Buyer’s-agent bonus is latest selling tactic

Curt Cassingham’s Studio City house sat on the market for a month with no offers. To stimulate some interest, he announced that he would pay a $3,000 bonus to the realty agent who brought in a buyer for the three-bedroom, two-bathroom house listed for $949,000. Four weeks later, he upped the bonus to $10,000 to the selling agent, to be paid on top of the commission.

“I decided, instead of dropping the listing price, to entice the Realtors to bring someone in,” Cassingham says. He had a property that wasn’t moving in a competitive market and responded accordingly. But does the practice have a downside for buyers? If the agent showing a listing stands to gain something extra for selling that particular home, as opposed to a property up the street, will the buyer even know?

Commissions, which are negotiable, typically are split 50-50 between the listing agent and the agent who brings in the buyer. But in this slowing market, some homeowners are now offering a little something extra to the buyer’s agent -- a cash bonus, a car, an all-expenses-paid vacation -- with the degree of incentive depending on the location and condition of the individual property and the level of seller desperation.

“I see it more and more in tract neighborhoods or condos, where there’s more on the market and fewer buyers,” says Susan O’Brien, an agent with Sotheby’s International Realty in Oxnard. “I have one client who’s offering 3.25% commission to the selling office, and he’s also offering to pay the closing costs on a $389,000 condo in Channel Islands Harbor, which is something you didn’t see a year ago. It’s a statement of the times.”

O’Brien says listing agents are beginning to urge sellers to give 3% to the buyer’s agent, while offering to keep their own rate at 2.5%, as an incentive to get property shown more by agents who may have numerous properties to offer clients.

This commission split, as with other incentives, is perfectly legal, according to the California Assn. of Realtors. Whether Realtors choose to disclose such additional income to buyers is up to the individual agent, making all transactions a case of buyer beware.

“All of the negotiations for what agents charge is generally done with the seller,” says June Barlow, vice president and general counsel for the Realtors association. In today’s market, where Realtors are being offered added incentives to move property, Barlow says it’s important for agents to be aware of their fiduciary responsibility to clients.

“It’s important for people to be upfront about facts that affect the agent-client relationship,” Barlow says. “Whenever you have extraordinary offers of compensation, it would be prudent for the buyer’s agent to discuss that with their buyer. It’s not necessary for the disclosure to be in writing, but that’s always the best vehicle for everyone to remember what was said.”

Barlow says that in most cases, disclosures about bonuses are done orally. To protect the agent-client relationship, she suggests that such information be shared as soon as the agent learns about the bonus.

Do bonuses and higher commission splits affect which properties an agent chooses to show a client?

“You’re not going to be able to sell a buyer something they don’t want just to get a bonus,” says Joan Shultz, a Realtor with Keller Williams Realty in Marina del Rey. “A seller will definitely get more showings by offering the bonus, but buyers are not being led away from properties that might work for them.”

Kendyl Young, an agent with Coldwell Banker in La Canada Flintridge, adds that the monetary bonuses on properties from $750,000 to $1 million are typically about $2,000, an amount that’s not worth jeopardizing a client relationship.

“Buyers and sellers today are more sophisticated,” Young says. “I don’t think the bonuses impact the buyer’s experience. The worst that’ll happen is they’ll get shown a house they don’t want to buy, and since a lot of inexperienced Realtors don’t listen to what their clients want, that happens anyway.”

Receiving a higher commission on a recent sale was an unexpected bonus for Jody Margolis, an agent with Keller Williams in Studio City, who was working with a couple who needed to move before the end of the year.

“I remembered a house I’d seen as a lease that I thought was perfect for them,” says Margolis, who went online and discovered that the property had just been listed, with a 3.5% commission to the buyer’s agent -- more than half of the 6%. “The bonus was fantastic, but it had nothing to do with my getting the buyers there. It was a house I would have shown them anyway.”

Margolis showed her buyers the Multiple Listing Service posting for the property, which listed the higher commission, and the buyers made an immediate offer.

“I still took them out to see other houses, even after that, and was running comps for them until the deal closed,” Margolis says. “I wasn’t pushing them toward the house. They just loved it.”

In the end, says Simon Mills, broker-owner of Mills Realty in Toluca Lake, closing any deal hinges on that final purchase price.

“I don’t see bonuses as being very effective,” Mills says. “I’d rather see incentives go to the buyer, rather than the buyer’s agent, for a quicker close.”