Home Selling in 76137>Question Details

Ora Butler, Both Buyer and Seller in Fort Worth, TX

I would like to know , what if your realtor tell you that you get a 2% back at the end of the home sale

Asked by Ora Butler, Fort Worth, TX Fri Jan 4, 2008

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It's a common misconception that Realtors cannot discuss commission. Lorie has hit it on the head, we are certainly allowed (even encouraged) to discuss commissions with our clients, ad nauseum, and sometimes do. Oft times we revisit it during the listing, and I've had occasion for it to come up again at the closing table.

What we are not allowed to do is to collude to fix pricing, and a discussion of this type, among Realtors, could be construed as a pre-cursor to price-fixing. So we have to be very careful to stress that commissions are negotiable. While there may be "average" agents, there are not any "average" commissions. There is no common commission, nor going-rate, nor usual fee. Different offices among different agencies charge different fees, and different agents among those agencies often have varied commissions.

Those variations often come with variations in the services offered, too. From limited service agencies like Redfin, who rebate a portion of their commission directly to their client, to full-service individual agents who will sometimes credit their client for a home-warranty.
3 votes Thank Flag Link Sat Jan 5, 2008
Alan May, Real Estate Pro in 60201
MVP'08
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For what it's worth - in my humble opinion - in reading many of the posts, there are a number of consumers who appear to be "anti-realtor" as well as some realtors that appear to be "anti-consumer".

I am all for tiered pricing for consumers - rebates, discount brokers etc. With the advent of unbelievable access to information, consumers can and do much of the ground work related to the search for real estate, whether it be for investment or for their own residence.

What I believe is critical, however, is to dispell the notion that the bulk of what I do as a realtor is to find listings and drive clients around showing them possible choices. Real estate is far more than big hair and Cadillacs (or any other high-end luxury vehicle of your choice). Tiered pricing allows consumers to choose what is important to them in regards to making a buying decision. Personally, in making the largest financial decision of my life, I would like some guidance.

A tiered pricing structure requires full service agents/brokers to better differentiate our services. It is fair to tell a consumer looking for a rebate, reduced fee etc. that not all services are created equal. That is not to say that an agent or broker who offers reduced fees is less professional - they are merely adapting to the needs of their specific consumer/client.

While I do a great deal of marketing to increase my own brand, my past clients do a bulk of it for me - they continue to refer me to their friends, family co-workers etc, because I have proven my value to them. I will continue to work hard as an advocate and hope that it continues. If I need to adapt, I will.
2 votes Thank Flag Link Sun Jan 6, 2008
... and others who may have no real name....

[staring at mirror] you talkin' to me? Yew, talkin' to ME? you TALKIN' to me?... okay, enough bad DiNiro imitation..

Don, Ora asked a question about a 2% rebate, and your first paragraph response to her was:

" Please note that any Licensed Real Estate Agent who takes too much liberty with discussions about commissions and their fee structure, may be liable to an anti trust suit or worse, loose [sic] their license. No kidding, its not a joke. "

So it was not unreasonable for Lorie and I (and perhaps others) to think that you were saying we couldn't discuss her question. Lorie, first, & then I clarified so the reading public wouldn't misunderstand. I don't think either of us did so pointedly (ie: Don's wrong, Don's wrong!), nor did we do so unprofessionally.

I was glad to see your clarification, I, too, have found your posts to be informative and professional. I'm sorry that my anonymity seems to be a burr under your saddle. No harm intended, and I hope that you understand that.
2 votes Thank Flag Link Sun Jan 6, 2008
Alan May, Real Estate Pro in 60201
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Don...I am sorry that you took offense to my post. It was in no way an attack on you or your credibility. Even when I go back and read the post I do not see where in the post I attacked you. I was simply clarifying the subject.

I agree that agents and/ or brokers should not and cannot discuss what their commission rates are with each other as it could be construed as price fixing. I have read through the post on this thread and do not see one post discussing a commission rate charged by an agent or brokerage company or even a post discussing an average commission rate. Commissions are negotiable from company to company and agent to agent. I personally do not answer a commission question asked by local consumers over the phone...I am not going to tell a consumer what I charge until they know what I deliver for what I charge.

