Buyer Agent Bonuses Are A Waste Of Time!

By
Real Estate Agent with Realtor®, GRI, Landis e2 Real Estate, LLC

  Offering a bonus to buyers agents is a waste of time and energy. A bonus will not determine whether the house meets a buyer's needs, it won't change the condition of the house, it won't change the location of the house and an agent bonus has nothing to do with whether a buyer chooses to offer on a given property.

  When working as a buyer's agent, my duty, loyalty and fiduciary responsibility are to the BUYER, not myself. This means that I'm looking out for my buyer's needs/wants/best interests, NOT whether a seller is offering to pay a bonus.

  I realize this may be a difficult concept, but I take my duties seriously. It's not ever about my needs, it's about the CLIENT, the one who's hired me to professionally represent them!!!

 When I see buyer agent bonus offers, I find it interesting because to me it shows:

 1. Sellers are motivated, they must want to sell pretty badly

2. That list price is apparently not very firm if they're willing to offer a bonus on top of the offered commission split

  What do I do when showing a house with an agent bonus offered? I tell my buyer clients and explain those key points about the apparent motivation and that the list price may not be very firm.

   If a house that my buyers are interested in happens to have a bonus offer, I'll tell the list agent I'm not interested in the bonus and my buyers can deduct any bonus amount from the list price when they consider placing an offer. After all, if a buyers agent bonus has been offered, that's lowered the net to the sellers so why not just have the buyers take it off the list price when putting together an offer?

  My bottom line is about finding a house that my buyers want to call home, no agent incentive will ever change or affect my client's needs and which house will be a good fit for them. I don't "sell" buyers on a particular house, I work with them to find them the most ideal house possible for the best possible price.

   It's about evaluating properties, price, condition, features and how those match buyer needs and desires, not about giving buyer's a sales pitch. Listening  to their needs and concerns while helping them evaluate properties, not trying to convince them they should fall in love with a particular house.

   Marketing a listing should be about getting a qualified, motivated buyer in the door and offering on a house that meets what they're looking for in a home. Agent bonuses won't ever change buyer needs, price range, or motivation and at the end of the day, it's about finding the right BUYER for the house.

   I assure you, if your listing seems to be a good match for my buyer clients, I'll show them the house. You really don't need to offer a bonus for me to help my clients find their next home, and if the sellers are motivated and willing to reduce their net, have them offer it to the buyers (closing cost credit, home warranty, list price reduction).  

  Maybe it's just my opinion but I think agent bonuses are among the least effective tools out there for sellers and list agents.

Copyright©2008 by Diane McDermott, All Rights Reserved, "Buyer Agent Bonuses Are A Waste Of Time!"

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  1. Tim Maitski 08/19/2008 01:28 PM
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Ambassador
883,569
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Anne has a good point and is integrating it into a broader plan, but otherwide I have to agree.  The first thing I think of when I see a bonus for the buyer's agent is "overpriced" or problem property. 

Aug 19, 2008 12:32 PM #3
Rainmaker
656,345
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Hey, Diane. I agree 100% with you on this one. If a bonus is being offered it should go to the Buyer not the Agent. Thanks for sharing, Jim

Aug 19, 2008 12:39 PM #4
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Alan, Exactly! The buyer decides which house to offer on, although I will say when a buyer of mine chooses a house with a bonus attached I don't mind helping them use the bonus to their advantage in negotiating

Hi Anne, I'll respectfully agree to disagree. It sounds like you utilize multiple marketing from the beginning not just a bonus offer, and I do agree with your points about getting the word out to as wide an audience as possible from the beginning. It still won't change whether or not I have an active buyer who might like the house, and if I do I'll go to a broker open or preview regardless of whether a bonus is involved. I do appreciate you stopping by and taking the time to share your thoughts

Hi Lane, I've had those thoughts as well, seems like I get several e-mails daily noting agent bonus offers

 

Aug 19, 2008 12:45 PM #5
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Jim, I do think buyers should know if an agent bonus is being offered and if I'm representing them I have no problem explaining options to use it to their advantage, thanks for stopping by!

Aug 19, 2008 12:47 PM #6
Rainmaker
645,178
Team Honeycutt
Allen Tate - Concord, NC

It may be a tell tell sign that the sellers need to sell the home, but it is a pretty nice motivational tool for agents to show and sell that home!

Aug 19, 2008 01:42 PM #7
Rainer
29,222
John Morrison
Buyer's Choice Realty - Ipswich, MA
Exclusive Buyernulls Agent, CBR - Boston Area Real Estate

Great post! I only work with buyers, and we sign a contract specifying what our success fee will be. Taking fiduciary duties seriously is a great way to conduct business. Homes will sell themselves, and I think that consulting with a buyer to determine their wants and needs is one of the first ways you can help them. Anything above and beyond what our stated success fee is gets returned to the buyer, i.e. agent bonuses. You make good points and I applaud you sharing them.

Aug 19, 2008 01:49 PM #8
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Team Honeycutt, Thanks for stopping by! My point was just that any offer of a bonus has no effect on which houses I show, it's about meeting buyer needs and no amount of a bonus offer will make me show buyers something that is not a potential match for them or that they haven't expressed an interest in. If a house seems to have potential for the buyer I'll show it bonus or no bonus

Hi John, Thanks for bringing up the agency agreement, you're right that it specifies exactly what our commission will be, great point! I like that you call it a success fee - true since it's irrelevant until we succeed in finding the right house! 

Aug 19, 2008 02:17 PM #9
Rainmaker
232,210
Don Davies, GRI "AshevilleRealEstateTrends.com"
Don Davies Real Estate/REALSEARCH/Asheville, NC - Asheville, NC
"Realsearch" and Agent Referrals in Asheville NC

Here is another way to look at your premise.

