Sure, there a few examples of good gifts, like the gift of 70% cash back by buyer's agents who recognize the truth about who actually pays commissions on real estate transactions. But for the most part, gifts realtors give to their clients are given for one of two reasons: marketing or, because if they don't, they'll appear cheap.
I remember the first time I heard about a realtor gift. A friend bought his first place. He spent about $300,000 if I recall correctly. His realtor, a young guy like himself, after earning somewhere around $6,000 for the time he spent on his client (I'm not sure how much, but I'd bet it was fairly considerable) before deductions etc, showed up at the closing with a brand new beer fridge for the garage, full of premium beer. It was the perfect gift for this single guy friend and it had our social circle talking. Good marketing, eh?
Another couple we know gets a gift annually from their realtor, who they used once way back in 2003, and will never use again, mostly because of this gift: a custom-labelled 375ml bottle of U-Brew
Until recently, we'd never received a gift. I don't begrudge the realtor we used for the commission they received. We made a choice to use a full commission buyer's agent and they made the full commission while spending less than 20 hours on us in total. Sure it pisses me off to no end knowing they "earned" more than $300 per hour while literally doing little more than scheduling viewing appointments and unlocking doors. But that was the rule of the game when we engaged their services and we entered into it knowingly. As they say: don't hate the player, hate the game.
Sure we tried to find a cash-back agent to save some bucks. We weren't successful, obviously, nor were we patient enough to wait until we could find an agent with a cash back structure we felt was realistic (you'd be amazed at how many agents advertising cash back deals have more fine print than legal documents and end up at full commission in the end) Anyway, back to the gift.
There's not much point in going into too much detail. The gift basket was crap. It was cheap. It was full of junk food and the one item that had any household usability was so engraved with marketing that we gave it away to Sally Ann. Even more, our agent called us that morning to ask what kind of wine we prefer: red or white? Here's the thing: when you only spend $10 on a bottle of gift wine you're going to save face by buying both, calling before hand to ask just draws attention to the cheapness of the gift.
I'd love to hear from the realtors who frequent this blog: Why do you give gifts? What do you give? Are your gifts personalized with your name and contact info permanently etched into glass or metal? If so, do you think your clients appreciate this?
I'd love to hear from other readers too: Do you appreciate the gifts? Anything positively memorable? Do you pass any on as gag gifts for the jokes they originally were? What gifts do you want to get? Should realtors just stop gifting altogether?
50 comments:
Gifts are quite common, not only with Realtors but also in other business relationships. I don't see anything wrong with it; if it's just about $ it removes the humanity, and most people get off on that sort of thing.
Let's just say I'll take the beer, share one with the Realtor, and invite him to network at neighbourhood BBQs if he didn't screw me over. ;)
My last realtor, who has gotten a lot of business from me, has never given me anything. Others have given me plants (this, I hear is a very common one), one time I got a vase (with no flowers in it). My young nephew and his wife received a top end front loading washer and dryer. Also, loads of realtors send calendars with their name on them each year.
Oh ya, I imagine the "gifts" are a tax right off and I'll bet dollars to donuts that many realtors "buy themselves" a gift after each transaction.
Jesse, you hit it. I have no problems with gifts... as long as they are thoughtful. I don't want a gift from a realtor just for the sake of the gift. Sh&t, a GC for a neighbourhood restaurant is more thoughtful than a bulk-discount gift basket... especially when the agent knows you're new to the city/neighbourhood. For that matter, a city map would have been more thoughtful.
My buddy that got the beer & fridge, that realtor probably spent $200 on that gift, chump change really on a $6k deal, but even more, he got word of mouth marketing that $ alone can't buy. He knew (easily) what his client would appreciate and got it.
Our agent made zero attempt to get to know what we like. A $50 GC to Rona or Homedepot would have been more thoughtful and left a more favourable sentiment on their behalf.
It's the thought that counts...
I don't give gifts primarily because of my margin. On a $600,000 home my client would typically receive a cheque for $7,350 a few days after completion....gift enough?
