Someone recently asked me about buyer rebates. I realized this is a fantastic opportunity to shed more light on them!
QUESTION: “Have you heard of the real estate broker business model where, if you do most of the legwork in searching out your perfect home, the broker will split the commissions with you? It seems like a pretty good gig. I find the house online, even set up the showings with the listing agent and then I get half of the commissions at closing!? Sounds too good to be true. Wanted to hear your thoughts…”
MY ANSWER: There are many reasons why this is shady, sleezy, and illegal, and ill-advised, but here’s a few to chew on:
1. Would You Work For Free? Then Why Ask Someone Else To? – First, he is telling HIS clients to SIGN an exclusive agency agreement which states that his is supposed to represent them and will get paid for it. However, he then states on his website his buyers should ask the listing agent to show them the home. So, he is asking the listing agent to do his job, the listing agent isn’t getting paid any more for their time doing this, and the buyer gets the savings. Pretty shady asking someone to work for free. Digging deeper, these type of outfits often encourage the buyers to NOT tell the listing agent they have a realtor so that the agent is inclined to show it to them (vs having the buyer’s agent show it to them). Then once they find a house they like the buyer coincidentally says “actually….I have thought more about it and I think I want someone to represent me….and then engages Mr. Shady Broker.
2. You Are Swimming With Sharks – To follow up on the issue above when the listing agent is showing you homes, you need to know that the listing agent is working FOR the seller and is TRAINED to negotiate and sell real estate. You are not (sorry to call it out so bluntly, but if you were, you would be a real estate broker and not be considering hiring Mr. Shady Agent). So, here is an average Joe (unrepresented at the showing) discussing a huge financial transaction with a highly trained sales pro. This is like representing yourself in court for big felony and potential prison sentence. No matter how skilled someone thinks they are at negotiating, if Average Joe is in casual conversation with the other side’s agent, they will give away critical pieces of information which will be negotiation ammunition used against them when Mr. Shady Realtor puts in the offer or them. Why would someone risk costing themselves $10’s of thousands of dollars by doing this…all to save 1/2 the buyer agent commission (maybe $3000)?
3. It’s Illegal – They Fudge Their Way Around This – the following is directly from the Colorado agency agreement that all agents in the state use for buyers, and Mr. Shady Realtor requires his buyers to sign thereby acknowledging this. Check out the bolded part about no discounts.
4. News Headline: “Brain Surgeon Rebates Patients” – That would sound weird wouldn’t it? Sure it would. If you were suffering from a brain tumor, would you choose the Dr. that agreed to rebate you part of what the insurance company pays him? We are not talking about a $5000 roof where many people try to get a roofer to do it for the insurance payment less the deductible. We are talking about a $300k, $500k, or $1M + investment that has serious short and long term implications. For many people, their home also plays an important role in their retirement plan etc. If someone is competing on being the cheapest and that’s what they hang their hat on, then that is making a strong statement that they prioritize being cheap over providing exceptional service and value. The cliche “you get what you pay for” is true. Have you ever gone with a cheaper alternative and then were disappointed and regretful later? The latest for me was a $100 plumbing fix that turned into a $850 mistake after Mr. Shady Plumber messed it up. I had to bring in a true professional to fix his mess and it cost triple what the initial repair would have cost if I had the pro do it in the first place!
5. If It’s Savings You Want…Go Rob a Bank – Ok, not literally. If the real goal is to just make the most money in a home purchase and pay your agent as little as possible, you would be better off going to a bank/auction/or court sale and get a steal on a home there. These often are done without brokers, so no commissions, and you often can get homes at an even deeper discount and you don’t pay ANY commissions.
Hope this helps – let me know what questions you have and how else I can help. As you can tell, I strongly encourage you (or anyone for that matter) to stay away from these types of outfits.