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Ken, Real Estate Pro in Jersey City, NJ

If you offer 2% comiss plus $1,000 bonus to selling agent, does the agent split that bonus with the broker?

Asked by Ken, Jersey City, NJ Fri Apr 24, 2009

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Ken, the simple answer to your question is "yes, the agent must split that bonus with their brokerage".
2 votes Thank Flag Link Sat Apr 25, 2009
Alan May, Real Estate Pro in 60201
MVP'08
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Regardless of bonuses, the length of time a home is on the market is materially dependent upon it's percentage of payout. In researching this about six months ago, I found there is little difference between 2.5% to 3%, but once the commission payout to the buyer's agent falls to 2%, the time on the market increases substantially. 2% payout property simply gets shown less, which results in a longer sales time. I'm forgetting the figures when I did the research, but as I remember it almost doubles. Without researcing and disclosing that fact to sellers, I think a disservice is being done. I would be interested to see how 2% properties did compared to asking price and actual value - the psychology being if it's a 2% payout, the buyer's agent already knows the selling agent is a bad negotiator, as he/she has already negotiated away their own salary.
1 vote Thank Flag Link Wed Dec 9, 2009
Ken,

You have already been provided with some great food for thought here. If my sellers insist on an agent bonus, I always recommend the AMEX gift check as there is a fine undetermined line in REC rules regarding these types of bonuses.

Personally, it has been my experience that a cash bonus to a buyers agent carries little weight . . . a buyer wants to see what a buyer wants to see and it would be considered unethical for an agent to promote one property over another simply due to a bonus. The same goes for the 2% or 2.5% buyers commission (atthought in today's market 2.5% is the norm - although I realize this may sound contradictory) . . . a buyers dream home is a buyers dream home and they couldn't give a hoot if the buyers agent is getting 2% or 2.5%. A buyers home of choice is not our decision it is that of the buyer, we are just brokers of a deal.

Love and Peace,
Francesca, Realtor, ePro
Web Reference: http://www.PatrizioRE.com
1 vote Thank Flag Link Mon Apr 27, 2009
Don't be so quick to answer yes, the answer is usually yes however it depends on the employment agreement between the broker and agent and how they will handle bonuses.

All commission must be paid through the broker, bonuses are commission to no matter if you call it a bonus, gratuity or gift. Be careful with those gift cards people, don't lose your license or worse.

That is the law!

J R, sellers usually offer these bonuses to entice and compel agents to go out of their way to have their clients show their home vs others because they may make more money on that sale. Sure agents are not suppose to show properties based on their compensation however its human nature that some may take the bait. On 2% + $1,000 I don't think the bait is good enough when most other listings are offering 2.5% and 3% broker cooperation either of which will be more then the 2% + $1,000 bonus.

$275,000 sale
2% = 5,500 + $1,000 bonus =$6,500
2.5 % = $6,875
3% = $8,250 which is pretty much the average in this market

You make the call...
1 vote Thank Flag Link Sat Apr 25, 2009
Ken: The path of your selling agent bonus, in NJ, is a long one. First ALL your commission goes to the Listing Broker. If you have an agreement with the broker (read: in writing,) he must split it with others, exactly as he has promised. However, neither the listing agent nor the selling agent get ANY of the commission, based on your listing agreement, in almost every case. They are simply not mentioned in the standard listing agreement. These people get whatever it is that they get in a separate deal that they have made with their agency. You don't control that. Brokerage fees paid their agents vary, not only among agencies but also among the agents of a single firm! Most agencies want that selling bonus included in their total revenue, which they share, as they will, with the individual agent. In my experience, very few pass the entire amount through. This leads to subterfuges, such as gift cards, etc., given to the successful agent at closing. This may cause a great deal of trouble, if the agency catches on.

There are two very good arguments against the whole practice. The first is that the selling agent's influence over the buyer (his client) is far from absolute and may, indeed, be marginal. The seller may well be paying for nothing at all!

The second is, as a buyer, how comfortable would you be if you knew that an agent was making a great deal more by "pushing" certain houses on you? We are seeing this question being asked of physicians and drug company bonuses.

Think about it.

Although, as I say, an agent should not look at the commission amount when showing homes (and most really do not,) there comes the point where it becomes just not worth the effort. A now defunct agency constantly offered only one percent. They did not last partly because they got little cooperation in showing their listings. Three percent on both sides is about right, except in very high end properties, which might well have a different marketing approach and a different commission structure.
1 vote Thank Flag Link Fri Apr 24, 2009
Ken,

I agree - the agent will get paid through her broker whatever split they are in with their broker will apply with the commission and the bonus. I also agree that if using this as a strategy to sell your house quicker, a buyer's incentive is more enticing than a bonus to the selling agent. Perhaps a home warranty or a $1000 credit towards closing costs.

