Kickbacks to buyers from realtors

[cully]

FYI, there is a difference between a kickback and a rebate, one generally illegal, one generally legal.

NVAR (Norther Virginia Association of Realtors) says it succinctly:

KICKBACK: An offer to pay a third party to win a client's business.
Example: A lender pays $1 to an agent in exchange for the agent referring the buyer to the lender.
Is it legal? A kickback is viewed as increasing the costs to consumers without providing anything of value. In certain circumstances, such as those covered under the Real Estate Settlement Protection Act, a kickback may be illegal.

REBATE: An offer to return part of a payment to a client to induce the client to use the firm's services.
Example: A real estate firm offers to give back $1 of its commission to a client in exchange for the client using the firm's services to purchase a property.
Is it legal? The offering of a rebate is generally viewed as a legal and ethical part of negotiating compensation. State and Federal regulators have taken the position that such rebates ultimately reduce the cost to consumers. Any attempt to prohibit, restrict or discourage the negotiation of commission is considered an illegal restraint of trade under established antitrust law.

[spleuchan]

Originally Posted by Carlingtonian

How does this work? Is it only if you as the buyer don't have an agent? (Otherwise, that agent would of course demand half of the listing agent's commission.)

All we got from our very lazy and unhelpful L&F agent was a measly 1% discount for agreeing to use him as our buyer's agent. (So we paid him 5% of the listing price when we sold our house.)

If we ever sell, I'm tempted by Redfin, but I wonder if the realtors from the big local agencies all hate it. Not that this should matter if the buyers find the listings on their own (as most do now) and demand to see the property.

We sold our house with a regular realtor, but when we bought a new one, we used PenFed realty. The house we bought offered a 6% commission, so 3% went to the seller's realtor and 3% went to ours. Ours collected 2% for themselves and gave us 1%.

If we were to have used them to sell our old house, they simply charge 5%. They would collect 2% and give the buyer's realtor 3%.

I think they have changed since then to only offer .5% rebate now, but its better than nothing.

[Natthapol]

I appreciate the value of realtors but in some cases like us. we were looking only a few places and we found all the places we wanted to see ourselves. Some will say that realtors provide a lot of value with documentation and they are looking out for us and I agree but I just think that it's not worth 3% or 6% for someone who is selling.

[snowdenscold]

Originally Posted by rhampton

Kww is correct, this must be lender-approved--not a problem, typically. As a licensed Virginia Realtor, it's sad to see the actions of a few bad apples and/or discount brokerages affect my profession's reputation. In the end, 'you get what you pay for' rings true pretty much every time. Exposure is the name of the game in real estate, and as a seller, if you want to pay less in commission, you will get less in exposure. Perhaps it won't matter, but my job is and always has been to provide your property maximum exposure (much of which I pay out of pocket for) and get you the absolute most money that the market will bear. Any dedicated, full-time agent who's been around the block a time or two will agree!
Soapbox down.

Richard Hampton
United Country Northern Virginia Realtors
richard@uc-vare.com

Lol, I couldn't tell the name of the game is exposure from your post...

Anyway, realtors can keep repeating the standard line till they're blue in the face, but reality is that with the Internet and off-loading some of the work onto the buyers, 6% is unsustainable as the norm going forward.

[NovaZombieDrivers]

Originally Posted by snowdenscold

Lol, I couldn't tell the name of the game is exposure from your post...

Anyway, realtors can keep repeating the standard line till they're blue in the face, but reality is that with the Internet and off-loading some of the work onto the buyers, 6% is unsustainable as the norm going forward.

His post reeks of agent insecurity.

The big sites all have pretty much the same listings. I expect these standard fees to reduce over the next few years, it's already starting. Agents clinging to the old commission model are going to find them selves looking for clients.

[spleuchan]

Originally Posted by rhampton

Kww is correct, this must be lender-approved--not a problem, typically. As a licensed Virginia Realtor, it's sad to see the actions of a few bad apples and/or discount brokerages affect my profession's reputation. In the end, 'you get what you pay for' rings true pretty much every time. Exposure is the name of the game in real estate, and as a seller, if you want to pay less in commission, you will get less in exposure. Perhaps it won't matter, but my job is and always has been to provide your property maximum exposure (much of which I pay out of pocket for) and get you the absolute most money that the market will bear. Any dedicated, full-time agent who's been around the block a time or two will agree!
Soapbox down.

I bought a house and sold a house using two different full fare (3%) realtors. I then bought a house with a discount realtor. Even if the % was the same, I would choose the discount realtor. Whenever I called her she answered, spent lots of time with us looking for a house, and was very knowledgeable. I would strongly disagree that you get what you pay for in the case of different realtors.

[midlifeman]

If I'm a real estate buyer I don't care about kickbacks to the realtor necessarily since the seller is paying the commission. Chances are the buyer agent is already getting squeezed on the deal because the commission could be 5 or 4% on the sellers end. More importantly I need good representation. It is definitely a sellers market in NOVA since inventory is so tight so it wouldn't surprise me to see 4-5% commission as opposed to the traditional 6%

Do any realtors out there have an opinion on this?

[kww]

Originally Posted by NovaZombieDrivers

His post reeks of agent insecurity.

The big sites all have pretty much the same listings. I expect these standard fees to reduce over the next few years, it's already starting. Agents clinging to the old commission model are going to find them selves looking for clients.

they do. and most of them are horribly outdated. A buyer nowadays needs to be utilizing an agent or an agent/office website that is directly feeding off the local MLS. It won't return nearly as many results, but it will be most accurate..

I of course have no first hand experience with any of the 'discount' model offices that rebate a portion back to a buyer, i can only go off what I read/hear. Most people that are happy don't publish and speak on it, so you only hear the horror stories.. Agents who are non-responsive, office structures that place a buyer with multiple people throughout the transaction.. buyers showing up to inspections and closings with no representation..

All to save some money that very well could have been negotiated by a potentially 'better', full service agent. possibly even saving the buyer more money.. Granted, a full service agent could also drop the ball, nature of dealing with a human being that works off commission.

From a sellers perspective, it is not unheard of to negotiate a lower price to list a home.. Some agents don't spend a lot on marketing, relying on their local MLS to syndicate it throughout the web.. Some agents will spend money for featured listings on these websites allowing that sellers home to be front and center, or additional exposure on pay sites.. They may build a website to advertise the specific home.. They may spend to bring in a professional photographer or staging service..

These things cost money, so in some cases, I can see the value in using an agent that may "charge" 3%, if to offset their expenses.

The point is, there are too many variables that come into play. i could fill this forum with instances where I picked up the ball when someone else dropped it to help my clients, numerous times with it directly affecting my pocket..

I'll continue to run my business the way that I do. Everything is always negotiable.

[michgc]

Originally Posted by midlifeman

If I'm a real estate buyer I don't care about kickbacks to the realtor necessarily since the seller is paying the commission. Chances are the buyer agent is already getting squeezed on the deal because the commission could be 5 or 4% on the sellers end. More importantly I need good representation. It is definitely a sellers market in NOVA since inventory is so tight so it wouldn't surprise me to see 4-5% commission as opposed to the traditional 6%

Do any realtors out there have an opinion on this?

We were going to list our house last winter and we contacted the realtor who initially helped us buy the home. She works for Prudential which has that deal with PenFed that a PP mentioned. So we were going to get .5% off the commission from PenFed. The realtor said she would deduct an additional .5%, so the commission was going to be 5% rather than 6%. We decided to rent it out for a year instead, but I'm pretty confident we can get a realtor for 5% when we list.