Broker is one of the most ethical and above board Brokers in the industry and highly respected as well.

What I have learned over the years is that there are many ways agents for a Broker work and many times I find their work ethics appalling. Like when an agent will not show a particular listing because they do not 'like' the agent or the compensation is too low. Those reasons to me are just as wrong as to only show in-house listings.

Bottom line is we need to show ALL homes available within a buyers criteria and not allow in-house bonuses, our feelings for an agent or compensation be the driving factor.

It sounds to me like the Broker in your area is handling the in house bonus all wrong OR the agents for the Broker are. Either way, they are doing a grave disservice to the consumer in my book

And BTW- I have heard through my local Broker grapevine that in-house bonuses are going away this year after all. Seems there have been many Brokers/agents across the country who have handled the concept all wrong and my Broker wants no part of being associated with the thinking that brought you to write your post to begin with. :0)

What a great post! I have enjoyed reading everyone's comments and I think it has all been said. Persoanlly it made me cringe!

Hey Debe....another great post today. Well put indeed.

Patricia/Seacoast NH

Debe,

Obviously this is not a practice that most here agree with. I also disagree with steering. It is your fiduciary responsibility to find the right house for your client...no matter the commission paid, brokerage, etc. If I have a listing in brokerage that is perfect for my buyer...I absolutely would show it. I do not agree with giving additional incentive...reward drives behavior.

Debe,

Debe,

I show and will always show what all properties my buyers want to see...period! My bonus is making a buyer happy...that results in great referrals and return business...

Evening Debe, It certainly falls far short of my fiduciary duty to my client. Please keep us updated

Wow! That is nuts - amazing what some companies try to get away with - we should of course just show the best properties for our clients...

I was not aware of this practice. I'll be watching for this type of thing now. I couldn't agree with you more. It sure sounds unethical to me.

I, and most Realtors, just want to find them a home. If I get a bonus as well, so be it. My company does not offer what you describe, but I can see why a broker would. I always work in my clients best interests, that way I am never wrong. But I don't have a problem with a broker that offers bonus's to their agents. We also have times when a seller will offer a bonus to the buyers agent. Similar to what you are describing. It doesn't mean I am only going to show those homes that the seller is offering a bonus. Whatever fits my buyer, that is what they are going to see, plain and simple. If they happen to like the "bonus" property, good for me.

I think it should be a disclosure. I like your objection handling technique on this one a lot!

If a franchise fee is reduced from the "normal amount" for an in-house sale, does that fall under your definition of steering?

Just curious.

Great post. I hope something is done about that, it is just wrong. It also puts another black eye on the professionalism of our industry. For all of us that work so hard to make the word Realtor stand for professionalism this really does not help. I show my buyers everything because in the end it is their choice not yours because you want to make a few extra dollars. If you are struggling for the couple extra dollars that much, maybe you should find more buyers and not try to milk every dime out of each transaction.

I suppose this might happen here in the OC, but I'm not aware of it. I agree that it's not to the buyer's advantage.

Debe - Kudos to you for putting this in perspective so quickly for your clients! I'm not surprised - you are a consummate professional. I look forward to meeting you Tuesday!

Debe, And we wonder WHY we rank one notch above a Used Car Salesman? Seriously. I think this is a poor way of doing business. IF they want to bribe their agents to sell their own listings, why NOT disclose it to the buyers upfront? Are they afraid the buyers will then feel like they were being steered????? It's all about being transparent, as someone mentioned above. Why on earth would a Broker NOT want to disclose something that is completely ethical, unless they fear backlash? I'm with you on this...I think it's a bad practice, unless they DO disclose and the purchaser is fully aware.

THRILLED that you got the listing! You deserve it on your own merit, not bribery!

Debe, I think your response to the sellers was perfect! Great way to handle it! I know there are some agents that look at what the commission payout is to the buyer agent before showing the buyer those listings or some agents who pick 10 houses to show the buyers, i.e., the AGENT picks the top 10 houses. I don't approve of either method. I send my buyers the listings that match their criteria, without ever looking at the buyer broker compensation until we are writing up the offer and I have to fill it in on the contract. Also I send the buyers the listings that match their criteria and they decide which houses we want to see. Why would I decide??? Maybe I think the colonial on the corner is a rundown, dump but my buyers see it and have finally found their dream home.

