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I am in the proces of moving to Virginia from Colorado. I have found a new home community where I'd like to purchase my next home (did the search myself).
I am now putting my house in Colorado on the market. One local realtor told me he can charge me a low listing fee (to seel my home in colorado) if I give his name as the buyer's agent for my Brand new home in Virginia. He explained that the Builder of my new home will give him a 3% commission for zero work, he is just a name a on a contract. In return for this "free" 3%, he will reduce my Listing fee to sell my Colorado home to 3.5% instead of his usua 6% (0.5% for himself, plus 3% Co-op fee for buyer's agent).
Is this practical/legal? Does this realtor need a Virginia license to be able to collect the 3% from the Virginai builder? Does he need to physically come in to represent me (I have his cards, he said just give it to the builder the first time I visit the office)
It's legal to accept referral fees from out of state brokers, and is very common. However, there are two problems here.
First, this is not a referral fee, but a direct commission payment. The builder likely would not be able to pay an out of state agent a commission for the sale since it would have to be paid to a licensed agent in that state.
Second, most builders (at least around here), require the agent to physically be with you on the first visit to the builder's sales office. Your listing agent is taking a big risk that the builder will accept just a business card. If you already know the builder you want to work with, your agent should contact them to check their policy for paying agent fees and the state laws for paying a commission to an out of state licensee.
Normally, an out of state agent would refer you to an agent in the state you are moving to and ask that agent for a referral fee (a cut of their commission).
Many builders will want your agent to be there and introduce you to the builder. Personally, I would avoid the guy he doesn't sound very honest.
Why not find a good agent in Virginia who knows the local builders and can help guide you with inspections, walk through and closing ? You'll actually get something of service that way that could save you grief and money down the road.
We have taken a reduced commission listing with a promise we would find them a good Realtor in Hawaii where they were moving. It was 25% referral fee. We found the agent, checked out his website and blogs to see that he would be a good fit for our clients, contacted him and presented our deal. It worked out great for us and our clients. They were happy with the other agent and found a nice in Hawaii. They got their house sold for a good price and made a little money and we came a few dollars ahead too.
There is no way I would do what that agent suggests. Find a good buyer's agent in VA.
Thanks for all replies, looks like some pros/cons on both sides, looks legal, though bordering on unethical, so I will research more.
I think this agent (or his company) has licenses in multiple states.
A couple of other points if I decide to go with him:
- he should call/introduce me to the builder (and confirm his 3% cut) before I present my face
- he should do some basic research on pricing and give me a ballpark on the new home price (not sure if the builder is open to negotiation)
- He is likely the one risking money if both ends of the deal does not go through, becuse the new home construction is going to take about 8-10 months to complete, and only after closing in 2011 he gets to collect his 3%. In the meantime, there is good chance my house is sold in coloardo, so I pay him the 3.5% before he gets to collect the 3%
- if I cannot sell, there is also a conditional clause with the new builder where I can back out of the new house purchase (with some minor penalty) if I dont sell my old home, so realtor has a good incentive to sell my home to get his 3%
If his brokerage has a license in VA and if the builder agrees to pay him without his presence, then I don't see why you can't take advantage of it. If you feel confident enough that you don't need an agent present to represent you and give you advice with the builder, then go for it.
I know it is an old thread but another fact can't hurt.
It is very common practice usually as long as there is an upfront agreement with the builder and out of state lic'd agent before you sign the contract. The bigger question is, will he/she represent you and review your contract in Virginia?
I know in Arizona and Florida it works for CA lic'd brokers and vice versa. Maybe get them to help pay for some smart appliances for doing nada.
Per AZ law - Referral Fees May Be Paid To Out Of State Brokers Provided They Are Licensed In Their Home State
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