Here’s another bad deal for home buyers. A couple weeks ago I wrote a post about what I view as an unethical practice, and what should be illegal – a Bonus to Selling Agent (BTSA). The issue arises because the buyer’s agent will get paid above and beyond the typical 3% commission, presumably to entice them to steer their buyer towards a particular house. The problem is this violates their fiduciary responsibility to the buyer. Not to mention will undoubtedly make the home buyer upset if their agent’s recommendation just happens to provide the agent with an extra special pay day, when he/she is supposed to be looking out for the client’s best interest.
This time the example email advertisement is for an existing home, rather than a new home from a builder. The email below was sent out today to all real estate agents that do business in the area where the home is located.
Similar to my last post, let’s dissect the email:
- “$5000 Bonus to Buyers Agent!”. This is a $5,000 Bonus to Selling(Buyer’s) Agent that will be paid to the agent above and beyond the 3% commission. Based on a sales price of $255,900, multiplied by 3% for the buyer(selling) agent = $7,677, plus an extra $5000 is $12,677. The offer to a buyer’s agent is “bring me someone to buy this property and the total payout for you will be $12,677.” That’s an astonishing 5% commission. Not a bad pay day.
- “Great deal @ $66.92 per sq ft. Bring us an offer!” This is the enticement that the buyer’s agent can position to the buyer. The only problem with this is, that two days before this email went out, the price in the MLS was raised by $5,000. So if $66.92 seems like a great deal to the buyer, well then, two days ago, they would have received an even better deal. That was before it became a good deal for their agent instead, and the buyer missed out on a $5K discounted home price.
What further astonishes me is that there are so many laws that protect home buyers from racial, age, sex and all kinds of discrimination, or from steering a buyer to or from particular neighborhoods, or bad lending practices – but apparently nothing to protect them from agents advertising to greedy buyer’s agents that aren’t looking out for the buyer’s best interests.
Makes you think.
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So far I don’t know of anyone who has sold a house because of the higher commission but I agree with you. I also believe that if an agent won’t show homes below a certain commission amount that it is their choice but they have to disclose it the their clients.
I tell my clients that offering more most likely doesn’t work and on the two instances my sellers have tried, nothing changed.
Hi Mike,
Thanks for your real-experience comments. It’s probably a good thing it didn’t work in your instance. Mostly I think it puts both the seller’s agent and the buyer’s agent in an awkward position. And probably makes the buyer mad. So why do it?