Sunday, January 16, 2011

Asking a Realtor for a Kickback

I met a couple recently and we discussed their housing needs.  They asked me to show them a property and I made the arrangements.  After spending considerable time at the home, they turned to me and asked if I would give them part of my commission if they bought the home through me.  I explained that they did not pay my commission, the seller did.  They said they understood that and yet wanted me to give them 1/3 of my commission for doing business with them. 

While I am not an attorney, and this should not be construed as legal advice, under Washington law this is considered a “kickback” and is prohibited. Some agents simply ignore this  and offer their services at a reduced rate in order to garner more business.  I have to wonder what kind of service these agents offer.  If they will not conduct a transaction within the law, why, then should we assume they will care for the interests of their clients?   I also wonder if they are astute enough to realize that what they are doing is prohibited  and is grounds for disciplinary action by the Department of Licensing. 

What some home buyers and sellers do not understand is that Realtors do not earn a salary and are only paid when they close a sale.  The 3% commission figure is  historically recognized as one that adequately compensates agents  for the  time, effort, expenses, and other factors involved in this type of business.

It is possible for realtors to legally share a portion of their commission with a buyer, but in order to do so, there must be full disclosure to the lenders involved and all aspects of the transaction must be fully disclosed on the closing settlement documents (“the HUD”).   To pay a kickback either before or after closing without informing the lender or disclosing the transaction on the HUD is illegal and puts both the client and the Realtor at risk of being targeted for mortgage fraud.  To avoid incurring liability for potentially fraudulent transactions, it is best to keep  all the financial dealings open and above board.  Better yet, work with a realtor that will not engage in deals that skirt the margins of permissible or ethical behavior.

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