There are 2500 pieces of Vacant Land for sale in Buncombe County. Last month only 25 Sold. I have a very nice property (6.36 acres) for sale that has long range views, easy laying land (for being in the mountains) and is clean, but in order to even get the attention of buyer's agents, the offer of a bonus has done the trick.

I agree with your business attitude and wish more worked and felt like you do, but the bottom line today is that there are many hungry agents that cannot skim successfully through the huge number of competing listings to settle on a few that will work for their buyer, so they are attracted to the offer of a bonus.

I don't care how they use it, but it does not indicate that my property is undesirable or overpriced, but the bonus draws the wanted attention, and I don't care what the reason is, as long as they keep showing it.

A bonus offer on housing may have a negative effect, but not on land, especially when there is several years worth of fairly priced inventory in good locations.

Aug 19, 2008 02:45 PM #10
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Don, Thanks for sharing your example. I do think there is a difference between vacant land and existing homes.

 With existing(or new construction) homes the neighborhood, home style, layout, features, upgrades(or lack of upgrades) are already in place. Buyers seeking a home tend to have more criteria than a purchaser of vacant land which may very well narrow the matching listings.

 It absolutely takes time to research and evaluate potential homes for buyers but that's part of our job as agents, and elimating potential matches because there's no bonus is in no way in the best interests of the client.

 It's still ultimately the buyer who decides which house/property is for them. Buyers today have access to online listing info all over the place, why not focus on marketing buyer incentives to buyers AND agents?

 

Aug 19, 2008 03:49 PM #11
Rainmaker
59,023
Cathleen OnullHannigan
Keller Williams Realty - Cary, NC
Cary NC Homes Pro

When I see a bonus, I think the price is too high or the house is a loser. I also am not motivated by bonuses, because it has to be disclosed to the buyer and I would think that they'd be negotiated away in order to make the deal. Much prefer to see a price reduction or the money put to staging the home if it needs it.

Aug 20, 2008 07:57 AM #12
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Cathleen, Thanks for stopping by! Great point about staging, there's definitely other creative ways to either highlight a feature or correct a drawback and have visual impact with buyers, it's all about buyers seeing value in the home

Aug 20, 2008 09:18 AM #13
Rainer
71,135
Jim Fischetti
The Fischetti Group/Keller Williams - Wake Forest, NC

Diane,

 

I'd have to agree with that too.

 

It is the wrong incentive.

 

Give the incentive to the buyer:

Price reduction

one year's gas

below market loan terms, etc.

 

Thanks,

 

Jim

Aug 20, 2008 09:24 AM #14
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Jim, Absolutely! Thanks for the comment.

Aug 20, 2008 11:39 AM #15
Anonymous
Anonymous
Trace Steele Banks

I totally agree with Jim and Diane on buyer agent bonuses are a waste of time. Fiduciary counsel DOES require the expertise, knowledge, and experience that a quality real estate professional brings to the table because this is what I do every day. It's market knowledge, judgement, and representation. My fiduciary responsibility is to find the home that matches the criteria of the buyer client; if upon looking I see a bonus being offered and my client likes that particular one-I will inform them that the bounus will be applied to price reduction, closing cost, etc. I will already earn my "success fee" on the upfront ageed upon buyer agency agreement and what the co-broker commission rate is. Their interest and is my interest as they will get the BEST DEAL I can find for them and come to a smooth and succesfull close.

Thanks,

Trace

Aug 22, 2008 09:21 AM #16
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Thanks Trace!

Aug 22, 2008 11:47 AM #18
Rainer
3,266
Park Creek
Park Creek - Kannapolis, NC

Thanks for your comments. I know as a developer, we are always looking for better ways to get outside agents involved in our lot sales, and sometimes we forget who's righting the check in the end. We look forward to improving our sales techniques, and providing the best product at the best price to the client thereby eliminating the need for incentives.

Aug 27, 2008 02:14 PM #19
Rainmaker
645,178
Team Honeycutt
Allen Tate - Concord, NC

I agree with you on this one!!! In the Normal Market that we are in now, it is very important to price homes correctly and aggresively to get them SOLD! If a seller can afford to offer a bonus then that number should come off the list price. The number one goal is to get the home sold for the best price and to do so quickly!

Aug 27, 2008 03:40 PM #20
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Carl, Thanks for stopping by! Quality product at a fair price that meets the buyers personal needs/wants/lifestyle is what it's all about. I know when I have buyers looking (or even considering) new homes it's still about finding the right fit in home and community for them, bonus offers won't change buyer needs and if a community/development seems to have potential for them, I'll show it to them.

Hi Team Honeycutt, I agree, if the seller can afford an agent bonus, they can afford to take it off the list price or give a concession to the buyer. When the bonus is added after a house has been listed for any amount of time, it won't retrieve the lost marketing time when the house was overpriced. Thanks for stopping by

Aug 27, 2008 04:13 PM #21
Rainer
41,803
Eugene Jones
Weichert Realtors - Somerville, NJ

Hi Diane, great post. I often see listings with "buyer agent bonus" but never paid too much attention to the bonus. Like you said, it's up to the buyer which homes they'd like to see and eventually make an offer on. I think it's a great idea to flip the "buyer agent bonus" idea into an incentive for interested buyers. I think it shows buyers that you really care and that it's not all about getting a commission, but rather servicing their needs. Thanks!

Aug 29, 2008 01:18 PM #22
Rainmaker
564,387
Diane McDermott
Realtor®, GRI, Landis e2 Real Estate, LLC - Charlotte, NC
Charlotte NC Real Estate Market

Hi Eugene,

So true, it's about the buyer's needs! Thanks for stopping by

Aug 30, 2008 12:54 PM #23
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Diane McDermott

Charlotte NC Real Estate Market
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