If I was a pocketing the entire $10,500 commission when helping someone buy a $600,000 home I would probably get them something memorable...60'' TV? new KitchenAid stove or fridge? Trip to Hawaii?
I think my marketing of 70% cash back is somewhat ineffective as the typical Joe does not get it.
I think I would be better off with FREE INSPECTION, FREE LEGAL FEES, and BRAND NEW 60'' LCD TV....and it would probably only be like 30% of the commission.
During the stressful part of negotiations and decision making in selling my condo, I mentioned in passing to my realtor 'boy, when this is all over and I have that money in my hands, I'm going to spend a day at the spa'.
On closing day, my realtor gave me a gift certificate for a spa. So either she had listened and filed that comment away for future (she seemed smart enough to do so), or she just gives them to all the ladies.
Either way - it was a great way to finish up a week of packing and moving. And though I wasn't expecting a gift (in fact, I didn't even know this was a normal thing until HHV's article today) I figured it was the least she could do considering the dough she made off my sale for the few hours of work...
I agree with you Marko - with your pricing strategy, I don't believe your clients would expect nor need anything more than a big fat cheque. And the dumber ones could choose the combo of inspection, fees and big screen tv and you can keep the rest. :)
Our buyers agent in Arizona gave us an $ 800 cheque (a lot when you consider the home was only $ 130K).
Our sellers agent in Victoria didn't provide a gift, except he saved us $ 10K on commissions, that's even better than a washer or dryer!! And our place sold in 10 days!!
Our previous buyer and seller agent in Kelowna didn't provide 'gifts' but he made up for it in the digging he did for us - and the money we made over the years we dealt with him for investment homes.
Would someone please explain how the buyer pays realtor fees even though ostensibly the seller is paying the entire fee? (I think this has been discussed in earlier posts, but I must not have been paying attention.)
@Introvert, who brings the money to the transaction?
Do businesses pay taxes or pass them on to their customers?
The buyer is the only person who brings money to the transaction.
If you're selling your house and you believe it's worth $200K, do you price it at $200K, or $200K plus $9K commission and try to get your buyer to cover the transaction cost?
I purchased my house in 2002 direct from the owner with the assistance of a real estate lawyer - so no gift either expected or received.
However, in 2005 after purchasing a new car - the dealer surprised me a few weeks later with a classy looking glass block with Orca whales carved into the rear surface. I didn't expect this, so it did generate "warm fuzzies" (goodwill) towards the dealership.
"The buyer is the only person who brings money to the transaction."
Well of course the money to pay commissions, salaries and taxes ultimately comes from the buyer but that doesn't mean that the buyer is paying them in a meaningful economic sense.
In particular, many businesses are price takers not price setters which means that these costs are borne by the seller because increases can't be passed on.
This is most obvious for something like oil where the price is determined globally. An increase in royalties in Alberta would be at the expense of the producers, not the consumers.
It's also obvious for something like RE rentals in Victoria or Vancouver when the landlord is cash flow negative in the first place and is incapable of passing on higher taxes or other costs.
And since the selling price for a house is always determined by what the high bidder is willing to pay, commissions cannot be passed on to the buyer but must be absorbed by the seller.
"And since the selling price for a house is always determined by what the high bidder is willing to pay, commissions cannot be passed on to the buyer but must be absorbed by the seller."
Real estate transactions are essentially open-ended auctions. More often than not, there is only one actual bidder. I get that a buyer "willingly" agrees to a price. But I don't think your explanation encompasses all types of sellers: just the one's that have to sell. What about the other, and I'm willing to bet it's the majority right now, who simply want to sell and are willing to wait until they get the price they want?
These people set their prices based not on true market value but estimated market value plus costs. True market value is set by the deal, which in these cases also include the seller-borne costs.
I think we've both presented overly simplistic explanations of who pays commissions, and the economic truth likely lies somewhere in the mushy middle as economic truths often do.
Commissions are as much perception matters as economic ones, which is why realtors all over tell you the money collectors pay them, except when they don't (and usually that's when you're the money collector in the transaction). It's one of the reasons why they can truthfully claim that realtor transactions command higher prices than FSBO ones.
