Buyers' Agent Bonus and Additional Compensation Disclosure? Oh, Yeah! We got that and more in North Carolina!

What fun! A hearty welcome to NCAR Form 770!

Often when I see a group of people squirm, I start to grin, and I had that opportunity over the last couple of months when contemplating the new NCREC rule regarding Additional Compensation Disclosure.

Squirm.... Squirm... GRIN! GRIN!

Gosh, what a low blow! Now an agent has to disclose in writing (writhing?) any co-broke or agent bonus above a negotiated "baseline" prior to the client entering the decision-making process on a property. This mostly impacts Buyers' Agents, due to the nature of co-brokes and bonuses. It is uncommon, although possible, for the Buyer to pay the Listing Agent, and that would likely require disclosure, too.

Revised NCAR Standard Form 201, Exclusive Right to Represent Buyer, requires in Section 4 for the Buyers' Agent to negotiate and establish with the Buyer an expected level of Agent compensation. The "baseline." Then, in Section 4(b)ii, the Agent and Buyer indicate whether the Buyer will compensate the Agent for any shortfall in compensation below that "baseline."

Should a Listing Agent offer a bonus or higher co-broke to a Buyers' Agent, the Buyers' Agent must disclose the dollar value of the additional inducement prior to the client entering the decision-making process. This requirement includes the estimated value of trips, cruises, etc, that an agent can earn via multiple sales in a neighborhood. That cruise value must be at least verbally disclosed to all clients the agent brings during the promotion. The disclosure will be documented in writing prior to writing an offer.

Offering a referral to another agent? North Carolina now requires the referring agent to disclose the referral fee. That may help an agent reconsider shopping clients for the highest fee, rather than for the best agent fit.

If you like the lunch money kickback you get from the home warranty company, you can still get it. You will disclose that payment to your client. Gee. Maybe we will have fewer listing agents fighting tooth and nail to order a warranty the week before closing, when it has no bearing on the transaction, no value going forward for their Sellers, and they have to sell the kickback to their clients so they can keep the lunch money.

Driven by a scandal wherein a builder paid bribes under the table to an agency in violation of RESPA and all that is holy there, this rule will generate tons of fun.

We are seeing Buyer Agent bonuses as high as $10,000 (And rumor is they are as high as $50,000--$60,000 in the NC Mountains) and co-brokes as high as 8% in the Raleigh Cary area. The inducements to neglect the fiduciary duty and to put the agent first can be difficult to withstand. This disclosure rule hits us at a good time.

That's my story, and I'm sticking with it!