Australian Broker forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Anonymous broker claims developers paying $10k 'unethical' kickbacks

Notify me of new replies via email
Australian Broker | 15 Apr 2015, 08:26 AM Agree 0
An anonymous Melbourne broker has told a media outlet developers are enticing brokers with "unethical" referral fees
  • Ethical broker | 15 Apr 2015, 08:43 AM Agree 0
    Gee what a surprise, people being influenced by $$.
    People live under a rock if they don't think it happens
  • Alex Stephen | 15 Apr 2015, 08:47 AM Agree 0
    What makes the world go round?
    Why should a data base owner not benefit, provided they are not ripping off clients.
    You think major R/E firms don't get way more than $10k to market property to their investor database? What basis are they paid on?
    At the end of the day, a buyer has to do what's best for them. If their broker/banker/agent/hair dresser gets paid a referral fee on the way, what's wrong with that? How else would the opportunity have come to the buyer?
  • Anon | 15 Apr 2015, 08:50 AM Agree 0
    How is this any different to an accountant or real estate agent referring their clients to a broker for a referral fee? No one bats an eye at that and I've seen what unskilled brokers can cost a client. Like anything it depends on the quality of the outcome, if it's a quality developer and the broker is confident their client will get looked after I don't see the problem. It comes down to if the referrer has the clients best interest at heart. Be that an accountant referring to a broker or a broker referring to a property developer.
  • Another ethical broker | 15 Apr 2015, 09:21 AM Agree 0
    This area really needs investigating - clients are paying significant premiums for these properties. In most cases 10-20% more than what the property is truly worth. Most of the valuations in this process are tainted and not arms length. These referral fees are being funded by the client through inflated property prices which they will never recoup. Say no to these referral fees - this arrangement is more prolific than people think.
  • Rosemary Johnston | 15 Apr 2015, 09:28 AM Agree 0
    Ethics around referral fees requires full disclosure to the client. If the broker is getting $10,000 for a referral of a name and address to a developer would the client be happy to learn this?

    The client's best interests have also been mentioned and it is questionable whether a developer with a stock list can perform that function. By definition they have a vested interest. So are the client's best interests being served by the broker and on what foundation have they assessed that this developer has the best option for their client?
  • Larz | 15 Apr 2015, 09:37 AM Agree 0
    Sure it happens all the time in every industry and if the developer was not making the payment to the broker it would be paid to an accountant , financial adviser, property marketer, whoever. The real issue is disclosure. If the broker advises the client that they will receive $10,000 from the developer for the referral then no problem but if they don't then we have a situation. Unfortunately in most cases the client is unaware of the referral fee. At the end of the day the referral fee is paid by the client in the price so they should be aware that a fee is being paid and the amount of the fee.
  • David Jackson | 15 Apr 2015, 09:40 AM Agree 0
    Disclosure is the key. If you're accepting referral fee's without disclosing them to your clients then you are unfairly trading on their trust in you.
  • Awesome Albert | 15 Apr 2015, 09:44 AM Agree 0
    Sorry, but we always disclose any interest in or payment that we might receive. It goes towards your long term credibility with the client. I think they should have a much closer look at the accountants before pointing the finger at brokers. 'Arrangements' where accountancy firms recommend a development or buyers agent without any possible need to disclose any conflict of interest seems much less transparent than brokers who if their doing the loan must disclose all fees.
  • Ray-Perth | 15 Apr 2015, 10:13 AM Agree 0
    I totally believe this referral fee transaction from Builders is at best unethical. Everyone knows the Builder simply adds the referral fee to the clients bill. We cannot be "Arms Length" from a transaction when we are being given money behind the clients back.

    To those who disclose the fee, do you actually disclose the actual full fee in $$$s, or just say you are being given a referral fee?

    This practise should be outlawed.
  • Ken Crawford | 15 Apr 2015, 10:17 AM Agree 0
    all referral fees need to be disclosed.
  • James | 15 Apr 2015, 10:26 AM Agree 0
    Funny this comment coming from a broker: who by definition makes a living from earning commissions!
  • Don Perth | 15 Apr 2015, 10:29 AM Agree 0
    What's the difference between receiving a commission and a referral fees? If a client asks me do I know a builder or developer, I would point him to someone I know and it's up to the client to do some background check on the company/person. Disclosure is the key.
  • City broker | 15 Apr 2015, 10:44 AM Agree 0
    Referral fee's paid to an accountant/RE agent/3rd party are all disclosed and have no impact to a client.

    Referral fee's paid to a broker for an introduction to a developer have a substantial impact to the client. Unfortunately when some of these assets are realised(fore-closed) in the future and the transaction is fully disclosed it will be crystal clear the client indirectly paid the referral fee to the broker.

    Not acceptable on any level
  • Ken Crawford | 15 Apr 2015, 10:53 AM Agree 0
    James it is not funny at all. I receive commission from the banks and referral fees from 3rd party referrals to financial planners and insurance referrals - at all times and included in our KYC process is an explicit disclosure of what fees; commissions or whatever we receive. this includes the possible bonuses we can receive from lenders as well. not only is it part of our process it is enshrined in legislation. This also includes referral fees we may recieve from Real Estate Agents for referring a client who wants to sell a house. it is disclose or perish
  • GC | 15 Apr 2015, 11:29 AM Agree 0
    This will never be stopped. I know a company in Collins St who charges 4.5% Sourcing fee even though they do very little work for it, and a further 4.5% undisclosed payment is made to the company from the developer. This creates havoc with the valuations and erodes trust with the financier. Its not ethical and I dare say its illegal but it happens.
  • Kym | 15 Apr 2015, 12:46 PM Agree 0
    Property spruikers are paid up to $30k per deal from building companies which is undisclosed in the the building contract - investors are getting ripped off every day in an unmonitored market. Nobody is worth a $30k commission!!!!!!!!!!!!!!!!
  • Michael Kent | 15 Apr 2015, 12:46 PM Agree 0
    I get emails every week from a property investment business who actually state in the subject line MASSIVE COMMISSIONS PAID.

    I had another company tell me if I didn't want to reveal to the client I had been paid $10k they had one contract for the client and one to keep on file in case they were audited!

    I don't get involved in kick-backs, referral fees, commissions call it what you will.

    I swap leads with businesses but there is never any money exchanged. It is seedy, it is rampant and it will never change!
  • Peter Heinrich | 15 Apr 2015, 01:22 PM Agree 0
    I have been in this businees a very long time and there is nothing new in this claim. In my memory developers always pay referral fees, they add it to the price and the valuers have a very difficult time justifying the values. The ethical brokers will always ignore it but the referral fee is built into the price and the client pays whether they are referred or not.
  • ANON | 15 Apr 2015, 04:04 PM Agree 0
    We act for developers on construction finance and have never been offered a referral fee for referrals off our residential client base nor have we ever sought any referral fees if we have ever referred a client. We always advise our clients that we act for developers. An open and ethical approach is always the best.
  • John | 17 Apr 2015, 09:49 AM Agree 0
    I have to wonder why so many of you are up in arms. Real Estate Agents get large commissions from the sale and also marketing costs. Other professions have been doing it for years, and the uninformed here think that the cost is JUST added to the top. the property still has to value up, so in fact the cost of the commission and marketing has already been correctly priced in. Property Groups or a developer are willing to share/pay the commission for a quicker sale. If you want to tell the client and be ethical or even rebate to them some of the commission, then why do you have a problem. As others here have said, as long as the client is not being ripped off, and everything is above board, then there is no problem.
Post a reply