It's one of the reasons why they can truthfully claim that realtor transactions command higher prices than FSBO ones.
Except they can't. Where are the numbers?
If we had those numbers, as well as numbers for sale prices of discount vs full commission realtors, then it would answer this question as well.
There was a thread on kiv a while back where some fool was going to give a gift to their selling agent. Seriously wtf. Here's you're fat commission cheque and a nice gift!
Long time Lurker, first time poster. I just had to weight in on the gift to the selling Realtor. It's SLOW out there and your Realtor needs to put in the phone calls, the emails, the time and the energy to sell your house. They need to WORK!
If they sell it, damn it, they deserve a gift!
Bought and sold three times, no gift, and wouldn't expect one.
Though when we bought and sold in Toronto we used the same realtor, and he acted as buying and selling agent in both transactions. Each time, he worked the deal in our favour, telling us to lowball the offer because the seller was going through a divorce, and stick to our guns when we sold because the buyer was willing to go higher than his initial offer.
I 'liked' him for what he did - we got along as people - but realized as well it was unfair to his other clients.
Who negotiates the amount of the commission to be paid?
Who offers or brings the product to the market?
What one property sells for is not market value, its a market price. The confusion between the two is that in most cases market price is in the range of market value. Hence, you hear people say that the property sold at market value. The property may may have sold for $100,000 but it could have just as easily sold for $98,000 or $102,000. All of which are at market value.
Its the market place that sets market value not one buyer or one seller. The agent facilitates the trade between buyer and seller. Out of the sale price, the seller has negotiated a fee to the agent in assisting him/her to sell the property. With or without the agent the property would most likely have sold in the range of market value. Its the seller that "pays" the commission.
If your the seller of the home, the "better" agents can get the property to sell at the high end of the market value range.
And it not "always" that the highest price wins. The best deals are made in the terms of the deal. Completion dates, whats included in the sale, cash backs, cars, boats, businesses all can affect the price.
If you buy a house for $400,000, but included in the sale is a landscaping business. Is that $400,000 a market price, market value or something else?
When we bought our condo in 2005, we got a gift: some inexpensive wine, a couple of wine glasses, in a basket with some tea towels.
Comparing our gift with the gifts that our friends received when they bought houses made it really clear that it was all about the money we spent. Our condo was only $175,000; their house was $500,000 (and wow did we ever think that was expensive back then! Half a million dollars! Who can afford that? I look back now and just laugh.)
When we sold our condo in 2010 for $100,000 more than we paid but didn't buy a replacement property, well then, no gift for us, even though we used the same realtor.
Hmm, when I bought, I got a bottle of wine, that wasn't too cheap, and I was kind of surprised by it, not knowing it was common practice. When I sold, using same realtor, got my moving expenses paid for. The realtor also does annual get togethers for friends and former clients, that probably helps with networking.
For the gift itself, I really don't like trinkets or household stuff. Best is something based on what the person knows about you, and a consumable, so you don't have to "proudly" display it in your living room :D wine, chocolates, things like that.
Sometimes realtors really do very little in the way of work. You establish the commission beforehand (if it is negotiated), but then it can easily end up being $1000 or more an hour. They're basically working for a fixed fee based on your price range. For the "easy" jobs, it wouldn't feel quite like a rip off if there was some compensation back.
The rules that apply to commission sales people and "gifts" are weird.
Realtors can advertise the gift right in the listing "free 60" tv"
Insurance broker (me) on the other hand, aren't allowed to provide a "gift/discount/reduced commission" in most provinces. This is called "rebating" and I could lose my license over it. BC is one of the only provinces that does allow rebating but the "gift/discount/whatever" cannot exceed 25% of commission.
I give gifts and they vary somewhat based on what I learn about the clients. I'm not going to state what some of the gifts are to avoid copycats. I have also received gifts from happy clients.
For buyers, I don't do rebates. I work with clients for weeks, months, years... The comment section here always likes to make this job sound so easy. A buyer from last month had been working with me for over a year and had offered on several properties before he finally found the right fit at the right price. I did refund his inspection expense on one property. He felt the inspector did a lousy job and I agreed, so I just paid the bill to keep him happy. That was his gift, apart from finding asbestos in the vermiculite and negotiating the sale price down (of the property he eventually purchased) several thousand dollars as a result.
