You be the Judge

By
Real Estate Broker/Owner with Island Style Realty Inc. RB-19250

I received this e-mail last week and have been giving this some thought.  I was not sure if I should post this or not.  I think I will throw it out to the group.  I blocked out the commission percentage, because I do not feel comfortable discussing percentages and actual fee amounts.  It is sufficient to say the percentage was higher than what I am used to seeing.

Here is the message; the name was removed to protect the innocent.  I copied and pasted it exactly how it was written minus the actual percentage.

                                                                             Lexus

AWESOME BRAND NEW  PENTHOUSE -  and NO AGENT NOR BROKER IN ALL OF HAWAII  IS OFFERING A  BRAND NEW SPECIAL ORDER LEXUS 2008 HYBRID and a huge GENEROUS        % COMMISSSION  to any broker - agent  for a full price CASH OFFER_ ( NO LOAN) on this fabulous one of a kind PENTHOUSE - BEST VALUE IN ALL OF WAIKIKI NOW!

Is this any kind of an ethics violation?  Any laws broken here?  Is it smart marketing or bad business?

How would they make good on this if an agent brought in the buyer?  All commissions go to the brokerage.  How would you split a Lexus?   Does the broker get the trunk and doors?  You would also have to pay taxes on the car.

This would have to be disclosed to the buyers wouldn't it.  How would you collect this and look out for the buyer's interest at the same time?  As a buyer's agent aren't you supposed to get your client the best deal possible?  This would make for a severe conflict of interest.

What do you think?

Posted by

 

--------------------------------------------------------------------------------------------------------

Randy L. Prothero, REALTOR®

Principal Broker, ABR, AHWD, CRS, e-PRO, GRI, MRP, SFR

Island Style Realty Inc.

Team Leader - "The Prothero Group"

Randy Prothero is well established as an expert in working with military / VA clients and first time home buyers.  His home seller's (listing) campaign is one of the most aggressive marketing programs in the area.

Based out of Mililani, Hawaii. Randy services the island of Oahu (Honolulu County) Performs mediations and ombudsman services for the Board of Realtors.  To improve overall professionalism in his area Randy also offers classes for real estate agents. 

www.HawaiiRandy.comOahu (Honolulu County) Property Search  Hawaii Military Relocations

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Location:
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Tags:
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Comments 32 New Comment

Show All Comments
Rainmaker
136,249
Kaye Thomas
e-PRO, Manhattan Beach CA
Real Estate West
These gimmicks rarely work.. they would be far better off offering to pick up all the buyer's closing costs and buy down the interest rate on the loan..
June 05, 2007 07:31 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

George - It got our attention

Dawn - It is an interesting question

Lenn - What if the buyer later decides he paid too much?

June 05, 2007 07:53 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Joseph - An agent can not accept any form of compensation directly.  That is against the law here.  It has to be paid top the broker and then the split is between them and the agent.

Gregory - I failed to mention the price.  It was reduced to $1,299,000.  There are some cash buyers in that arena, especially 1031 types.  The bigger question is how many with cash need to pay full price?

Sally - It is not selling is what is wrong.

June 05, 2007 07:59 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Laura - That is the question.  The inducement is for the agent.

Larry - The term agent here generally refers to licensed sales people.

Bryant - it may be foolishness, but the are greedy agents who will try their hardest to get the car at the expense of their clients.

June 05, 2007 08:03 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Chris - My broker said he wants the doors and hood.  LOL

Teri - I know in some states you can use inducements of any type, not even advertising food at an open house.

Thesa - $1,299,000

The buyer can not even get cash back with some types of loans.  Even giving the car to the buyer could be complicated in some situations.

June 05, 2007 08:08 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.
Kaye - I agree
June 05, 2007 08:08 PM
Rainmaker
219,728
Ava Anderson
REALTOR-Dedicated to Superior Service
Solid Source Realty Inc
I tried something similar, but the car was going to the buyer of the home.  It didn't work in my market, only one inquiry and she was not interest in the car, just submitting a low ball offer.
June 05, 2007 09:04 PM
Rainer
84,875
Carol Williams
Wenatchee Real Estate
Nationwide: Self-employed Real Estate Copywriter, Blogger, Photographer and Real Estate Mentor
Seems like the car ought to go to the buyer and the "generous __% commission" to the agent/agency.
June 05, 2007 10:29 PM
Rainmaker
573,888
Neal Bloom
Realtor CRS-Weston FL Real Estate
Keller Williams Properties, Weston FL

Randy,

Maybe the broker lets the agent use the car during the week and the broker keeps it for the family on the weekends. :) I showed you the one where the buyer gets the 2002 Camary..but I never heard of the agent getting the car. Sounds fishy to me. hopefully it is not a A/R member or is it?

