BTSA stands for Bonus to Selling Agent. A BTSA is at best unethical and at worst illegal, and violates the fiduciary responsibility that a real estate agent has to their client. If real estate is to succeed as an industry, in my opinion the practice needs to be banned. The email below should be plastered in the break room of every real estate office nationwide as an example of what not to do. In the dictionary, the term caveat emptor (buyer beware) should have this guy’s picture on it. Is it any wonder why many homeowners distrust real estate agents when this stuff is going on?
Let me explain…
What is a BTSA? Typically a residential property is sold with 6% commission built into the price, and the commission is split 3%/3% between the seller’s agent and buyer’s agent (also known as the “selling” agent). On a $200,000 home, that’s a $6000/$6000 split for each agent. Sometimes, the seller will offer an additional incentive called a Bonus to Selling Agent (BTSA), above and beyond the 3% commission. A BTSA is more typical on new construction from a home builder, as is the case below, but is also done frequently on regular ol’ existing homes.
The email below was sent out to all real estate agents that are on a mailing list in the city where this house is located. I’ve blurred out some of the info to protect the… innocent?
Let’s dissect this email.
- “Who wants to pay you $11,510?” The $11,510 is based on a sales price of $216,990, multiplied by 3% for the buyer(selling) agent = $6510, plus an extra $5000 (5K BTSA). Basically the offer to a buyer’s agent is “bring me someone to buy this property and the total payout for you will be $11,510.” That’s an astonishing 5.3% commission! That’s equivalent to a $500 car payment for almost two years.
- “The [vendor deleted] 30K discount” The email tries to position that there is a great advantage to the buyer since the list price has been reduced by $30K from $246,990 to $216,990. What the email doesn’t tell you, however, is that the price of the home was actually increased by $28K from $218,990 as listed in the MLS a few months prior to the email being sent out. A net savings of $2K ($30K – $28K) isn’t as impressive. A buyer’s agent could research that fact in the MLS and ask questions. But would they notice? Instead, would they just say to their buyer – “look at this $30K discount being offered!”
- Who’s pocket does the extra $5K come from? Ultimately, the buyer. It is $5,000 they could have used to reduce the price of the home and buy new furniture. Or start making a few $500 car payments.
Ah, but for one problem…
The buyer’s agent has a fiduciary responsibility to the buyer. That means the agent has to hold their buyer’s wants and desires above their own. So they can’t legally steer a buyer to a particular house because a higher commission is offered. They should find the best home at the best price for their buyer.
So why offer a Bonus to Selling Agent? Why do literally thousands of properties offer BTSAs?
Because sadly, they work. Some real estate agents will tell you a BTSA should not work, but it does. It’s human nature. And therein lies the problem.
It’s surprising to me that the Department of Justice, with its propensity to ferret out illegalities in the real estate industry, hasn’t jumped all over this one. Yet.
Email sent out to real estate mailing list
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