Bonus Round
Some people may wonder about my apparent obsession with NC Realtors. It's really very simple. Political corruption is rooted in the large amounts of money injected into the political process. NC Realtors have injected the largest amounts of money. They've also targeted an issue I care about, sustainable growth and, the local government funding options required to provide for it. Roll a few pet peeves into one and you have Stop The NC Home Ticks.
The North Carolina real estate industry has a little secret that may get a little sunshine, or not. According to the Carrboro Citizen 10/11/07 real estate brokers are not required to notify buyers in writing about bonuses paid to the broker by a seller in addition to sales commission.
The North Carolina Real Estate Commission voted last week to convene a task force to determine whether homebuyers in North Carolina are being made sufficiently aware when the real estate agent showing them a home is being offered a bonus by the seller. As the regulations now stand, agents must tell buyers of such financial incentives but are not required to notify them in writing. Many sellers, particularly homebuilders, pay a bonus to agents in addition to the sales commission.
However the task force will be comprised of "representatives from throughout the industry" so don't hold your breath for full disclosure. An earlier Charlotte Observer story (via N&O 10/11/07) notes that:
The panel was responding to an Observer investigation of Realty Place, which received millions of dollars in bonuses from home builders in exchange for finding buyers for their homes.
:::::
In more than 50 interviews with Realty Place customers, the Observer found no one who was aware of the bonuses.
The original Charlotte Observer Investigation 9/30/2007 shows:
Realty Place worked closely with the builders it had vowed to beat up. The company funneled buyers into low-priced starter-home developments, many of which are now plagued by foreclosures.
Realty Place's marketing, sometimes subsidized by builders, regularly and dramatically understated the cost of buying a home.
What kind of bonuses are we talking about in the Charlotte area? The sidebar of the Charlotte Observer Investigation goes into detail on real estate bonuses and practices in Charlotte which "are offered on about 40 percent of newly built homes and about one-fourth of existing homes". The following slideshow of images I culled from the current Charlotte realtors' publication will give you an idea of some broker incentives beyond standard commission splits:
Next time a someone complains about a commission, commission split or, a transfer tax, don't forget to ask about the "bonus" (or property tax).
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Unbelievable.
This is fantastic work, Greg. Thank you, thank you, thank you.
So, not sure if I understand.
A developer buys a pieces of property and gets approval to build 100 homes. He then sells the plots to home builders, or one home builder, who puts up a bunch of houses. People come to see the houses and decide whether to buy them or not. If they buy them, who gets the bonus? The realtor they brought WITH THEM, the one who is "working for them". Or, the realtor that is brokering the sale of the houses?
One of the pitfalls of childhood is that one doesn't have to understand something to feel it. - Carlos Ruiz Zafon
The agent who supplies a paying customer.
The agent who supplies a paying customer.
I thought a thousand dollars in transfer fees would kill them?
So, how can they afford to give away $5000 bonuses.
One of the pitfalls of childhood is that one doesn't have to understand something to feel it. - Carlos Ruiz Zafon
Robert, you just don't get the math
Cost in a $200,000 home sale caused by Realtors: $12,000 (6%)
Cost in a $200,000 home sale caused by a .4% transfer tax: $800
Clearly it is the $800 that is sucking the equity out of a person's home when they sell it. Pay no attention to the 12 grand.
D'oh! Of course! n/t
One of the pitfalls of childhood is that one doesn't have to understand something to feel it. - Carlos Ruiz Zafon
They already split the commission,
if there are two agents (buying + selling) involved, right?
Just the fact that these bonuses exist is evidence that some part of the formula is being misrepresented, whether it's the value of the property or the "total of payments" of the loan.
The bonuses are few and far between regarding the number
of actual homes sold vs. those with a bonus to the selling agent, however it is not unusual to see an MLS (Multiple Listing Services) listing that includes a bonus to the selling agent. This bonus is paid to the buyers agent over and above the split of the commission that is paid to the brokers (sellers broker and buyers broker). An average commission would be in the 6% range. The split goes to the listing broker (3%) and the buyer broker (3%). The Realtor that actually listed the property and the Realtor that brought the buyer to the listing are then paid one half of the 3%, or 1.5% of the sale price of the home.
Lets say a home sells for $200,000.00 with a bonus to the selling agent of $1000. The home seller pays 6% or $12,000 to the brokers. That is $6000 per brokerage (3%). The brokers then pay their Realtor half of that, which is 1/2 of the 3%, or $3000. The bonus for $1000. goes only to the buyers Realtor, who makes a total of $4000.00 on this transaction.
North Carolina. Turning the South Blue!
Right, but the question(s) are,
a) where does the bonus actually come from?, and b) does it negatively impact the way a buying agent "represents" the needs of his/her client?
Imo, the additional incentives for some house sales must be indicative of a factor(s) that would make them less marketable compared to other houses. A buying agent should be looking for negatives to bring to the attention of the homebuyer, not giving these homes first preference due to the bonus.
The bonus comes from the home seller.
Realtor's are trained to work for their client, not to push homes on the client due to anything other than the client wants and needs. Yet, being human, I am sure there are those out there in the business that would certainly put a home with a seller bonus out in front of other properties due to the extra money that could be made.
North Carolina. Turning the South Blue!
Ya think an extra $5K would do that?
phhhhttt.
: )
One of the pitfalls of childhood is that one doesn't have to understand something to feel it. - Carlos Ruiz Zafon
I keep wanting this post to be titled Bogus Round
"If boiling people alive best served the interests of the American people, then it would neither be moral or immoral." Max Borders, Civitas Institute
Going for the gold.
I have been in the real estate business since the 1960's. That was before the buyer's agent and the seller's agent. But let us be clear. There are times when the Realtor "may" steer his prospects to a listing on which that Realtor "may" make more money. Get real. When the car payment is due and the baby needs a new pair of shoes where do you think the Realtor "may" lead his "suspects." I have seen the bonus system work before. I "may" have even steered my suspects to that listing. I "may" have pressured them and I "may" have tortured them a little too. I "may" have stretched the truth a "little." The bonus system and the kickback system is alive and well. Always been around. Always will be. I should have been a chiropractor. Or a preacher.
I appreciate that take on the subject.
I do not sell real estate but have my license. I was perhaps a bit too forgiving in my attempt to not piss off those that do sell real estate it would seem. ;-)
North Carolina. Turning the South Blue!
Amen, Brother.
Crrrraaaaack.