Here’s another oddity about real estate for buyers already facing high home prices.
Tucked in the fine print of some Multiple Listing Service posts that can only be seen by agents are cash bonuses for agents on top of the usual standard commission.
Some are a flat amount. Others seem to reward a buyer’s agent as the sale price increases.
In a so-called sellers’ market — where analysts, politicians and the public battle each other over what exactly is driving skyrocketing home prices — there should be no need for such bonuses.
“Selling bonuses have been used in markets where there are more listings than buyers,” said Maureen Coleman, professional standards adviser with the Real Estate Council of British Columbia.
The bonuses, like the controversial practice of shadow flipping, are legal as long as they are properly disclosed.
With the market so hot, it’s questionable that a seller would need to pay more than the usual commission to get a property sold. But if offering a bonus can land a sale at an even higher price, the cost of the bonus can be deducted from the sale.
For buyers, however, such bonuses could potentially motivate their agent to work against their best interests and seal a deal at a higher price or pass over a property that doesn’t come with a bonus.
As one agent put it: “What sense does it make for a (buyer’s agent) to get a bonus for making you, the client, pay more?”
It’s not clear how widespread these bonuses are. The Real Estate Council of B.C. said it received one complaint last week.
But in a little over an hour of digging around on the version of the MLS accessible only by agents, this reporter was able to find another eight such bonus offers — four on homes that have sold and four for listings that are still active.
For example, there is a five bedroom, five bathroom home on Nolan Street in Burnaby South that is asking $1,188,000. It’s listed by Nu Stream Realty Inc. and comes with the offer of a $5,000 bonus (in addition to a typical commission of 3.255 % on the first $100,000 and 1.15 % on the rest of the sale amount.)
On Sardis Street near Central Park in Burnaby, there is a 4 bedroom, 4 bathroom duplex listed by New Coast Realty with this offer for a buyer’s agent: “If sold price between $1,460,000 and $1,509,999, the commission of buyer agent will be added bonus $3,000; If sold price between $1,510,000 and $1,549,999, commission of buyer agent will be added bonus $9,000. If sold price higher than $1,550,000, commission of buyer agent will be added bonus $14,000.”
A house in the 6000 block of Griffiths Avenue near Deer Lake in Burnaby sold for $2.32 million, an amount on which the buyer’s agent, of New Coast Realty, was offered by the listing agent, also of New Coast, the usual 3.255 % on the first $100,000 and 1.1625% on the balance, plus a $20,000 bonus.
According to notes on the version of MLS that agents can access, a five bedroom, 3 bathroom property in West Vancouver’s Ambleside on Jefferson Avenue sold for $3,160,000. It was listed by Nu Stream Realty Inc, which offered the buyer’s agent the commission of 3.22% on the first $100,000 of that sale price and 1.15% on the rest, plus a bonus of $22,222.
In Vancouver, a penthouse suite on Eagles Drive on the University of British Columbia campus sold for $1.03 million with the standard commission, plus the offer of a bonus of $20,000 for the buyer’s agent, listed as Leslie A Miletich.
Reached by phone, Miletich confirmed she got the $20,000 bonus in addition to the commission of $14,000. “I got it after the offer was accepted and it was total happiness,” she said.
“On my mother’s life, and I have been in the business for 26 years, I never look at the selling commission and I did not look this time. I took my clients to two properties. They didn’t like the first one and then we went to this one and they walked in and absolutely loved it.”
That said, she added: “I think it’s not in good taste for sellers to offer these bonuses. You can’t talk a buyer into buying something if they really don’t like it, but it could definitely influence an agent if their (clients) are clueless and if they were a snake.”
Agents are required by the Real Estate Council to disclose details of remuneration, including commission, cash bonuses and even non-monetary ones such as air miles by way of a form that is submitted to their brokerage for review by the managing broker. “In an audit or as part of an investigation, the Council may require that those documents be supplied for our review,” said the council’s communication officer Marilee Peters in an email.
Larry Buttress, deputy executive officer at the Real Estate Council of B.C., had this advice for both sellers and buyers:
“If a listing agent suggests you need to offer a bonus in order to receive offers on your property, ask why. There should be no reason in the present real estate market for a bonus to a buyer’s agent to be necessary. Bonuses are more typically seen in markets where there is more supply than demand — in Vancouver currently the reverse is true. Establishing value in a market where prices change rapidly can be challenging, so the Council encourages consumers to get multiple opinions on the value of their property, including asking what comparables are being used to establish that value.”
“Buyers should ensure that before they make an offer, their agent discloses to them in writing the amount of commission, including any bonuses, that he or she expects to receive from the transaction. Multiple offer situations can be unpredictable: the highest bid can be considerably higher than others, so before making an offer ask your agent for comparables to ensure you’re comfortable with the price you’re offering.”