Even the question above appears to be referencing an agent rebate. It no where mentions the commission that Ora's agent is earning. I guess I am confused... I just do not see how a thread a Trulia where there is no mention of a commission rates by an agent or a consumer could be construed as price fixing.

I do agree, that agents should refrain from discussing commissions and assumptions. It should not be assumed that because one agent charges less than another agent that the agent that charges less provides service or representation. That is simply not an accurate statement. Commissions are negotiable and I believe that most consumers understand this.

Don... again I apologize if I offended you in anyway. It was never my intent. I do not think and I hope that the others who posted on this thread do not feel that I was knocking your expertise. Your posts were very knowledgeable and I appreciate your reminders about commission talk.
2 votes Thank Flag Link Sun Jan 6, 2008
Well said Elvis and I did not catch a single typo:) Could not help myself:) I gave you a thumbs up... if I could give you more I would!
2 votes Thank Flag Link Sat Jan 5, 2008
Expect to do most if not ALL the work. You find the house, you set the appointments, you go to the inspection, you intrepret the results, you do the negotiating, and you go to closing yourself. My guess is that they cannot walk you through the process or be there much if things go wrong or if you have many/any questions. Maybe they can, but I'd be surprised as there won't be much money left over for them if they give it all back to you. I find out exactly what you get for this deal. I also wonder how hard the agent will negotiate for you if they're so quick to give up their profit. From what I often see on these deals is that in the end, it's not always the BEST deal.
Web Reference: http://www.teamlynn.com
2 votes Thank Flag Link Fri Jan 4, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Hello Ora,

Please note that any Licensed Real Estate Agent who takes too much liberty with discussions about commissions and their fee structure, may be liable to an anti trust suit or worse, loose their license. No kidding, its not a joke.

Yes, there are a few companies doing that right now. Is it Legal in many states. Not legal in a few. In my opinion, you would be better served by having a full service Agency do a great job for you.

Today, in a buyers market.... it has become increasingly harder to sell any kind of property all over the Nation. Some agents have began to charge higher fees, so that they could spend more to promote their clients property. Agents will work an average of 5 times harder to get one sale closed and over with in this market than they would have 2 years ago when it was a sellers market. Ask yourself, what kind of service will you get?

Here is a Dept of Justice link with info:
http://www.usdoj.gov/atr/public/real_estate/rebates.htm
Twelve states currently ban rebates and/or inducements:
• Alabama
• Alaska
• Kansas
• Louisiana
• Mississippi
• Missouri
• Montana
• New Jersey
• North Dakota
• Oklahoma
• Oregon
• Tennessee

There are no free rides. You get what you pay for in the end.
....
2 votes Thank Flag Link Fri Jan 4, 2008
I think Dave and Shelia are way off. I have given a portion of my commissions before to my clients. It is away for us to intice you. However, the mortgage company has to agree to this also. There rebate to you which is a portion of their commission has to go on the HUD Settlement at closing. Some mortgage companies will not allow this. Any questions please do not hesitate to contact me.
2 votes Thank Flag Link Fri Jan 4, 2008
Lorie,

We can call it "bowling for dollars" or the "lucky lotto", or if you like we can call it rebate ... the reality is it's a "kickback".



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1 vote Thank Flag Link Sat Jan 5, 2008
Yes most Realtors in Texas can do whatever they want with their commission and giving a "rebate" to a buyer is not out of the ordinary. Most of the time it is done when an agent lists the house as well and they tie you into a listing agreement where they have to represent you in the purchase too. so they are getting paid from both sides and they offer a part of their commission to the seller/buyer. However, my associates put it very well as to be prepared to do the bulk of the work yourself. Totally legitimate as long as all parties involved, buyers, sellers and lenders are aware of this.
Web Reference: http://www.sumnerrealty.com
1 vote Thank Flag Link Fri Jan 4, 2008
Tman... the word "kickback" not a good term for Realtors. Don Leske JR is correct about the states that do not allow rebates from agents. Other states including my state does allow rebates. The rebates have to be approved by the lender to avoid any mortgage fraud issues down the road.

