Now certainly if you're a contestant on the Price is Right game show those are the words you want to hear!
Recently though, I've been getting a lot of e-flyers from agents all over Washington State offering me a free Mercedes (two year lease paid in full) if I can procure an offer on their listing.
Now, obviously offering additional agent incentives to bring their clients to your listings isn't a new thing. They range from higher than average commissions to hefty cash bonuses, but the Mercedes is certainly a new spin on it. Now I do appreciate that agents are obviously going the extra mile for their sellers, but it also concerns me that they are (in doing so) skewing the buyers agents position as a neutral party, and their ability to render professional unbiased opinions to their clients.
Then there's also the question "do you inform your client of this huge luxury bonus your receiving from the sale?" I would be inclined to say yes you should. However, as agents we don't typically mention or discuss what we are paid as a commission on a sale because it is in effect our "pay check" and thus not an issue. When you throw a new Mercedes into the picture that seems different than "earning a commission" to me.
I am curious as to what a clients reaction would be if they were either told, or later learned that the largest most costly transaction of their life (often the case) resulted in their agent driving a new luxury car for the next two years completely free (except for gas of course) on top of their commission. On the other hand, I would think if you informed them of the free car being offered, the client may very well feel they should get it; but of course that would lead to issues with their lender.
So I am a bit curious as what other uncommon incentives are being dangled around out there in other States, and if anyone else sees possible ethical issues stemming from such practice.
Not sure what the law in Washington is but in CA that clearly would not fly!
Seems like so much trying to cash in on 'leads' or 'prospects' these days! So my question is, why is there a mentality that paying for it will give you what you need, when there are options? dave at ree.com
as far as knew any bonus had to be offered to the agents broker. agents can't receive the bonus directly. on the other hand...where is this listing that needs a buyer for the merc?
I just feel that when you create an atmosphere that encourages agents to think "Man, if I can find a buyer for that house, I'm really gonna make-out!", you really do a disservice to the industry as a whole. If I recommend a client look at a property, it's going to be because I feel it suitable for them, and appears to be fairly priced. It's not going to be because I can gain a free Mercedes lease out of the deal on top of my commission.
As for where is that listing: I've received about three such offers in the last two months via eflyers. I always delete them, thus I'm unsure what listings they were. I have no doubt I'll get another offer very soon and I'll post it for you.
.How about that commission? I understand there is a commission involved, but added "incentives"? As a potential home buyer, I would look at that as a reason to NOT to work with a particular agent, as it creates a "used car salesman" type feel, and that reputation will speak volumes long after the "incentive" is gone. The satisfaction, and commission that a Realtor receives in finding a "dream home", "starter home", etc. and what could be the largest financial transaction one person or family might make in their lifetime should be enough. If it isn't, and the car is tempting, then one might consider changing professions. You will have to after folks start talking.
The housing market is in a slump, but I hear cars are still selling like hot cakes. Used cars that is.
K.Z.
RESPA may not care, but I can assure you the IRS does! The Real Estate commission might get into the act if the Broker has not agreed to the "bonus" going directly to the Sales Associate (Keeping in mind the term "Agent" means that a Sales Associate is an Agent of the Broker) thereby circumventing any compensation agreement the Broker may have with the Associate.
Ethics began to deteriorate from the moment that Sales Associates became "Realtors" as opposed to only the Brokers having that designation. That was done under the auspices of NAR and local Boards when they saw a way to get more money from the Sales Associates by "elevating" them to the same status as a Broker. From that decision, the line between Brokers and Sales Associates began to be erased and all of the ethics began to be twisted to allow the "new majority" to operate with virtual immunity from any cumbersome "ethics rules"!
Now, it is the "wild west" approach to an industry that once had high standards and ethical backbone. I do know the vast majority of Sales Associates and their Brokers operate in an ethical and honorable manner, but how long will that remain after some of the "tricks" like this become commonplace? Maybe the change has already occurred!
That's why I just delete such offers. It simply opens a Pandora's box of ethical issues I don't care to get involved in. My car works just fine.
If I did encounter a home that a client was interested in and it came with such an offer I would (in all fairness) offer the car/lease to the buyer. However, I suspect in this day & age of foreclosures and people walking away from their home rather quickly, most lenders would not permit a buyer to get such a perk at closing.
Michael,
Your post really struck a chord with me. Oddly enough, I was going to post something similar regarding "where is the ethical line in real estate"? My take on it was little different in that it was regarding realtors advertising to prospective clients and pumping up and/or manipulating sales figures. I decided not to post on AR because an example I cited was from a somewhat local competitor. Since you have broken the ice so to speak, I feel better about chiming in on this topic, and I edited my blog to protect the identities of my examples. The article on our company site is linked above, and I thought your post was so pertinent I added a backlink to your post here. Great post!
Michael, interesting subject, first, something to be disclosed, second, to participate or not, something to be considered. Happy Holidays.
