Paul Slaybaugh posted The Buyer's Agent Bonus: Thanks, But No Thanks.
Not a new topic of discussion and surely one that is presented the best. Buyer’s Agent – Buyer relationship as it pertains to a particular situation where there is a bonus involved.
I am not seeing bonuses now, and I am not offering it on any of our listings today, which does not mean that I did not do it before, or will do it tomorrow. Market changes, tactics change with it. So, this discussion is for argument’s sake.
What Paul stated is a position of an agent. And all the explanation is about the dangers to the agent's relationship with the buyer. And while ethical positions can be universal (avoiding bonuses no matter what) business may be not.
There are a few things that surprised me in the blog and in the comments. Agents being content with “fair” compensation and willingly agreeing to receive compensation MINUS bonus. Giving it to the buyer. So, bonus is perceived as unfair compensation.
Surprising notion that buyers always need or deserve the bonus, which the agent better give them. Markets are different and properties are different. Sometimes I feel like a pauper standing next to my Buyers. And my usual clients do not need help with financing; they buy for cash.
Another notion is that we do not sell ourselves. Really? I do….
It has been called a job even before the sliced bread. You do something and you get paid for that. We are selling our knowledge, expertise, time, effort… and, believe it or not… our ethics. We are selling the way we work, with all our ethics. All that stuff about integrity on agents websites, what is it then if not selling yourself in a package?
But let’s step from the Agent and his Buyer. There is another side to the transaction, the Seller. So many agents expressed the wish for the Seller to apply the amount of the bonus to reduce the price or pay Buyer’s closing costs instead of offering a bonus.
What is missing here is the business part. To say that the Seller should rather reduce the price for the amount offered in the bonus, we are assuming that the same dollar would work the same way.
And this is not true.
The bonus could be significantly less than the amount of reduction in price to achieve the same goal, i.e. sell the home/condo faster. I read an article a few years ago about Miami multi-million condos, where developers were offering private jet round trips to anywhere in the US to selling agents as a bonus. They noted that $25,000 bonus had the same effect as $100,000 - $150,000 reduction in price.
Now, this is business. With 1/4th or 1/6th of the money you can reach the same result. Would you still demand the personal soul comfort knowing this statistics?
There is somehow an assumption that a bonus is something that does not affect agents, or the way they operate. And it is considered ethical, and everyone is happy with it.
“I am not looking at bonuses”
And on the beach you do not look at a gorgeous girl unclad in a bikini? (If not, check whether you still have heartbeat - LOL)
Real Estate is business. Imagine that there is an 11 Mil oceanfront luxury villa in Naples. 3 apples offered to the selling agent. Plus a bonus – a brand new $300,000 silver Rolls-Royce. Those who were at the NAR Convention in Orlando 4-6 years ago could remember seeing that Rolls Royce on the Expo floor. Or was it Bentley?
Two scenarios here. An agent, who was contacted by a buyer, and who takes the buyer to the villa, and sells it, and then s/he can give away the Rolls Royce to the Buyer (got the name for that agent, but it may not be in the dictionary).
The other scenario is when the agent knows about this property and about the bonus, and s/he wants both the cool commission, and a similarly cool bonus. His/her choice is not to wait for someone to walk in, but try to involve other agents out of the area, and find the buyer, and bring the buyer from New York, London, or Singapore.
The bonus can create activity, provided the property is worth what it is selling for, and the bonus is worth extra activity. A bonus can create activity beyond “normal” or “usual”. Isn’t that the goal?
I know that there are not that many $11 Mil deals and I never closed one myself. But is helps to clarify the basics here.
Bonus is just a tool. It is not ethical, it is not unethical. It is a tool that can be used ethically, or unethically.
The nuclear power and nuclear bomb are based on the same fuel. One used to provide power, and the other to wipe out cities. It is the way they are used that determines their morality.
Do we love real estate but hate the tools?
* image courtesy of geishaboy500 via Flickr.com