Don Leske... I believe that the only illegal discussions regarding commissions is comparing and fixing commission rates. Discussing what one charges to their clients is not illegal. We cannot discuss what an "average" commission is as there is no average commission and commissions are negotiable. Each broker sets the commission rates for their companies and some brokers allow agents to set their own commission rates.

There are many brokers providing rebates as an incentive. What do I feel about that? I feel like brokers should earn business based on their qualifications not because they bought the business. If they earn the business and choose to give their client a gift back then fine by me. I have seen agents here locally rebate 2/3 of their commission and I can assure you that the buyers got what their agent received... 1/3 the service. I actually had a buyer call me in tears because they chose another agent that was rebating and the agent was not attentive and did not fight for them with the builder. I hope your experience is different. I certainly would never say that all agents that rebate are horrible.
1 vote Thank Flag Link Fri Jan 4, 2008
Hi Ora,

Not sure about the question. Is your Realtor giving you 2% or is the seller of your next home giving you 2%? If it's the Realtor, it's probably a commission rebate and it is perfectly legal in Texas for you, as a buying and/or selling client of the Realtor (or licensed agent) to receive a rebate. Many knowledgeable and professional Realtors, including myself, offer rebates to loyal clients when selling and buying a home.

Did that answer your question? If not, please clarify what you are asking. Thanks!
1 vote Thank Flag Link Fri Jan 4, 2008
"If" I understand the question correctly, It depends on where you live ..

But as a whole, there's nothing illegal about it, it's done every second of everyday ...

Right now in S.Cal you have builders that are looking to kick back 6/10% to the realtors (because they're sitting on so much inventory) and they intern are passing "some or most" back to the consumer (let's hope) ..... 2 years ago you couldn't get a free coupon for Dunkin' Donuts from a builder

--- oh, how times have changed.



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1 vote Thank Flag Link Fri Jan 4, 2008
Ora,

Plain and simple.....here in TX.... it's the Realtor's commission and they can do what they want to do with it when YOU are their CLIENT!! Plain and SIMPLE! "Fraud" "anti-trust"and all this worrisome non-sense is not worth your time or does it hold much validity. It's called "gifting"

Now if he/she is giving it to you ONLY so that you can qualify for a mortgage...then up pops a HUGE red flag...and that's up to you and him/her as there obviously may be consequences there.

The obvious question is "why is this Realtor offering basically 2/3'rds of their hard earned commission back to you?" Is it to supplement the fact that they are a lousy Realtor and can't get business any other way other than to give you almost all the money they make back? (Which by the way... is the 2% part of the sales price....or 2% of his commission... BIG DIFFERENCE!)

If he/she's willing to do that for you...and you are getting the house you want at all the terms you want.....then I say go ahead... tell him/ her that you want it in writing and you want it in a gift card after closing! - He / she may not be worth the paper their license is printed on and will be out of the business pretty soon... but hey... you got a great house at a great deal and received a nice big gift card to Lowes... what a nice way to coerce a poorly skilled Realtor into padding your pocket..?
1 vote Thank Flag Link Fri Jan 4, 2008
Ora,

It is critical that you ask them where this 2% is coming into play. If the agent is telling you that you will get it back in cash and it's not disclosed to your lender it is quite possibly fraud.

If the agent is gifting you 2% back out of their commission then it probably isn't illegal. As long as you are one of the parties to the contract then the agent can offer you an incentive. However, if this agent is only keeping 1% of the price for themselves they are probably not terribly experienced and probably won't work terribly hard to get the price down for you or represent you well. In real estate, as in anything else, you typically get what you pay for. Obviously, if this agent is offering you this incredible deal, they don't feel like their expertise is worth paying for.

