The Alberni, a Westbank development, recently had a subpenthouse unit listed with a $500,000 bonus.Westbank Development Corp.
The sale bonus is a relatively new phenomenon in Vancouver, but one that is showing up more frequently in today’s uncertain real estate market.
The bonus is generally offered on top of the usual commission paid to the buyer’s agent. It’s an incentive designed to sweeten the pie, to bring broader attention to that particular listing. But it can also mean that agents might be more motivated to steer clients towards that particular listing, and away from ones that don’t have bonuses, which is why it’s mandatory, according to the Real Estate Council of BC’s disclosure rules, that agents reveal the perks to clients who make offers.
But few buyers are aware of them. Adam Major, manager of Holywell properties, recently launched a real estate website that offers consumers a wealth of housing data, including information on sale bonuses. Such bonuses are not publicized on the Multiple Listing Service, but Mr. Major lists them on his Zealty.ca site, which earns money by connecting buyers with realtors.
Among the surprises: A whopping $500,000 bonus on a subpenthouse unit in the upcoming Westbank development the Alberni at 1550 Alberni St. – on top of the commission already on offer. If Unit No. 3902 sells at the $13.9-million asking price, the commission alone would be around $150,000. [Commissions vary widely, but on this unit, it is structured as 3.22 per cent on the first $100,000 and 1.15 per cent on the balance.] With the added bonus, the buyer’s agent could walk away with as much as $650,000.
Mr. Major says bonuses are a growing trend.
“I’m looking at the British Properties, looking at homes from $3-million to $16-million, and there is a fairly significant percentage of high-end homes that offer these bonus commissions – maybe 10 to 20 per cent, would be my guess,” he said. “But, you know … there’s no way to track if these bonus commissions help sell these properties.”
Mr. Major points to a house at 1430 Bramwell Rd. in West Vancouver that’s listed for $18.8-million and offering a $200,000 bonus. The $15.8-million house at 815 King Georges Way also comes with a $200,000 bonus. A more modest house at 4558 Woodgreen Ct., listed for $4.7-million, offers a $50,000 bonus if completion occurs prior to Nov. 5.
In Vancouver, the mansion at 6255 Cedarhurst St. listed at about $15.9-million comes with a $100,000 bonus, as do several others in Shaughnessy. And in the Dunbar neighbourhood, at 4011 W 38th Ave., a $5.75-million house comes with a $30,000 bonus.
Not all bonuses are on high-end properties; many middle-market properties are offering them as well. In Langley, a condo at 103-5485 Brydon Cres., listed for $555,000, offers the buyer’s agent a $4,000 bonus. Another unit in the same building offers a $5,000 bonus.
Designed by leading Japanese architect Kengo Kuma, the luxury 43-storey Alberni tower is in the early stages of construction.Westbank Development Corp.
“If you are buying, find out what the commission is," Mr. Major says, "and ask before you write an offer. Because some agents may negotiate, especially if there is a bonus commission.
“If the seller is offering a $10,000 bonus on a modest apartment, you should wonder if that means they are more motivated to sell or essentially if they are agreeing to $10,000 less than the asking price.”
Realtor Ian Watt says he would advise clients to lower their offer on a property that comes with an agent bonus. Mr. Watt, who specializes in downtown listings, says the Alberni subpenthouse unit is priced higher than any property sold downtown this year. He knows of a condo that sold for around $3,000 a foot in the area. But the 3,030-square-foot Alberni property is priced higher; it isn’t waterfront and the unit shares the floor with another unit.
“If I were a buyer and I knew my client was making $650,000 in commission, I’d be thinking, ‘I am paying $650,000 too much for this,’ ” Mr. Watt says. “And it’s not even completed yet, so that price they are asking doesn’t include GST.”
The bonus for the $13.9-million Alberni suite is an unusually large one. Designed by leading Japanese architect Kengo Kuma, the luxury 43-storey tower in the West End is in the early stages of construction. There are currently 21 assignment sales in the building – which likely points to the speculative environment at the time the presales launched.
With the downtown condo market in a slump, many of those who made presale purchases appear to be unloading them. It’s unknown what they paid for the units because that information is not public, so it’s also not known whether the sellers are looking to break even or make a tidy profit. Either way, Mr. Major believes the bonus commissions indicate they are dealing with a market that has more listings than buyers.
“I’m sure lots of people have done very well selling those assignments of contracts before completion, but these bonus commissions may be a sign that the market is slowing down.”
Realtor Malcolm Hasman is the selling agent for the $13.888-million Alberni unit.Malcolm Hasman
Malcolm Hasman is the selling agent for the unit. Mr. Hasman is having a good year: He says he has sold more than $140-million in real estate in the past 110 days, and he is confident that the buyer of the Alberni subpenthouse will be an international buyer – which is why he offered the $500,000 bonus. The client bought the unit as a presale and has decided to assign the property because their plans changed, he explained. He occasionally offers bonuses, but this is a unique property and he wants to attract agents in other cities who are used to making bigger commissions, he said.
“The bonus is only really an incentive on an extremely unique and luxury subpenthouse residence to make certain that the property is exposed through all luxury real estate agents that may have a potential buyer for this truly extraordinary property,” Mr. Hasman says. "For example, it may be somebody in Toronto or somebody in the U.S., where the general commission structures are higher than in Vancouver. When you are dealing with successful high-end real estate agents out of New York, Chicago, Boston, Los Angeles and Toronto, they have much higher commission structures.
"A $500,00 reduction on a $13-million listing is like taking 25 cents off a $5 item. It doesn’t make a difference at all.
“And I can tell you, I’ve had one telephone call in the past week out of Toronto. So there you go. That’s where it’s coming from. It’s just part of sophisticated marketing strategy to attract and identify top luxury agents in major cities in North America that may have a potential buyer. And my client is fully prepared to offer that fee structure.”