I do offer significant discounts on selling commissions. I simply find selling less time consuming than buying. Most of the work in selling can be handled on the computer and phone.
I certainly won't hand out someone's personal information/situation to make a sale happen. This may seem like a small issue to some of you, but it is a huge breach of contract between the client and the agent! We have to protect your personal information! You have to be able to trust your agent. If a client wants the agent to state that they are dying or going through a divorce, that's a different story.
When agents ask what I can tell them about my buying or selling clients, I tell them "nothing." The reason they are digging for "intel" is to try and gain the upper hand in negotiations.
When I give wine, not always, it certainly isn't home brew or cheap. One client wanted a Texas mickey of rye for his housewarming party. I gave him that in addition to another gift. That was the first time someone actually told me what they wanted though.
Craig: "I 'liked' him for what he did - we got along as people - but realized as well it was unfair to his other clients."
So you liked the fact he acted unethically and you benefited?
Interesting comment... It amazes me how people let ethical transgressions go when they receive a benefit but are quick to condemn when they benefit the other party (not saying you do this Craig...).
EatMe, your concern for ethics is touching and dovetails nicely with the welcoming moniker EatMe and the icon of someone giving the middle finger to us readers.
Apart from that, yes, I believed it was slightly unethical. I think he considered us almost friends because of shared interests, background whatever and wanted to give us an edge.
But the other parties went into it with eyes wide open, knowing he was both buying and selling agent. I took it into consideration and they should have as well.
Giving the middle finger and using EatMe has absolutely nothing to do with ethics.
Anyway... So he was your friend and gave you the "edge". When the other party had their "eyes wide open" were they aware their representative was relaying information about their situation to the other party (you)? Did they know the two of you were personal friends? I doubt it...
And what's "slightly unethical"? Is that like slightly pregnant?
SLIGHTLY unethical to say the least. An agent representing the buyer and seller in a transaction is about as huge a conflict of interest as you can get, but most realtors treat it is a big success on their part to pull it off. Surprised the professional realtor organizations have nothing to say on this, beyond providing disclosure (if that?). That one always surprised me, but people don't seem to mind, so maybe not a big problem.
With my business plan, I don't double end my deals. If a buyer is interested in my seller's property, I make the buyer represent him/herself. I can still supply comparables, data, etc., without representing him/her and helping him/her negotiate a price.
The buyers that view properties with the listing agent are usually savvy and don't want to work with an agent anyway. If they want an agent, I appoint them one, but I won't represent both sides.
If I have a pre-existing buyer that wants to purchase one of my listings, I will still appoint them another agent for the offer process. I go over these scenarios with my sellers before we start.
Nice way of approaching it Sweetrealtor. Though I disagree with the practice (due to so many potential issues) it's not illegal and the real estate board provides specific guidance to realtors who engage in the practice. Obviously not all follow that guidance and just see it as an opportunity to get double the commission. In fact they often work even harder and pull stunts like Craig's to make the deal happen.
Last week I commented on how listings had climbed to 190, after being stuck at 160 for a couple months.
Just hit 200, I thought inventory would be dropping. Keep them coming, its all about supply and demand....
Dave#1
Housing prices to drop over next two years: TD
Canada’s housing market is set to undergo a “modest” correction, with resale activity poised to drop 15.2% and average prices likely to fall 10.2% over the next two calendar years, according to a report released by TD Economics Wednesday.
I had an interesting lunch today - I overheard 3 different conversations at lunch and all of them were about real estate! The first was about a local couple who just bought their third house, all three mortgaged to the hilt. The second was a woman in her mid 40s discussing her prime-0.5% variable rate mortgage she just landed with an elderly couple who were congratulating her (presumably her parents). The third was a divorced husband discussing how his ex wife could have sold the house in 2007 and made 400k, but today, it's only worth 100k to her, since she's spent all the equity since then.