Good luck.

Gina Chirico
Sales Associate
Prudential New Jersey Properties
Livingston Regional Office
973-715-1158 cell
973-992-6363 ext 116 office
Gina.Chirico@PrudentialNewJersey.com
1 vote Thank Flag Link Fri Apr 24, 2009
As Jeanne said, only brokers can pay agents. So, it really depends on the company policy as to whether or not they take a portion of the "bonus" offerred.
In my neck of the woods, I tell my sellers not to bother with an agent bonus, just reduce your price! The buyers are easier to bribe than the agents!!!
Web Reference: http://www.dianeglander.com
1 vote Thank Flag Link Fri Apr 24, 2009
Yes, unless the agent has a specific agreement with their broker about agent bonuses.
0 votes Thank Flag Link Sat May 5, 2012
Hi Ken, you've gotten the clarification on the matter of whether a bonus can flow directly to the agent, "no", and in passing through the broker, it will likely be hit with the same split.

I would recommend to your seller that increasing the payout to the minimum customary level of 2.5% would be a far more effective strategy to increase agent interest/showings.

Good luck,
Jeanne Feenick
"Unwavering Commitment to Service"
Find success at http://www.feenick.com
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Thu Dec 10, 2009
only the Broker can decide if the agent will receive the full bonus,or if its in the agent 's written commission contract.
no money can be given to the agent in any form ,only throught the Broker
0 votes Thank Flag Link Sun May 10, 2009
Francesca
"I always recommend the AMEX gift check as there is a fine undetermined line in REC rules regarding these types of bonuses"

Whoa... Not at all, I'd suggest talking to your broker about this one. There is no fine line, the rules are clear cut and dry from the rec on value of gifts as well as ANY form of payment to an agent MUST be through the broker. We're in the same state so I can say that as a matter of fact being and as a broker myself.
0 votes Thank Flag Link Mon Apr 27, 2009
The money goes through the broker but whether or not it is split depends on the agreement they have. I really dislike the 'bonus to agent with FPO' deals. When I see that, I know that there is room to negotiate for my buyer. If someone is just acting as a sub agent for the seller or 'simply preparing the offer and not representing the buyer' like many posters have said that they wanted, then I'd say go for it.

As far as 'average' commissions, we all know we're not supposed to go there. If one listing is offering less than the next, I really don't care. I already have an agreement with my buyer so they don't have to worry that I'm not going to show them a house with a low fee being offered.
0 votes Thank Flag Link Sat Apr 25, 2009
J R, sellers usually offer these bonuses to entice and compel agents to go out of their way to have their clients show their home vs others because they may make more money on that sale. Sure agents are not suppose to show properties based on their compensation however its human nature that some may take the bait. On 2% + $1,000 I don't think the bait is good enough when most other listings are offering 2.5% and 3% broker cooperation either of which will be more then the 2% + $1,000 bonus.
~~~~~~~~~

I'm aware of the reason. I simply don't think any cash enticement will make a buyer want a particular home. Buyers see homes on the internet. If this one is priced right it will sell. If it isn't, then all the bonuses in the world aren't going to make someone buy it.
0 votes Thank Flag Link Sat Apr 25, 2009
There are two very good arguments against the whole practice. The first is that the selling agent's influence over the buyer (his client) is far from absolute and may, indeed, be marginal. The seller may well be paying for nothing at all!
~~~~~~~~~~~

Basically Ken would be rewarding an agent for the luck of the draw. There is no way we can make someone buy a house because there is a bonus. I'd be more inclined to reward the LISTING agent a bonus if you feel they worked hard to promote your home. I think all gifts with the sale of a house are silly. Even to the buyer. Who would buy a house costing hundreds of thousands because they were getting a minuscule gift?
0 votes Thank Flag Link Sat Apr 25, 2009
Ken,
Any bonuses go to the agents Broker, it is up to him whether he gives the agent the full bonus. Most times the broker takes a piece of it, like he/she does with the commission.
Laureen Coup
Broker-Manager
Crossroads Realty
0 votes Thank Flag Link Sat Apr 25, 2009
In my area the bonus would go to the buyer agent NOT to the listing agent. So the buyer agent's office would get the 2% plus the $1,000 bonus.
0 votes Thank Flag Link Fri Apr 24, 2009
Hi Ken, an agent can only be paid through his/her broker and so any financial compensation must flow through, and I'm pretty sure the same split is applied to the comp, whether it is in the form of commission or bonus.

I'll be interested to see what others say, but I think this is the case.

If you are thinking of incentives - I would combine what is customary in your market as selling agent commission with an incentive to the buyer - perhaps a contribution towards closing costs.

Good luck to you!
Best,
Jeannie Feenick
Search and connect at http://www.feenick.com
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Fri Apr 24, 2009
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