States That Prohibit Real Estate Broker Rebates


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These states prohibit real estate brokers from paying commission rebates to consumers.

1. Alabama
2. Alaska
3. Kansas
4. Louisiana
5. Mississippi
6. Missouri
7. New Jersey
8. North Dakota
9. Oklahoma
10. Oregon
11. Tennessee
12. Iowa

Links to the state real estate statutes:

1. ALA. CODE § 34-27-36 (12)

2. ALASKA STAT. § 08.88.401

3. KAN. STAT. ANN. (K.S.A.) § 58-3062

4. LA. REV. STAT. ANN. § 37:1455

5. MISS. CODE ANN. § 73-35-21

6. MO. REV. STAT. § 339.150

7. N.J. STAT. ANN. § 45:15-17

8. N.D. CENT. CODE § 43-23-11.1

9. OKLA. STAT. ANN. tit. 59, § 858-312

10. OR. REV. STAT. § 696.290

11. TN Senate Bill 1160, House Bill 2095

12. IOWA CODE § 543B.60A

Source: Report of the FTC and U.S. Dept of Justice, April 2007

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  • Ralph
    Moreover, a credit of commission on the HUD for closing costs isn’t really a “rebate”. That is nothing more than an increase of seller concessions. A true rebate is when a check or thing of value is issued by the buyer’s broker directly to the buyer after closing. In my sole opinion, this requires lender disclosure, but not approval.
  • Ralph
    When you say “approve”, do you mean recording it on the HUD as “POC” item paid by Redfin to the buyer? Or, conversely, do you mean the lender does not “disallow” the rebate but isn’t recorded on the HUD? There is a difference.
  • http://www.ftc.gov/reports/realestate/V050015.pdf
    Report of the FTC & DOJ April 2007
  • Tony,
    Thanks for looping me in. What report/link are you guys looking for?

    Regarding an anti-rebate "loophole," I don't know what Zip is doing to get around the rule, but we're definitely looking into how we can do business in these 12 states.

    I haven't seen any Real Estate Commission complaints about rebates either ... at least in the states we're in: California, Massachusetts, Washington ... soon Washingon, D.C, Maryland, Viginia and Illinois. As long as the lender approves, Redfin applies the commission refund to closing costs and any excess is refunded by check at closing.

    Regards,
    Cynthia
    Redfin
  • Sellsius - CC me on that link or shoot me a note if you cant find and i will start digging. I have some intel on this....but need more for my 'discount brokerage' library that I am building in my new condo :) (just kidding full service gals/guys) but seriously sellsius keep me connect to your findings.
  • The list came from a recent FTC Report (I have to find the link). I decided to post it after the recent Tennessee rebate law was signed. I had to get the links myself from Google (some were tough to find).
    I don't know whether Zip is in violation or whether they found a loophole via closing cost credits, as Tony Longo mentioned in his comment.
  • Did you guys dig these up yourselves?

    I was reading through Zip Realty's disclosure and the only state they don't do rebates in is New Jersey...

    Are they in violation???
  • No complaints that I know of. The real guys to ask are guys from either e-realty.com (Now a Prudential Co.) or Redfin. The credit vs. rebate debate is more a financing issue than an illegality. Mortgage lenders don't like the buyer getting anything outside of the HUD or any kind of kick-back. Kick-Back = bad to mortgage peep's! I would shoot a note to Cynthia over at Redfin...maybe some feedback there...
  • Have there been any complaints by the Real Estate Commissions? Have they given any advisory opinions on credits vs. rebates? If the credit is not seen as a rebate, then that is an easy solution.
    As we lawyers say, "where's there's a law, there's a loophole"
  • This is a sensitive subject, however, I believe in most of these states you can give it as a credit (just not as cash back). So for example you could apply a $7500 rebate to your purchase price, closing costs, pre-paid interest, taxes, upgrades or even add it to your future monthly mortgage payments.

    I know this is what some of the players do out there, INEST for one has been doing this for a while in states that have not allowed cash back at closing.
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