No one was talking about the new product they developed or business they plan to start - for a place with silicon valley prices, you'd think more people might be talking about the great things they work on all day. Nope...real estate. Victoria is an interesting place.
"Its the market place that sets market value not one buyer or one seller."
Um, every property that sells has one buyer and one seller. Who besides these people determines the price that it sells for?
The market place is not some theoretical abstraction, it is simply buyers and sellers agreeing on price.
nan - you eating at Dennys, McDonalds or something?
I too had an interesting lunch today - I overheard 7 different conversations at lunch and only one of them was about real estate! The first was an Asian guy talking about his internet business and how it was rapidly expanding. The next was a group discussing some legal issue and the huge fee they expected. After that a couple was talking about her new hair salon and the instant sales success it has been. Then there was the two students discussing the option of staying in school or continuing with their successful summer business. The real estate conversation consisted of how to “clear $300K” on the sale of an investment property.
All of them were indirectly talking about how much money they have and the opportunities ahead of them Victoria really is an interesting place.
You answered it yourself.
Its buyers and sellers (plural)
Because, one buyer and one seller does not make a market.
eatme said: nan - you eating at Dennys, McDonalds or something?I too had an interesting lunch today - I overheard 7 different conversations at lunch ... (all about thriving businesses and money opportunities)
Where you eating lunch there eatme? Over a Skype call with a bunch of friends in Calgary? I ate lunch around a bunch of tourists today downtown.
I had an interesting lunch today - I overheard 3 different conversations at lunch and all of them were about real estate! The first was...
Why isn't somebody other than EatMe jumping all over nan here? I mean, this is some serious anecdotal information!
The last time I dropped an anecdote someone totally nailed me for it and attacked my credibility as a blog submitter.
I'm waiting for some consistency...
"Giving the middle finger and using EatMe has absolutely nothing to do with ethics."
A more sophisticated reason lies behind it, I'm sure.
"When the other party had their "eyes wide open" were they aware their representative was relaying information about their situation to the other party (you)?"
Realtors always relay information about the other party. That he was repping both sides was known to all. I acted accordingly and so should anyone.
"Did they know the two of you were personal friends? I doubt it..."
You're right, when we started getting friendly during the transaction we should have immediately notified the other parties that we both had been to Tokyo and liked the same music.
"And what's "slightly unethical"? Is that like slightly pregnant?"
Ethics are a subjective field, dependent on perspective, while pregnancy is what we would call an objective fact.
All caught up now?
Anyways, as for real estate I'm about to throw in the towel on searching for a rental house. Of all the places I've moved to, Victoria has the worst, most tawdry selection of rentals I have ever seen.
Just awful.
I'm now seriously considering taking what I know will be a loss over the next several years in order to find a decent place to live for my family.
"Victoria has the worst, most tawdry selection of rentals I have ever seen."
You could make the same case for SFH units for sale too. There is a ton of crappy housing in Victoria.
Anecdotes. Nan's, EatMe's, don't matter. They're just comments on a blog that fit two different memes.
Craig and House Hunt,
You got that straight. When we looked at property over 10 years ago we could not believe the poor quality. We were coming from Toronto and had more money to spend than we do now. Victoria was pretty flat at that time.
The houses here are just not that pleasing to the eye - the newer ones of better but there was a big time of bad building.
Unless it's a custom home built with actual quality products, I wouldn't touch anything built in Victoria in the last 7 or 8 years. Once the sheen wears off these places they'll keep carpenters, plumbers and electricians employed for years.
@Craig
How big of a place are you looking for? I have a friend just finishing the renos on a house in Cadboro Bay that she plans to rent out. It's a 50's house that has been reno'd top to bottom - new kitchen, new bathrooms, new flooring, new light fixtures, extended the deck (which has amazing views of the water). In my opinion, she spent way too much on the reno and should have sold the house when she inherited it. She couldn't bear to part with her childhood home and has sunk a lot of money into it. Can't remember how many bedrooms - 3? Definitely 3 bathrooms. The yard, driveway, and parking are not much to write home about as the place is on a major slope.
