The murky world of kickbacks
I had a client earlier this year, who was an overseas buyer. Certainly not unusual here at House Search and, as with all our foreign purchasers, we verified their residency and visa status as per FIRB (Foreign Investment Review Board) requirements and subsequently ensured that FIRB approval was provided, before proceeding to unconditional exchange on the eventual property purchase. They were thrilled with the purchase, and though it was a long and drawn-out search, the outcome was very positive.
However, when I first began the search I had the unpleasant experience of being treated “differently” by some of the selling agents. Some of them seemed unusually unhelpful, stand-offish and asked far more questions than with previous clients. I smelt a rat when one agent asked me how much “commission” I was seeking, if I bought through their agency. When I, confused, relayed to her that I was an exclusive buyers’ agent, and only paid by my buyer for acting on their behalf in the transaction, she then brightened and proceeded to let me know why I had been treated so suspiciously for the last few weeks….
It turned out that the finance broker, acting for my buyer in organising the finance for this purchase, was not only accompanying us on inspections (which was a little odd but she was able to translate and speak to my clients in Mandarin so I assumed this was a gesture of goodwill initially) but was handing her card to selling agents, and contacting them (usually prior to us inspecting) to seek a kickback fee for “introducing” the buyer to the property, and assisting in a subsequent purchase. She started off with a 50% request of commission share (according to one high-profile North Shore agent) and then negotiated with the agents who were willing to share, down to 20%. Naturally, some selling agents were miffed, and rightly so, when they discovered that my clients had an exclusive buyers’ agent working for them as well. The broker was telling them that we were working together (unbeknownst to me!) so you can imagine my horror and disgust when I found out. Talk about a conflict of interest, potential damage to my reputation, as well as being grossly unfair to my clients, whom had absolutely no knowledge of her quest to secrete cash in “brown paper bag style” from the eventual sale. No disclosure whatsoever.
I disclosed her activities to my client, upon learning the truth, and she was subsequently admonished and removed from subsequent inspections. Upon also learning that she was unlicensed I proceeded to let her know the current law here in Australia regarding the taking of commissions from third parties as well as the (lack of) ethics of her activities. She seemed unperturbed, however, and as far as I know, continues to operate this way as a friendly “broker” who helps unwitting mainland Chinese buyers, new to the purchasing process.
What was particularly galling to me, however, was the reaction of some of the selling agents when I discussed this with them- with a handful seemingly highly aware of the practice, and willing to collude with the broker in order to effect a quick sale by paying a kickback or secret commission. Needless to say, I am now much more aware of this practice and let my foreign buyers know upfront to be aware that they may be taken for a ride by fellow opportunists in related industries when it comes to purchasing here in Sydney.