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The Agent Bonus Lure

By
Managing Real Estate Broker with Riley Jackson Real Estate Inc.

In the current buyer's market I more frequently come upon listings that offer a selling bonus for the agent who brings an acceptable offer. Now what does that imply about real estate agents???

It implies that, motivated by extra money, agents will bring buyers to a listing they might otherwise not have shown. Additionally, since the bonus only applies to an accepted offer, agents might actually put influence on their buyers.

Here is where it could get really ugly: Tasked by relocating buyers to put together a tour of homes, an agent might purposely arrange the tour to include homes that are all lacking compared to the "bonus" property, which he/she will show as the last home on tour.

                   

Has this ever happened? I'm a positively optimistic person and will say "NO WAY!"

But the mere fact that this scenario could be thus interpreted, muddies the waters of Realtor ethics.

Why would sellers not offer a Buyer Bonus instead, or lower the price of the home?

Some Realtors see nothing wrong with accepting a bonus, as long as they feel they really didn't steer.

Some Realtors might disclose the bonus just to be up front.

Some might even split it with the buyers.

I'm uncomfortable with the idea of an agent bonus and would pass the entire thing on to my buyers to avoid any negative implications. To me it's like a hot issue I wouldn't touch with a ten foot pole. I really wish the Association of Realtors would take a stance on the subject and provide some uniform guidelines.

Sandy Nelson
Realtor for Olympia area real estate
www.sandynelsonrealestate.com

 

 

 

Comments (63)

David Thomas
HomeSmart Realty, Elite Group Scottsdale, Arizona - Gilbert, AZ
Phoenix,Chandler,Mesa,Gilbert,AZ
I too far prefer to see that the home is being marketed to the buyer's not to the agents.
Nov 27, 2007 05:53 AM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor

All,

Thanks for the great response. It's really interesting to hear the different opinions on the subject. I didn't mean to put anyone on the defensive. Offering or taking agent bonuses is not against the rules (as of yet). I know first hand how hard we work for our compensation, and we all deserve more. I just wanted to point out the aspect of how agent bonuses may be perceived and how offering and accepting them might taint our industry's reputation. Allen brought up, what I think is a good point, that agent bonuses are a lawsuit waiting to happen. I like Kathleen's opinion on how it's all about integrity, however perceptions are powerful and if you want to see just how, Kristina's suggestion to poll your buyers is a good one. I agree with Allen, that it would be a good idea to get away from commissions and move to a fee structure. Let's be honest, how much more does an agent spend on marketing a million dollar home, versus a $200,000 home? But I guess that's another post waiting to be written. I just want to say that I love the candid exchange of ideas, suggestions and opinion here on AR.

Sandy

 

Nov 27, 2007 07:43 AM
Kim Wilbourn
Kim Wilbourn Realty - Scottsboro, AL
Your Local Alabama REALTOR
I believe in lowering the price instead. I am seeing alot of bonus's in my market and giving the selling agent 4.5% commission.
Nov 27, 2007 08:45 AM
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic
If you are working for the best interest of your buyer the bonus should not matter. I show what my buyer wants to see and can afford. It makes no sense to show a property with a bonus knowing fully well your client cant afford it. That's part of our problem now with this mortgage crisis. There are alot of shifty agents out there forcing(yes i mean forcing) people into these homes and we see the result of that. 
Nov 27, 2007 10:26 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Robert:  I really don't know where you get your information.  If these types of Realtors you speak of are people you are working with... perhaps one of you needs to make a change.  Why would anyone show a client something they cannot afford.  Your hinting that they would do it just for a bonus is silly.  If they cannot afford it, they cannot afford it. 

Hmmm... shifty agents, forcing people into homes... if you know this is happening... report them to the local board.  You seem to have a pretty low opinion of your fellow Realtors.  If a seller wants to offer a Realtor bonus to stimulate activity, and everything else is as it should be... it is the seller's choice.

Nov 27, 2007 12:22 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
If one does the right thing then money will follow. Doing the right thing should be what people are caring about.
Nov 27, 2007 03:17 PM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor

Kim, lowering the price is much better, or for developers of new construction homes, who don't want to bring down the price so not to lower appraisal comps, a buyer bonus would be better.

Robert, I can't even imagine a scenario in which an agent can force a buyer into purchasing a home they can't afford.

Karen, I'm with you, complaining to each other about "bad" agents does nothing to clean our industry. That's what the ethics boar is for.

Bob & Carolin, I'd like to believe that doing the right thing will be rewarded.

Sandy

 

Nov 28, 2007 02:16 AM
Amanda Evans
DFW Living - Fort Worth, TX
Real Estate Broker - Fort Worth Texas

Given that commissions are not set or fixed, I cannot imagine a rule that imposes a limit of any kind in how much we make on a deal will be put in place either.  

 

Nov 28, 2007 02:56 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

This is fascinating to read the comments where the agents are trying to do away with the free market idea because of their being comfortable or uncomfortable. I negotiate with the Seller my commission, and then I take part of this commission and structure it as a bonus.

Nov 28, 2007 03:56 AM
Chuck Willman
Chuck Willman - Alpine, UT
NewHouseUtah.com
Unfortunately real estate is not immune to marketing and sales tactics. We are very accustomed to going to department stores and buying something on sale... there is the thought that we bought something valuable at a lower price. It's human nature- and it works. I don't mind a seller giving a portion back to to the buyer- especially if it is to help with the costs associated with getting into a new home.
Nov 28, 2007 04:23 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Chuck,

If you are representing the Seller and you did everything right, and then you do not mind your client to give some money back to the Buyer? Why did this Seller hired you?

