Paul Slaybaugh, who is a really good Scottsdale Arizona real estate agent by the way, wrote an interesting blog post about buyer agent bonuses.  He syndicated it to the real estate network ActiveRain and a brouhaha ensued.    I think as a consumer you should take the time to read some of the comments and what some real estate agents across the country think about you knowing what they get paid.

Here’s the truth…well according to me anyway…

Home buyer bonus paid to Salem Oregon real estate agents?

If a real estate agent has agreed to act as a buyer agent for a client, then that client has a right to know how their agent is going to get paid, how much, and for what services. Now real estate agents scream about raising the bar of the quality of real estate agents, but frankly I think some agents need to be hit over the head with the bar because they just don’t get it.

Now before you think there is some massively huge conspiracy going on in real estate, I pulled the WVMLS properties that are offering a buyer agent bonus: 123 of them out of 5, 492.  That’s 2.2% here folks.  It is not a common practice in our area to offer buyer agent bonuses, and I can tell you without running those numbers that a good chunk of those are bank owned properties.   So why should you care?

Well because you are spending a boatload and a half of your money to purchase a property.  The real estate machine will tell buyers that representation is free, but really it is amortized over 30 years and figured into the price of a home. For most people that pick a good buyer agent, it is worth the additional cost.    You know I have a great company attorney who bills me and writes next to it what he did for me.  My doctor bills me along with the services.  I know that consumers get that real estate agents don’t work for free.   I know you are all intelligent people and don’t need to be schmoozed with soundbites.  So what I don’t get is why agents feel compelled to not share how they get paid or what they get paid to provide services to someone that they agreed to represent.

The example I shared in a comment stream

Let’s say an agent is offering a $2,000 bonus +3% on a $200,000 home purchase.  So the buyer agent will make $8,000.  The seller runs their NET sheet and says “I want to net this amount.”  The seller negotiates from a position of net, unless they have a doofus agent who doesn’t know what a net sheet is.  The seller should only care about their bottom line.

So the seller doesn’t really care where that $2,000 goes, as long as it gets the property sold.  On that I totally agree with you…bonus, commission, closing costs…whatever…to the seller it is a tool.

Now, enter the buyer.  The seller won’t budge off their $200k price because they want to net a certain amount and the buyer loves the house so they agree.  NOW, if there was no bonus involved, the seller would have come down to $198,000 or given the buyer $2k in closing costs because it worked with their net numbers.

In this scenario the buyer loses $2,000 and the agent gains, but is that okay if the buyer isn’t aware of it?  I think the only way for a buyer agent to act as a true fiduciary to their client is to disclose any incentives.  I think a buyer has the right to know if their agent, potentially, has a conflict of interest.  If you are buying a house and hire an agent to be your representation, do you think the agent representing you has an ethical obligation to tell you of any financial incentives that they will receive as a result of bringing in a buyer to that property?