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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Rainmaker
138,518
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA
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..
Jun 05, 2007 07:31 PM #13
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

George - It got our attention

Dawn - It is an interesting question

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

Jun 05, 2007 07:53 PM #14
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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.

Jun 05, 2007 07:59 PM #15
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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.

Jun 05, 2007 08:03 PM #16
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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.

Jun 05, 2007 08:08 PM #17
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645
Kaye - I agree
Jun 05, 2007 08:08 PM #18
Rainer
221,208
Ava Anderson
Solid Source Realty Inc - Snellville, GA
REALTOR-Dedicated to Superior Service
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.
Jun 05, 2007 09:04 PM #19
Rainer
86,200
Carol Williams
Nationwide: Self-employed Real Estate Copywriter, Blogger, Photographer and Real Estate Mentor - Wenatchee, WA
Wenatchee Real Estate
Seems like the car ought to go to the buyer and the "generous __% commission" to the agent/agency.
Jun 05, 2007 10:29 PM #20
Rainmaker
574,889
Neal Bloom
Keller Williams Properties, Weston FL - Weston, FL
Realtor CRS-Weston FL Real Estate

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?

Jun 05, 2007 10:36 PM #21
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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?

Jun 05, 2007 10:49 PM #22
Rainmaker
158,069
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner
The listing agent is part owner of the property.
Jun 06, 2007 12:29 AM #23
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645
David -He did not mention that in the ad.  Does that effect the buyer's agent receiving the gift, maybe makes it uglier?
Jun 06, 2007 12:42 AM #24
Rainmaker
158,069
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner
I dont know the right answer.  I wont even touch dual agency and this looks just as ugly to me.
Jun 06, 2007 12:50 AM #25
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645
David - it is defintely a place I would not like to go.
Jun 06, 2007 01:36 AM #26
Rainmaker
608,170
Teri Eckholm
REMAX Results - White Bear Lake, MN
Acreage & Lakeshore REALTOR Minneapolis St Paul
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.
Jun 06, 2007 08:01 AM #27
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Teri - We would have exactly the same problem here.

Jun 06, 2007 05:06 PM #28
Ambassador
2,036,450
Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

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.

Jun 07, 2007 12:17 AM #29
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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.

Jun 07, 2007 04:35 PM #30
Rainer
19,093
Joseph Grabowski
Keller Williams Preferred Real Estate - Yardley, PA
REALTOR - 4saleinbucks.com

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.

 

Jun 07, 2007 04:54 PM #31
Rainmaker
623,732
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

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.

Jun 07, 2007 05:24 PM #32
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Rainmaker
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Hawaii REALTOR, (808) 384-5645
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