So, How Much Are You Making Off This Deal, Anyway?
The News and Observer reported this week that the heads of Realtor Associations in Charlotte, Raleigh and Greensboro were asking the Real Estate Commission to change a rule requiring a firm to disclose its compensation when its agents work for both the buyer and seller in a home sale.
First some background. The first piece of paperwork a buyer is usually asked to sign is the “Exclusive Right to Represent Buyer” form [which is only slightly longer than its title]. It’s basically a form that employs an agent to help a home buyer find and purchase a home. Part of that form details how much the real estate firm is going to be paid — an amount negotiated between the buyer and the agent. That amount is a minimum, so if the seller of a property was offering extra commission or a bonus for bringing the buyer, the firm got to keep the money, and the buyer didn’t have to know about it.
In an ideal world agents would try to find the perfect home for their sellers and that’s it. But we’re human, and bonuses were getting quite high [higher than the commissions in some cases], so sometimes agents would push a home because it make the agent more money. In response, the Real Estate Commission made a requirement that agents tell their clients if a seller was paying an agent bonus or increased commission.
The problem comes in when the same firm represents the buyer and the seller. By the letter of the rules, the buyer would see everything the firm would receive for both sides of the transaction. The Associations feel that buyers don’t need information from the other side of the transaction.
This all screams for an example — Let’s start with Big Time Realty [BTR], a real estate company with several offices in the Triangle. BTR has a deal with New Home Builders where BTR gets 3% and a $2,500 bonus for each home BTR sells. They also offer a $1,000 bonus to any agent who brings a buyer. Amy Agent is an agent with BTR. She takes on a relocation client sent to her by the relocation company, who is affiliated with BTR. She signs an agency agreement with the client and they negotiate a 2.5% commission. The buyers love a home in New Home Builders and want to make an offer. Here’s how the conversation goes.
“I’m happy you like this home, and want to make an offer, but I should let you know some things first. Starting off, the builder is offering me a $1,000 bonus if you buy this house. Oh, and since BTR is helping the builder market his properties, the firm gets a 3% commission and a $2,500 bonus, none of which I’ll ever see. Oh, and don’t forget the relocation company pays the firm when we find you a home.”
Now, was all that really necessary? Sure, the buyers need to know that Amy Agent was going to get that bonus, but the rest of the conversation covered things that did not change Amy’s decision making at all. That’s what the Associations are trying to deal with.
What do you think? Do buyers really need to know all of this information?
Tags: legal
