Do Sellers "Bribe" Buyers' Agents With a More Attractive Commission?

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Mortgage and Lending with San Diego VA Home Loans/858-777-9751

I sure did.  I sold a property, back in 2003, and wanted it closed in in thirty days.  I was uprooting my family to move to a different state and knew I was going to need cash quickly.  At that time, I was "real estate rich", cash-poor, and jonesin' to buy in my new area.  I knew I'd need to move some real estate quickly so I "bribed" the buyer's agent with a higher than normal co-brokerage fee.

I had three "non-negotiable points":  

  1. I wouldn't accept anything less than the listed price
  2. The escrow had to close within 30 days,
  3. All  contingencies had to be removed within 10 calendar days.

I listed the property on a Thursday and asked my agent to hold it open on Saturday and Sunday.  The property was vacant and I had just repainted it so I knew it would show well.  I priced it competitively so I expected offers quickly. 

Monday morning, my agent presented me four offers:  two were below the listed price and two were above it.  What stood out about the one I accepted (which was not the highest offer), was that the offer waived the appraisal contingency.  This was 2003 and lenders were using automatic valuation models (AVMs) for home buyers with at least 20% down payment. 

I accepted the buyer's offer.  Now, all I had to do was to get through the contingency period.  Typically, the buyer's agent submits a request for repairs for the seller to accept, reject, or amend.  I received that request on day nine.

I was kind of sweating a bit at this point.  The request for repairs was a laundry list of items, which I calculated to be 1% of the sales price.  I relied on my "bribe" to make this deal happen quickly and denied the request for repairs.  I basically said " take the deal or walk"

The contingency was removed and the seller closed a week early.  I don't know if my "bribe" to the buyer's agent did it but my house sold...early and for the price I wanted.

Pretty icky, huh?  At this point, you might think I'm a real sleaze ball for "bribing" the buyer's agent with a bonus but, I want you to ask yourself these questions:

  • What was my role in the transaction?  What was my job?
  • Who was supposed to be protecting the buyer's interests?
  • Would you care if your agent earned more than the average co-brokerage fee if you got the home for the price you wanted?
  • How could you prevent such a thing from happening to you?

This is a real estate website so expect a bunch of real estate agents to comment that my post offends them.  Some might even say that this practice NEVER happens and threaten that I did something illegal or unethical (I didn't; I was selling a property and I represented nobody).

A few might just answer the question in your mind right now (which is, most likely, the fourth question I asked you to ask yourself).  Those are the smart agents.

How do I know you ask those questions?  Consumers like you ask me them all of the time.  After all, I've been involved in over 600 real estate transactions.  Here is an example of questions I get.  Read what (sandycat) asks right here:

Does a buyer's agent have to disclose that they would receive a bonus if they sell a particular house? We signed our contract and now our agent said that she just found out that she gets a bonus for selling that house to us. Had we known that the seller was giving a bonus to the agent, we feel as if we could have had more negotiating power. Are there any disclosure laws about this??

This San Antonio agent (kevcrawford) answered her question reasonably:

99% of the time, the bonus being offered is out of the listing agent's commission, not from the seller, so you probably wouldn't have had any more negotiation power. I know that if I have a listing in a slow area that's priced correctly and we're just not getting many showings because the area is slow, I'll tack on a 4% buyer agent commission or bonus and I'll cut my take way down. This is a pretty standard practice in most places.

As far as disclosure, every state is different.   I have a feeling that you were happy with the house and felt you got a good deal until you found out your agent got a bonus. You wouldn't have bought the house otherwise. Enjoy your new house and thank your agent for finding you a great home for a deal that you obviously were happy with, because you closed.

At least I thought it was a reasonable explanation, until I read the customer's follow-up comment:

Yes, we feel like we got a good deal. But like I said before, if we would have known that the seller is willing to dish out all this extra money, we could have negotiated a little more aggressively. We are talking large sums of money, OUR money. Also, with a house transaction, we would expect full disclosure. I understand that real estate people buy and sell houses all the time, but we are average people who, at most, will buy and sell a few times in our lifetime. We rely on the experience and honesty of you guys to help us through this sometimes confusing and legalistic process.

Do I feel like we should get a piece of the bonus? No. I say good for her and Merry Christmas for getting a bonus right before the holiday. But we felt as if we were sideswiped and it doesn't feel right.

Ugh, that's not a big vote of confidence for her agent.  Let's see if she relaxed.  Nope, it gnawed at her:

I'm totally not upset that she got a bonus. And she didn't lead us to this house, we asked to see it. I really have to believe that she didn't know until later. I really think in the end we got a good deal, I guess it felt a little "shady".

Finally, we see that the customer's husband tells all the agents that incentives DO matter:

There is still another perspective and this goes to all realtors. It is about the fact when a professional is to represent the buyer's side and professional advice is requested. Any extra incentive will have some impact on the agents motivation

You want to know as a buyer if there is a special motivation to sell that specific property. Especially when the agent is asked about specific matters you want to trust in their judgement. By not disclosing the extra bonus there is a lot of room for second guessing...

...Honesty still matters and once the deal turns sour it's a lose lose situation for everybody. For the realtor side is about losing recommendations or even worse, reputation.

Smart agents will address this and will advise you to negotiate the fee you expect your buyer's agent to receive before you look at homes.    As I've always said, most real estate agents are good and honest business people.  Most loan agents are, too.  The compensation structure for loan agents and the compensation structure for real estate agents, is broken, though.  The REALLY good agents will acknowledge this and want to help you answer all those nagging questions, about the appearance of impropriety,  before, during, and after the transaction.

Hire one of them.

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Rob Lang
At Home Kansas Team Powered by Keller Williams Partners Inc / www.AskRobLang.com - Lawrence, KS
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Thank you for sharing this. I hope someone finds exactly what they're looking for here.

Jun 30, 2011 04:52 PM #1
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Brian. I buyer will not purchase a home due to a larger commission. However a property offering a higher buyer agent compensation WILL get more showings. Ands of course more showings will increase the chance of the property selling faster and for more money.

So offering an bribe incentive is a good thing for the seller and the agents and does ZERO harm to the buyer.

Of course must agents know they will never get the bonus anyway because sellers place too many contingencies on it (as you did). The best way is to just offer a higher co-broke. Skip the bonus.

A monkey could have sold a house in 2003. Not a good time period for you to use to form an opinion on the affect of bonuses.

The consumer's "feelings" really have nothing to do with anything. Especially since they are after the fact AND on a property they ASKED to see.

Now having said all of that my BBA addresses bonuses and how they are handled.

Jul 01, 2011 12:50 AM #2
Rainmaker
311,469
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Of course must agents know they will never get the bonus anyway because sellers place too many contingencies on it (as you did). The best way is to just offer a higher co-broke. Skip the bonus.

I agree about the co-brokerage fee vs bonus, Bryant..  That's what I did (I offered a 4.5% co-brokerage fee).  I put the conditions on the buyer (not through the MLS.  The conditions were communicated to my listing agent).

The consumer's "feelings" really have nothing to do with anything. Especially since they are after the fact AND on a property they ASKED to see.

I only disagree from a marketing standpoint.  Clearly, as we see with sandycat, she is happy with the deal she received on her home but she makes a good point about not knowing that her agent was being compensated more for that home than the others in the neighborhood.    This taints objectivity because, as we know, incentives matter.

sandycat's husband's comments rea;;y sum up the feedback I hear post-closing.  When agents have an incentive that the consumer thinks tainst their objectivity, and the agents doesn't remove (or address)  that incentive, the appearance of impropriety affects the consumer's experience.  That hurts the agent long-term

 

Jul 01, 2011 04:24 AM #3
Rainmaker
374,862
Gina Chirico
Lattimer Realty - Fairfield, NJ
Real Estate Agent - Essex County, New Jersey

Brian, when searching for homes for sale for my buyers I match homes with their desires and needs (# of beds; # of baths; towns; etc).  I compile a list NEVER looking to see who the listing broker/agent is and NEVER looking to see with their paying out to a BB.  Once my buyers looks through the properties I've sent based on their criteria and selects those of his choice, I make the necessary appointments, etc. 

I work for my buyer and although I get paid per the seller's listing agreement, a higher commission doesn't entice me.  I don't choose the properties to see, my buyer does and he/she has no idea what commission is being offered out.  I know agents who prepare their own list of "the best homes on the market" to show buyers - never sending all the properties that matched their criteria to the buyer to choose.  I don't agree with this method because who I am to choose what house a buyer wants to buy and just because I don't like the house doesn't mean my buyers won't fall in love with it.  

 

Jul 02, 2011 04:29 AM #4
Rainmaker
311,469
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

That sounds like a great practice, Gina.  You certainly avoid any appearances of impropriety when you don't exercise discretion for the buyers.

Jul 02, 2011 05:22 AM #5
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