June 05, 2007 10:36 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Ava - I doubt this will actually work.  I question whether it is ethical for a buyer's agent to go after it.

Carol - The commission is what ever it is.  I agree the gift if any should go to the buyer not an inducement to the agent to bring in a higher price.

Neal - It is not an A/R member.  I don't have a problem with offering something to the buyer as long as it is allowed by the lender.  The question is what about offering substantial gifts to the agent for bringing in a full price cash offer.  Wouldn't that be a violation of their fiduciary duties to shoot for the gift instead of the buyers interests coming first?

June 05, 2007 10:49 PM
Rainmaker
157,590
1SG (Ret.) David Kucic
President and Owner
Hawaii Military Realty, Inc.
The listing agent is part owner of the property.
June 06, 2007 12:29 AM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.
David -He did not mention that in the ad.  Does that effect the buyer's agent receiving the gift, maybe makes it uglier?
June 06, 2007 12:42 AM
Rainmaker
157,590
1SG (Ret.) David Kucic
President and Owner
Hawaii Military Realty, Inc.
I dont know the right answer.  I wont even touch dual agency and this looks just as ugly to me.
June 06, 2007 12:50 AM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.
David - it is defintely a place I would not like to go.
June 06, 2007 01:36 AM
Rainmaker
604,303
Teri Eckholm
Acreage & Lakeshore REALTOR Minneapolis St Paul
REMAX Specialists
Randy--The problem in MN was similar to what you said that the broker must be given the compensation. The fact that the builder needed my tax id for this gift was where it became obvious that there was a line crossed. If it had been a bonus or valuable compensation of any type, it has to go to the broker. Now if it was a prize in a contest, it would have been a different story. But this was valuable compensation tied directly to the sale of a home so it would have to be pd to the broker. I know laws are different in each state but based on my experience this promotion would not work for agents in MN.
June 06, 2007 08:01 AM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Teri - We would have exactly the same problem here.

June 06, 2007 05:06 PM
Ambassador
2,032,195
Todd Clark
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494
Keller Williams Realty

I've heard of investors doing this, but not agents. I've heard of a FSBO selling a home with a new car in the garage instead of having to pay agents commissions.

June 07, 2007 12:17 AM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Todd - Everything is negotiable in real estate.  You can throw in what you want for the price.  The bigger issue is is it OK for an agent to pay a big inducement to another agent to bring in a top dollar offer? The buyer's agent has a responsibility to get his client the best deal. 

In our state they can't give it to the agent anyway.  It must go to the broker.

June 07, 2007 04:35 PM
Rainer
19,093
Joseph Grabowski
REALTOR - 4saleinbucks.com
Keller Williams Preferred Real Estate

Randy,

 quote: "Joseph - An agent can not accept any form of compensation directly.  That is against the law here.  It has to be paid top the broker and then the split is between them and the agent."

 Like I said before, the Lexus is not a commission. I never said anything about the agent receiving compensation directly. Whatever happens to the Lexus is between the agent and his or her broker. In their independant contractor agreement they might have it as all bonuses do directly to the agent. Or they might have to negotiate something with their broker.

If I was to get that as a bonus, if my broker wanted some sort of spilt or compensation because I got the Lexus, I would find another broker to work for.

 

June 07, 2007 04:54 PM
Rainmaker
620,086
Randy Prothero
Hawaii REALTOR, (808) 384-5645
Island Style Realty Inc.

Joseph - Your broker would not have a problem with an agent who represents their own interest over a clients?  I am just completely uncomfortable with giving a bonus to an agent to push the price up with their client.

June 07, 2007 05:24 PM
Show All Comments
Rainmaker
620,086

Randy Prothero

Hawaii REALTOR, (808) 384-5645
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