Amazing story Debe! I'm glad the sellers "saw the light" and you got the listing.

Debe, I think every firm I know of offers agents an in-house bonus. But that certainly does not limit the properties I show to my buyers.

Great point Debe. Thanks for sharing and I think everyone who commented here made some great points. Steering is not the way to do business. As far as extra bonuses, that should be between the seller and the listing agents. If the seller wants to give extra bonuses, it should be all written in the contract. There should not be any ambiguity about it. For a buyer agent, that is up to their ethical practice if they want to stress showing a property that will make them more money or show the property that their client is looking for. At the end of the day, client satisfaction is what matters.

I don't think it should be illegal... but I think it should be a required disclosure. There is already too much interference in the way we do business with clients.

Debe, while I think it is unfair ro the customer/client that agents refuse to show properties outside of their agency listings, I am not sure if it is an ethical matter that those agents are offered an incentive to get the in-house listings sold. But again, in fairness to both buyers and sellers alike, I do think that type of information should be disclosed, and then let the client/customer decide.

FEB

2010

Then there are those companies that withhold listings from the MLS for 72 hours to give their own agents a chance to bring a buyer in so that they agency can double-end the deal.

Personally, I also think double-ending by an individual agent should be banned. There simply is no way that an agent can take a listing, promising to get the highest and best price as quickly as possible, and then sign an agreement with a buyer saying that the agent will get the buyer the best home at the best price. It's a conflict of interest, and anyone who can't see that doesn't understand contract law, notwithstanding the fact that it's a well-known practice. Is it tempting? Sure, especially in places like Hawaii and some areas of California, Florida, D.C., etc., where prices are inflated.

I love it when I see a case come to court that involves double-ending. I'd love to see the agent get up on the stand and explain how he could represent conflicting interests for a seller and a buyer. Unfortunately, these types of cases are always settled out of court so as not to upset the system.

Debe, In my old company they used to do this, not enough to steer the client in my opinion and this was many years ago. I really didn't even know the practice still existed with all the various compensations. I don't think it should be illegal but disclosed as Lane said. It's not right the buyer doesn't know. If you have to disclose other forms (warranties) of compensations why not this one then?

Ron (#132): Not sure if you really read the post--the agents ARE disclosing to the Sellers--by way of 'touting' that their firm pays a bonus to them if they sell the firm's listings. Again, hypothetical situation: Buyer's agent is desperate in these economic times; steers (read the definition of steer above) buyer to one of his firm's listings so that he can make an added bonus. Agent's firm pays bonus to agent and buyer was none the wiser--tell me disclosure isn't warranted here.

Just as Larry said, we get buyers all the time who complain that their agent 'must get some type of incentive' to sell their own listings because that's all he/she's shown us.' If this practice WAS disclosed, the buyers that come to us asking this question would have ALREADY known that there is, indeed, an 'incentive.'

And, no, I don't tell my buyer's I won't be showing them FSBOs--as a matter of fact, we phone them together if we see something while we're out.

BethAnn: I'm not the LEAST bit worried about your ethics!

John (#139): No, I'm not referring to steering to a neighborhood, merely steering (as defined above) to a particular home, listed by a particular firm, so that the agent can benefit from further compensation.

Jason & Russell! WooHoo! Me too--I'm in Chicago headed your way!

Martha Brown--Can I just say, "AMEN?!"

Patricia--You just made me glad I'm not in DC! We combat this all of the time with our listings and the sad thing is that when they do wind up listing with us, they tell us that is what convinced them initially to go with the 'bait!' It's sad because it's doing the sellers AND the buyers an injustice any way you look at it--if they have a buyer for the seller, they're going to bring them to the home no matter WHO has the listing--IF they've got an ounce of integrity!

Mike: Thanks and I can't wait to see you and Loreena tomorrow!

Lane: Like some states prohibit dual agency, this should be viewed as a similar practice and be prohibited as well. My guess--it's not going to happen but, if the firm mandated disclosure, I would hope that it would be in written form so that they would be able to cover themselves.

William: Absolutely!

Russel: Coming from someone who is not in the trenches in this aspect of the business, I SO appreciate your opinion. This is definitely something that the public needs to be made aware of.

Lyn: We have to have the buyer's signature saying that they approved the inspector--even if they selected their own inspector OR if they didn't know one and I told them to just PICK one out of the list I sent them!

