One of North Carolina's largest real estate companies has decided not to wait for N.C. regulators to decide how transparent agents should be about their financial interests in selling a home.
Prudential Carolinas Realty – with offices in Charlotte, Greensboro and Raleigh – has required its agents since January to provide written disclosure of bonuses they might receive from sellers before their clients make a decision to purchase a property.
The N.C. Real Estate Commission, since October, has been contemplating a rules change that would require such a written disclosure from all N.C. agents. Earlier this month, after indefinitely postponing a vote on the rules change, the commission changed course and called a special meeting on the topic today.
Gov. Mike Easley, in a letter to commissioners, has urged the commission to approve the new rule. Easley has the authority to appoint and remove Real Estate Commission members.
The issue of bonuses – and when to tell customers about them – has prompted recent debate among real estate professionals in the Carolinas and nationwide. State rules currently require agents to tell customers of bonuses before an offer for purchase is made, but that disclosure needs to be only oral, making the rule difficult to enforce.
At Prudential Carolinas Realty, which is among the state's top three real estate companies with about 14,500 closed transactions in 2007, officials began considering a written disclosure policy after reading Observer stories last year about the Real Estate Commission's deliberations – as well as reports of improperly disclosed bonuses in the Charlotte area.
The commission formed a committee to review bonuses following an Observer investigation in September of Realty Place, a Charlotte-area company that received millions of dollars in bonuses from homebuilders in exchange for finding buyers. Observer reporters spoke to more than 50 Realty Place clients, none of whom remembered being told about a bonus an agent received. The company funneled buyers into low-priced starter-home developments, many of which are now plagued by foreclosure.
Burks Crumpler, broker-in-charge for Prudential Carolinas in Raleigh, said the new policy was made by an N.C. management team led by president and chief operating officer Tommy Camp, who lives in Charlotte. Crumpler called the written disclosure policy “the right thing to do.”
Officials at the state's largest real estate company, Allen Tate, declined to answer questions about its policy on disclosing bonuses. In a statement, spokesperson Karen Murray said the company and its agents adhere to all local, state and federal rules and guidelines.
N.C. real estate agents say they see seller bonuses offered in about 10 percent of listings. While most incentives are offered on new homes by homebuilders, they are also found on existing homes. The bonuses generally range from $1,000 to $5,000, although $10,000 offers are not rare.
Bonuses are most common in N.C.'s larger cities, but they are found regularly in rural counties throughout the state, real estate professionals tell the Observer. Their popularity could increase as sellers try to overcome increasingly hostile economic conditions.
Says Crumpler: “Clearly we're going to be heading into a market where we're going to see more.”
While some agents have expressed concern to regulators about having to reveal extra income to customers, others say that full transparency about bonuses is the best way for customers to feel secure that they aren't being steered toward homes on which agents could make extra money.
“If I were a buyer, and I learned later that the agent received a bonus, I'd be a little upset,” said Bob Hecht of Century 21 Hecht Realty in Denver. “I'd wonder if they pushed it just to receive the money.”
To that end, some real estate agents eschew bonuses altogether, instead passing them on to customers or using them as leverage to negotiate with the seller on price. “It doesn't make sense to me that bonuses could be justified,” said Diane Aurit, an agent for Re/Max at the Lake in Mooresville. “An agent should make a decision to show all properties without consideration to what compensation they'll receive.”
Crumpler, of Prudential Carolinas Realty, said he has heard no complaints about the written disclosure policy.
“I see it as one of those things that if there's a doubt about how to do this, why not just have disclosing required?” he said. “Even if it's a tiny perceived problem, I don't want it tainting the industry that I'm in.”