Those offers have been here for a year or so. I haven't been in a position to worry about it. It wouldn't make a difference to me, and I would disclose it to my client.
I think it would be better to price appropriately.
Agents and brokers should be offering the incentives to the buyers in paying their closing costs or reducing the price of the property.
I'm not going to show a home just because it has a buyer incentive on it. It has to be something that the buyer wants to see and ends up falling in love with.
There's enough issues currently with the lending guidelines tightening. We don't need to be offering car incentives, etc.
We need to settle into this buyer's market without offering a Mercedes if another agent will just p l e a s e bring us an offer. That's a bit too close to desperation for me. However, an attractively priced property and assistance with closing costs will generate showings and an offer. I'm happy with a fair commission--no Mercedes necessary.
I would certainly disclose, and in all honesty, I don't think I could accept a bonuse like that. What on earth is the average sales price of a home? $7,000 would be the entire buy-side of an average deal in my region!
~Jonathan Benya Website Blogsite
bottom line and I have said it before...Sellers pric eyour house right and the buyers will come.
Jim Tutton
Windermere
You folks in Washington State have some crazy stuff going on. There is some smoke some where, I’m not sure where but I smell it.
If a property is priced right, there should be no need to induce brokers with the kind of offers I've heard about. There seem to be some RESPA issues that you folks might want to examine. Someone is paying for that car or whatever and it is definitely not the developer or listing broker as the case may be.
I wish we would seriously get back to the business of selling real estate and stop shucking and jiving. Most of the down markets, lost of credibility, and bad press is created and warranted by the greed in this industry.
It is a self-fulfilling prophecy. We are our own worst enemy. Price the damm properties at market and there is no need for Mickey Mouse tactics. Free lunches went out in 1964. I know, I was the last in line to get one.HI Michael,
Here in Pennsylvania, I am required to disclose any fee I receive that is over and above the agreed to fee when the buyer's agent paperwork was signed. So if I accept a bonus for selling a property that would have to be disclosed to the buyer. In most cases, they are fine with it. However, in this area I've noticed that most agents will forego the bonus if it is significant, in order to allow the buyer to get a lower price for the house. Not everyone, but those who are looking out for their clients best interests will!
In saying that, the most expensive bonus I've seen offered is Builders in this area are offering buyers of their product to pay their mortgage payment for up to a year, not to exceed $2,500 per month - there are all sorts of caveats that go with it of course. The new construction market, especially high end, is taking the worst of our market "slow down".
Remember, for REALTORS, the three most important words in real estate is NOT location, location, location; it's disclose, disclose, disclose! Have a great day!
Michael, if I were a buyer, I would feel somewhat resentful if my buyer agent was getting a Mercedes out of the money I was paying for my house. Having the bonus disclosed to me wouldn't make me feel much better.
This puts the BA in an uncomfortable position. As a BA, I'd be more inclined to try to just get my buyer the best price. As a listing agent, I'd encourage my seller to price competitively rather than offer bonuses.
Wanna throw in some Ginzu knives as well?
I hate these incentives since they just put more doubt into the client's mind as to our true motives. Get the homes priced well and pay buyers' closing costs. That will help me more than a car, a Ginzu knife, a toaster, a plasma TV, a trip to Hawaii or any other item.
As a buyer, I would want a fair price, not a car. I already have a freakin car. As an agent, I feel that I would be obligated to tell my client, but I also feel that if the house is not right for my client I am not going to push them to buy it. The future happiness of my cliets and the future referal business is BY FAR MORE IMPORTANT than a pre-paid lease on a Mercedes for two years!
I have never liked agent bonuses as an incentive. If my sellers want to offer one, I always tell them to either lower their price or offer concessions to the buyer.
Although, I would love to get a new car...but i will pay for it with my honest earned commissions.
I should point out (since some feel this car offer is burdened by the buyer and essentially included in the cost of the home), it's highly likely that the cost of the lease is paid in full by the sellers agent via their earned commission. So in a sense, how an agent spends his/her earned commission is his/her business. If an agent earned a commission and leased their spouse a new car, or themselves, it certainly wouldn't be an issue, it's their money.
However, it's the overall impression it makes, and the appearance of impropriety that makes me steer clear of it. I have also seen many listings offering 4% and 5% commission to the selling agent. Usually such listings are due to expire soon, and the listing agent would rather surrender a majority of their commission as opposed to losing the listing. On a 500k home, an extra 2% is no different than a two year lease on a car.
I suppose it's more the image created by the agent rolling out in a new Mercedes as a gift for getting the buyer to sign on the dotted line. Also it's the unlikely ability of the agent to be unbiased in their opinion (if asked for it) in evaluating the home, and it's price that I take issue with.
Usually such gift offers are made only for full price offers; so to encourage your client to make a full price offer so that you can get a free car would obviously be wrong. I just hope no one is doing that.