The High Road: Don’t pay your broker a cent!

What could be nicer for a real estate broker than to have a grateful client?

Many of us have had such a buyer or seller, one who wanted to express his or her thanks with money or a valuable gift.

That’s a thoughtful gesture!

There also are the rare clients who decide that there’s no reason for the broker to split the entire commission with the firm to which the broker is affiliated. 

I suppose they make the suggestion to do part of the transaction “off the books” for a couple of reasons: It saves the broker money and, likely more important, saves the client money too, assuming the commission will be cut in what could be viewed as a win-win situation.

Whether clients seek merely to be benevolent or have more base reasons, there’s a problem with giving any money at all directly to a selling agent or a listing agent.

The problem: It is against the law.

The law declares that commissions are to be paid directly to brokerage firms, which split the sums with their brokers/agents, and that includes bonuses:

No real estate salesman. . . shall receive or demand compensation of any kind from any person, other than a duly licensed real estate broker with whom he associated, for any service rendered or work done by such salesman in the appraising, buying, selling, exchanging, leasing, renting or negotiating of a loan upon any real estate.

Circumventing the law is far more serious than an ethical lapse.  It is a practice that comes with severe penalties.

Many clients are unaware of the stricture, of which brokers must remind them when the occasion arises.  From what I can discern, some do, some don’t.

Also against the law is the improper payment of any part of compensation by a broker to anyone not licensed to sell real estate or exempt from licensing; that is called a kickback, a term that includes the payment to an unlicensed person for procuring a listing — in order words, a referral fee.  (However, it is fine to offer a buyer a credit at closing.)

Buyers and sellers whose brokers are willing to accommodate either their well-meant generosity or their avaricious intentions should know that the character of the person who willingly breaks the law is someone in whom their trust is unfounded.

By the same token, a client bent on essentially bribing a broker isn’t particularly respectable either.

Tomorrow:  Who are you calling a procurer?

To take your own bite out of the Big Apple, search for your new home here.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201
Web site

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