A friend of mine is making their first house sale and asked me if a real estate agent can accept a bonus. Apparently, the agent has gone above and beyond what is required as well as answering endless questions and nursing my buddy through the ups and downs of the process. As a consequence, my friend wants to reward all of the agent’s hard work, but wasn’t sure if this was “allowed.”
Can A Real Estate Agent Accept A Bonus? Yes, a real estate agent can accept a bonus as long as the details of the bonus are included in the sales contract and the payment is made, through the brokerage. The managing broker can pass the entire bonus onto the agent, or take their own brokers percentage and then pay the agent the remainder.
The exact detail of the licensing laws varies slightly from state to state. Basically speaking you can give a bonus of $25.00 or a gift valued up to the same amount, and it is a private matter between you and the agent. If you reward their excellent work with anything more, it must be included in the contract of sale and must also go through the managing broker of the agency for whom your agent works.
Can Real Estate Agents Accept Bonuses?
Real estate agents, as a profession, tend to get a bad rap, but in reality, the vast majority of agents are ethical, hard-working people who genuinely want to do their best for their clients. So it should come as no surprise that, from time to time, a buyer or seller may wish to show their appreciation for a job well done.
Two Reasons For A Bonus
Generally speaking, two types of bonus are offered to a real estate agent, and they depend on the reason for the additional compensation.
- Some clients begin their house search or their home sale without the idea of a bonus ever crossing their mind. The thought of showing their appreciation for the hard work an agent has done only arises either part-way through or at the end of the process. We can think of this as a responsive bonus. The agent has no idea they may receive further compensation and so there is no way in which it could affect their performance.
- The second type of bonus is the offer of an incentive payment. This is usually in the form of a clause in the contract and is set out at the beginning of the process. These are designed to encourage an agent to go “the extra mile” and may be connected to the speed in which the house is sold, the final sale price an agent achieves, or some other element which is essential to the seller.
Is Offering A Performance Bonus A Good Idea?
A performance bonus can feel like a suitable way to ensure you get what you want, as quickly as possible, but is that what you will really get? For example. If speed is an essential factor in your sale how would you feel if the agent bought you a buyer who offered you 10% less than the asking price? Would this be a trade-off with which you could live? You may find yourself in a position where your agent brings a qualified buyer to the table, you turn them down, and the agent pursues you for the bonus because they kept their end of the deal.
It can also backfire if your buyers see as “quick purchase” bonus in the contract and begin to wonder if they have been railroaded into a purchase that’s not in their best interests, by an agent who is pursuing a big payday.
How Do You Give A Bonus To Your Real Estate Agent?
To offer an incentive bonus to your real estate agent, you can write it into your listing agreement with the agent, and into the final sales contract.
If you find yourself wanting to show your appreciation for a job well done, the rules state that any bonus should be paid through the agent’s brokerage. The reason for this regulation is to ensure any additional payments are clearly recorded. This is to prevent a real estate agent being influenced by “secret” payments.
The process itself goes as follows:
- The client who wants to give their real estate agent a bonus must first contact the managing broker for whom the agent works.
- The managing broker can:
- Approve the bonus, accept the payment from you and award it directly to the agent.
- Say yes to the bonus, accept the payment, take their brokerage percentage and pass the remainder to the agent.
- Approve the bonus, and after accepting the bonus and taking their percentage, distribute among all of the agents in the brokerage.
- Refuse the bonus.
- The bonus or the value of the bonus is recorded by the brokerage.
Of course, if your real estate agent is also a qualified broker and works independently of a brokerage, this is not an issue.
Is It Only Money That Counts As A Bonus For Your Real Estate Agent?
Some clients may not want or be in a position to, offer a substantial cash perk to their real estate agent in which case they may consider a gift. Others may be aware that the payment of an additional amount to a real estate agent, outside or the agreed commission is prohibited by most state licensing regulations. As a result, they attempt to circumnavigate this by offering gifts.
The regulations are unambiguous that any cash payment or gift to a real estate agent must be channeled through the brokerage and noted in the contract if it is worth more than $25.
No exceptions.
Therefore, if you decide to thank your agents’ hard work with, for example, a case of wine, that item, or the value of that item must be included in the final sales contract.
Can You Offer A Bonus After Closing?
While there is nothing to stop you offering a bonus after closing any self-respecting brokerage that wants to retain their license would refuse any additional payments because it would not be possible to record them as part of the sales contract.
A Note Of Caution
There are some real estate websites and forums where you might read that you can wait until after the property sale has been finalized, contracts have been written, and all parties have moved on, and then either pay your real estate agent a monetary bonus or buy them a gift.
The rationale for this advice is that by doing so, any payment does not get muddled with the agent’s sales commission. This then prevents a situation where the agent for whom the bonus was intended would have to split the extra money, with the other agent on the other side of the transaction.
Personally, I have never seen a sales contract where payments, their amounts, who is paying them, or the reasons for which they are being paid have become muddled. Nor have I ever seen a bonus included for an agent on one side of the exchange, be split between both agents against the intent of the person making the payment.
It does not happen.
If you are considering a gift, the same principle applies. An agent is not permitted to accept a gift of over $25 in value, from a client outside of the sales contract.
How Can I Show My Appreciation?
A real estate agents success depend heavily on reputation. Referrals, online reviews, and word of mouth are the backbone of a thriving career, and you can show your appreciation for a job well done by letting everyone know what you think.
Visit real estate websites which host agent reviews and write precisely why you feel your agent went above and beyond. Let people know that you would use this person again and that you appreciated their hard work. Also, you could write a letter of appreciation to the agents managing broker or even, if it is a national company, track down where to sing their praises to the corporate offices.
Conclusion
Anything you choose to give your real estate agent that is worth less than $25 is between you and your agent. Any bonus money, tip, or gift worth over $25 must go through the managing brokerage of the agent.
If you are thinking of offering an incentive type bonus to a real estate agent, ensure that all of the terms and conditions are explicitly written into your representation agreement. This will protect both you and the agent. The amount of payment should also be included in the sales contract.
If you chose to offer your agent a bonus in response to their excellent work, it must also be written into the final sales contract.
Once a payment is made through the brokerage you have no control over how it is distributed.
Do not attempt to compensate your agent outside of the official transaction as it could lead to them and their brokerage their license.
Instead, let the world know how happy you are and reward you agent with referrals and more business.