Debe, something smells bad about this. Recently a local company had a problem with steering LINK I also was a part in the GA Real Estate Commisions investigation of a local broker that only showed their builders homes in a new home subdivision. The other builders found out, someone complained, why aren't you showing me those home? The Commision was very thorough in their investigation, don't be surprised if this comes back to bite them....

Debe - I KNOW what firm you're talking about, and I've always been bothered by that policy, even when I worked for them back in Maryland. I don't know HOW they get away with it. Seems very much like steering to me, and someone should call the Virginia Real Estate Board where that company is headquartered.

Debe,

Quite an interesting story. I am surprised at the practice. I think it is counterproductive. People are looking for the best match, and not the best match of their agent's commission.

168 comments, wow. I usually read comments, but 168? Sorry, if I just ended up repeating someone word for word (LOL)

We have a major firm in my area that does the very same thing. My hairdresser was selling her home and using a long time family friend from a neighboring town. Being in the business I would ask how things were going whenever I was in the chair. To my surprise she told me an agent with an office in her town, let's call it "V Town", came to show and advised that she will NEVER sell her home unless she listed with an agent from "V" because "V" agents only showed homes listed with "V" agents. The house was getting showings but no offers, they were chasing the market. Upon expiration haridresser listed with the other agent and during the listing presentation was told the very same thing, agents in her office were given bonuses for selling office listings and since they were the biggest in town they had ALL the buyers. I nearly fell over when I heard this.

So Debe, I see your Steering and raise you a little Panic Peddling.

FEB

2010

Yes indeed a joke in the world of transparent real estate yet this is how this same firm does business all the time. Then again you have to wonder- how many listings did you or I lose and just never knew the reason why?

This is also putting the selling broker in a dual agency role. I wonder how much of this is explained when agents taut the in-house bonus.

FEB

2010

I believe that this practice should be illegal.

Harm to the Buyer:

It gives an unfair advantage to buyers who use in-house agents and puts buyers using outside agents at a disadvantage due to agent bias. In a competitive bid, agents may push the contracts that benefit them. It may also create a situation where not all offers are submitted, holding external offers while the agent waits for an in-house offer to arrive.

Harm to the Seller:

In this situation, the agent clearly represents that agent's own personal interests. To get a commission bonus would the listing agent favor a less attractive contract for the seller in favor for an in-house contract? Also, if I were a buyer and knew the situation, I'd go for a lower price because I know all agents involved will still encourage the seller to accept the offer so they can get their bonuses.

Harm to Agents:

External agents would have a hard time getting cooperation from the agent who would be stalling until an in-house offer comes.

All around, it's a bad idea. I don't think it falls under steering though, I think it's a violation of fiduciary duties and an outright fraud whether it's on the HUD-1 or not.

By the way, enjoyed your talk in Dallas yesterday.

FEB

2010

Debe, Over 20 year ago I used to work for this company and while being recruited (and new in the business) I thought this was a great idea. But after thinking about it and finally going to work there, I "steered clear" of this program because I personally just did not agree with it. I figured as the industry progressed, competition would drive other companies to do similar, or this practice would be abolished because I felt like it was borderline steering. Once I left the company, I started using the exact same script you use, against them. But as another writer mentioned, how do you know whether or not this was the reason you did not get the listing? (I always call and ask though) I'm surprised they are still practicing this today and am curious to see what the end result of this will be. They are certainly big lobbyist's here!

Debe, that is very interesting... Great post! No Steering Allowed!

FEB

2010

Debe, I love your posts! But (respectfully!) I don't see the problem in this one. To me, it's no different than some listings offering a higher compensation to the selling agent. It doesn't matter to me in either case: I show what my clients want to see and what will best suit their needs. The level of compensation is just icing on the cake when I find what the home they love!

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Debe Maxwell - Search Charlotte Homes for Sale - Charlotte NC Neighborhoods

Charlotte, NC

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Steering? You Tell Me. I Say, BUYER BEWARE

Steering? You Tell Me. I Say, BUYER BEWARE.

Debe Maxwell, CRS/Realtor®/BrokerBroker@TheCharlotteScoop.comPhone (704) 491-3310

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Debe Maxwell, CRS/Realtor®/Broker
Broker@TheCharlotteScoop.com
Phone (704) 491-3310