Anyway, let me know if you would be interested in viewing. She just got the (re)occupancy permit from Saanich so there may be a few tiny things left to do (like landscaping) but I think it is pretty much ready to go.
Another anecdote: Was visiting with some friends' parents the other day. They have been operating a small, but successful manufacturing business for the last 30 years in Greater Victoria. They own three commercial/industrial properties in GV. Comment that stuck out was: " When is the government going to start telling the truth about the economy??? I have never seen industrial vacancy rates in Victoria at the level they are now in all the years I have been in business)
HHV says:
"I wouldn't touch anything built in Victoria in the last 7 or 8 years. Once the sheen wears off these places they'll keep carpenters, plumbers and electricians employed for years."
How old is the house you bought, as Alberta has the same issues.
Dave#1
HunnyD:
I agree. I am a small businessperson in Victoria and although sales are down, we are ok. We are B2B and could we tell you some stories about business struggles here in Vic the last 1.5 yrs. This has gotten quite serious, some folks we've done business with for YEARS are going under. Others are, like us, hanging in there and doing ok but it really depends what your business is. Regular people aren't seeing it that much yet but they will, when the layoff notices start coming out more and more.
I don't know about comparing the quality of rentals in Victoria to those of other areas. Toronto was pretty crappy, as I recall, from renting there many years ago. The problem is, rentals are rentals, and landlords like to do as little as possible while getting as much money as possible. That's why the good rentals are often houses that are "in between." Houses that are part of an estate, or that the owners are renting because they are on sabbatical, or moving, but just not ready to sell yet, etc. We have finally found that rare commodity, a rental house that IS a rental house, but is big enough for us, and in really good condition. True, not an easy thing to find in Victoria, but I think not an easy thing to find anywhere in North America. We simply don't have the renter culture here that they have in Europe, and our rental options are so much more limited. In spite of that, as I have written here before, renting in Victoria sure beats buying, at present, and has for some years now.
How's that upper income housing market doing?
I wanted to look at averages and medians of the marketplace and relate them to a recent sale of an upper income home in Cordova Bay.
Back in February 2003 a water view home on Bonanza Place sold for $540,000.
Since that time, the average price of home in the core areas has risen from $323,000 to $687,000 or 113%.
And the median price has risen from $278,500 to $615,000 or 121 percent.
So in the last eight years, prices have more than doubled. But that's for the overall market. From starter homes to waterfront acreages and everything in between. But is every economic group having the same windfall in price appreciation?
Well, I'm seeing that once you leave the mainstream middle income housing, you find the market becomes shallow and dysfunctional.
So, the average and median price appreciation would suggest that the home on Bonanza should have more than doubled to $1,150,000 to $2,000,000.
But it just sold for $885,000 or just 64% more than the original purchase. Is it that our middle income housing market is overvalued? Or is our upper income market undervalued?
Now, I'm not a TD economist. I'm just a layman looking at the discrepancies and asking myself, what it would take to bring the different market income groupings into balance.
To me, it looks like a minor correction today would be 25%. That's without any changes in the interest rates or lending policies.
Since nothing in life ever remains the same, an estimate of 25% will never be shown as accurate. But what it does show you is the direction and the likely size of a correction in prices.
Introvert said "The last time I dropped an anecdote someone totally nailed me for it and attacked my credibility as a blog submitter."
Yea and the guy (JustWaiting) apologized for it and said he would never post again!! As far as I know he has disappeared. What more do you want?
TD Economics released a report saying prices will drop across Canada.
The TC has not completed a cut and past version but the Ottawa Citizen has used a TC photo and cobbled together an article.
Housing market facing `modest' correction over next two years: TD
Canada's housing market is set to undergo a ``modest'' correction, with resale activity poised to drop 15.2 per cent and average prices likely to fall 10.2 per cent over the next two calendar years, according to a report released by TD Economics Wednesday.
Vancouver, which they describe as ``the poster child for those individuals worried about a real estate bubble here in Canada,'' is destined for a thumping 25.4 per cent peak-to-trough decline in sales activity and a 14.8 per cent drop in prices.
The entire report is available by clicking here.
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