And you consider this more ethical when I take part of my commission and give it as a bonus to the Selling agent? The difference is that I give away my money and you give away the Seller's money. Of course it is easier.

And also that I am trying to get the best price for my Seller's home, and not give away his money. That's what I would promise to the Seller when I am asking for the listing. I should not have an agenda here, so, unless my client's goals are to give away his money, I do mind it. 

 

Nov 28, 2007 06:27 AM
David Slavin
Keller Williams Premier - Katy, TX
CDPE, ABR, SRES Keller Williams Premier
I always advise my sellers to offer to pay buyer closing costs before offering a BTSA.
Nov 28, 2007 06:36 AM
Ryan Hukill - Edmond
405home @ ERA Courtyard - Edmond, OK
Realtor, Team Lead

Jon said it quite well here. I've been battling with how to explain my theory on the BBB and Jon just nailed it for me. There's nothing wrong with it as long as everyone's aware. The commission is between the seller and the listing agent, and the listing agent can disperse it or share it however he/she sees fit. It's not that any agent will be able to make their buyer buy that home over another one, but the BBB definitely creates more showings, and we all know the more buyers that see a home, the quicker it will sell, and likely often for a higher purchase price. Great reply Jon.

Nov 28, 2007 10:44 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Thanks Ryan,

It is simple. It becomes difficult when we for whatever reason start talking about us and not our clients' interests. Our feelings are irrelevant here, but skills are. And I consider the willingness to give away part of your commission, structured this way, a good way to show that you really would like to move the property for the highest possible price.

What you are actually are saying is that you would feel uncomfortable to fight for the Client's money. If you represent the Seller, did you tell him that you would not feel comfortable to fight for his interest? I am just curious.

As for offering the Seller to pay Buyer's closing costs BEFORE offering the bonus, first you may have a problem as lenders may not allow that or limit that to certain amount. However, why not do it together. That is the Sellers part in negotiations, and this MY part in making sure that the negotiations have a chance even to start.

The bonus is your first impression. If the property does not move, you better remove the bonus.

Nov 28, 2007 04:53 PM
Ryan Hukill - Edmond
405home @ ERA Courtyard - Edmond, OK
Realtor, Team Lead
Jon, I'd like to answer your question, but I'm not sure I understand what you're asking. Please clarify. Thanks.
Nov 29, 2007 02:41 PM
Jim Tutton
Windermere/ Professional Partners - University Place, WA

I have always thought, if you can afford a buyer bonus or agent bonus, just drop the price instead. 

If there is an agent bonus on a house I sell I will just pass it on to my buyer either to go towards clsoing cost or price reduction.  I do not want any to feel I sold them that house just because there was a bonus.

Jim Tutton
Windermere
www.mytacomahome.com

 

 

Dec 05, 2007 04:22 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Hi Sandy:  I still maintain that if you drop the price $5,000... the buyers payment drops $31 a month.  But the home may not get shown, because there are so many other homes on the market.  If the price stays where it is, and the Realtor is offered a bonus of $5,000... the house is more likely to get shown. 

It is not an either/or situation.  My suggeston... offer the bonus.  That way, you have something to offer both categories of agents.  The ones who dislike the bonus... they can play hero and give the bonus back to the buyers after closing and funding. 

For the agents who like and/or need the bonus... perhaps just to stay in business during this "crunch time..." then the agent show that seller's home rather than one of the other 23,406 homes on the market in that area.  Give people a choice.  If you don't, you are lessening the chances of your seller being able to sell their home.

And... for all the agents who are against giving a bonus... that is your decision.  But you have no right whatsoever to take away the other showing agent's ability and right to make that choice themselves.

Dec 05, 2007 04:38 PM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor

Jim, thanks for your input on the topic.

Karen, My question is: If a house is priced right and is in good showing condition, why wouldn't it be shown?....Unless there are agents who skip over that listing in order to direct their buyers to a listing that comes with a bonus for the agent. That $31 a month in their clients' pockets should matter to a buyer's agent. I understand why sellers offer the agent bonus, but it implies that buyer's agents will steer. It sounds too much like a bribe to me and I believe this kind of practice stains our profession. I'd like to see it go away, but I also understand that, just like campaign financing, it will most likely hang around. Politicians are also ones to swear that they would have voted a certain direction anyway, so they see no harm in taking the money.

 

Dec 06, 2007 03:17 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Sandy,

In a market where there are hundreds of similar homes, you will steer one way or another. You can't show all homes, and you do not usually know all homes, and even if you do, you are not the buyer, so you are gambling on that you know what they might like and minimize the choices.

They however, are based not on the homes, as unless you do not show the home, there is no value for the buyer.

It is a bit frustrating, why is that this got an ethical connotation, which it hasn't? You go and place an ad in the newspaper to attract people to your listing, not to let them choose between 300 similar homes. This is your job to steer people to your listing, this is your obligation to the Seller, who hired you.

As Buyer's agent, you do your job, we might be just shouting louder, so that you might notice us better. And whether you steer or not, is YOUR choice.

Dec 14, 2007 05:34 PM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor

"And whether you steer or not, is YOUR choice."   ???

I just hope agent who choose to steer, disclose it to their buyers. If there's no ethical issue with steering then full disclosure shouldn't be a problem.

I found this interesting article on the subject:

http://www.businessweek.com/bwdaily/dnflash/content/dec2006/db20061214_841972.htm?chan=top+news_top+news+index_businessweek+exclusives

 

Dec 15, 2007 06:40 AM