Good luck with everything Ora!
Web Reference: http://www.christesch.com
1 vote Thank Flag Link Fri Jan 4, 2008
Hi Ora,
Ask them what they are talking about, and if they say they will give you their commission, run fast! They are offering to give you their own money; what will they do with YOUR money during the transaction? Also be aware that paying a commission to an unlicensed person (namely, you) could be illegal.
1 vote Thank Flag Link Fri Jan 4, 2008
Well al this discussion is nice, but tell me please. Is the OP the Seller? Or is he the Buyer? If a Realtor gives to the homeowner a 'rebate of commission' when it settles - say if it was s a buyer-controlled sale by the listing agent or an in-house sale by his agency, does that make a difference in your answers?
0 votes Thank Flag Link Sun Jan 6, 2008
Lori, since you mentioned my name and others...who may have no real name, if you want to discuss commissions/fees, go right ahead. I never said it was illegal, if you re-read my post. I said "...any Licensed Real Estate Agent who takes too much liberty with discussions about commissions and their fee structure, may be liable..". --- what was that? TOO much Liberty!.... - why would you even want to go there on a public forum? - Maybe Brokers are a bit more sensitive about it.

Yes, agreements among real estate licensees to set commissions is known as "price fixing," which is illegal. This principle was first established in the 1950 case of United States v. National Association of Real Estate Boards. However, illegal price-fixing is NOT limited to those cases where a specific fee or commission is agreed upon. Rather, the prohibition extends broadly to all agreements that have the effect of raising, depressing, fixing, pegging or stabilizing the price of real estate services. Furthermore, cases brought under the Sherman Antitrust Act have not required a showing of an express agreement to adhere to an illegal plan. Tacit agreement to such a plan will suffice for a violation of the act. A tacit agreement is one that is implied or indicated by an act or by silence and is carried on without words or speech. The case of United States v. Foley is an example of how easily a broker can be found to violate the law without expressly agreeing to the conspiracy.

In the Foley case, the Fourth Circuit Court of Appeals upheld the felony convictions of four brokers who conspired to raise commissions. At a 1974 dinner party in Montgomery County, Maryland while complaining about the current market slump, one of the defendants announced that his firm would raise its commission rate from six to seven. Within months, all of the brokers who attended the party had also increased their commissions to seven percent. The court found that the dinner announcement and the ensuing discussion between the brokers, even without the brokers arriving at an express agreement to raise commissions, was enough to uphold the jury's conviction of each of the defendants under Section 1 of the Sherman Act. A similar result was reached in the 1985 case of Park v. El Paso Board of Realtors.

Real estate licensees should be aware that they are easy targets of price-fixing suits because studies indicate that commission rates have been relatively stable. Plaintiffs usually allege that such stability is due to tacit agreement, express agreement, or other type of collusion among real estate professionals or real estate firms. It might be argued that commission rate stability, in and of itself, does not establish a conspiracy. Rate stability can be explained solely by market forces and not by collusion. However, due to the nature of a price fixing case, the best advice that can be given to any real estate licensee is to never discuss with another licensee, regardless of the setting, the commissions they charge their buyers or sellers.

....ahem!
-Don
0 votes Thank Flag Link Sun Jan 6, 2008
If they're giving away their own paycheck....what are they doing with YOUR money? How hard are they negotiating on your behalf? Something to think aboutQ
0 votes Thank Flag Link Sun Jan 6, 2008
Cindi Hagley…, Real Estate Pro in San Ramon, CA
MVP'08
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I hear you on reality..."kickbacks" are an illegal in real estate which is why we refrain from calling a rebate a kickback.

As the saying goes... walk like a duck, talk like a duck, look like a duck...its a duck.
0 votes Thank Flag Link Sat Jan 5, 2008
Sounds to me that the Realtor is talking about a Seller's Assist. Perfectly legal and is negotiated with the Seller or builder. It's their money, not the Realtors money or commission. No problem, it's done all the time in Pennsylvania. $5,000 to $10,000 for buyer's closing costs is common here.
0 votes Thank Flag Link Fri Jan 4, 2008
I agree with Chris! Be VERY CAREFUL about what is going on with this agent. Have it spelled out IN WRITING as to where this money is coming from and in what form you are going to receive it. MAKE SURE that the mortgage company, title company, and the other party are aware of this "money back" deal.
Just make sure what is transpiring is on the up & up.
0 votes Thank Flag Link Fri Jan 4, 2008
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