Legal Hotline: The Legal and Ethical Limitations of Offering Client Rebates

The offering of rebates to clients at the close of a transaction has become more common as a marketing strategy in some business models, especially in extremely competitive markets. However, doing so, raises legal and ethical limitations that REALTORS® should be aware of when offering rebates.

Answer: Although it is both legal and ethical for you to do so, the REALTOR® Code of Ethics and the Massachusetts Board of Registration for Brokers and Salespersons place clear requirements and limitations on the use of offering gifts or incentives:

  • REALTORS® are prohibited from sharing their commissions, fees or other valuable consideration with an unlicensedindividual. A REALTOR® may, however, offer gifts to their clients as part of a specific real estate transaction. For example, a REALTOR® may pay their client’s closing costs or provide their client with a cash rebate at closing. This sort of payment must only be made to a party to the transaction.

  • REALTOR® Code of Ethics permits the offering of prizes or merchandise discounts even if receipt of the prize or discount is conditioned upon listing or buying a home through a specific REALTOR®. