Agent Bonuses – Buyers Should Know

by Steve Crossland, REALTOR in Austin TX on December 21, 2007 · 2 comments

Agent BonusThe news snippet below discusses a proposed new law in North Carolina that would make disclosure of agent bonuses mandatory in real estate transactions. Good – it’s about time. Currently, very few states require this.

I’ve long had a problem with the fact that most buyers have no clue whether or not their Realtor is receiving a bonus up and above the commission on the sale of a home. Home Builders often offer very attractive bonuses and higher commission to agents as incentive to bring buyers out to their new subdivisions. I receive builder flyers in my Keller Williams box at the office almost daily offering “$5,000 Bonus to Agent!” or “7% commission to Buyer’s Agent”, intended to motivate me financially to bring buyers out to see those builder home. The problem is, the home search should be guided by the needs of my buyer, not financial incentives offered to me as the agent. I personally think hidden bonuses to agents are unethical. Additionally, if the builder has to offer those kinds of incentives to sell homes, is that neighborhood really the best investment for my buyer? Maybe, but high builder bonuses make me think the buyer will be waiting a while for any appreciation in value to happen, and I’ll explain that to the buyer.

This is another reason every buyer should have a signed Buyer Representation Agreement with the agent you have helping you. The Buyer Rep agreement spells out the agent’s compensation. The buyer rep form that Sylvia and I use provides that the Buyer receives any bonuses or or commissions in excess of the 3% we charge. By doing this, I know that the homes I choose to show buyers are in no way influenced by bonuses or higher commissions. The Buyer may be motivated and influenced by it, but not me. This is, in my opinion, the only ethical way to handle excess or “bonus” compensation when offered by sellers.

N.C. Pushes to Disclose Agent Bonuses
North Carolina could soon join Tennessee and a handful of other states that require real estate agents to give home buyers written disclosures of bonuses from sellers.

So far, Tennessee is the only southeastern state to implement such a mandate.

In North Carolina, the rule change was approved by the N.C. Real Estate Commission; and if approved by the state, the North Carolina Association of REALTORS® or individual real estate agencies would be charged with creating the disclosure forms that would be presented to buyers before they decide whether to purchase the home.

Some REALTORS® note that bonuses are not common in certain markets, making the rule unnecessary. In most states, bonuses are spelled out only in the HUD settlement statement given to buyers at the closing table.

{ 2 comments… read them below or add one }

1 arz December 22, 2007 at 12:29 pm

The only thing I felt is unfair is that if I went to that builder and want to buy the house without the agent, I will not get a 7% discount or $5000 off upfront. On the other hand, if builders give me the same treatment as what they give agents, then most individuals will go sign the contract without their agents…

2 southwest3210 December 26, 2007 at 5:43 pm

Thats just good old-fashioned american capitalism, using money as a tool. If agents feel so reticent about bonuses, why don’t they practice RE on a pro bono basis? This way thay can save the client more money, and alleviate completely
the possibility of being solely motivated by greed and cash. And let’s be honest….there are some agents that list at 2%
or less per buyers agent commission, and I’ll bet they aren’t prioritized. Also, if a buyer was set on a house that offered
1.5%, how motivated would you be to push that? Honestly? The answer is that ALL agents are motivated by commssions, whether standard or more than standard, regardless of it being a bonus or a higher commission rate.
Also, most buyers find their own houses now on the web, and just use agents to see/negotiate them to closing. The days
when the agent held all the trump cards of the MLS, and chose single-handedly what to show are long gone.

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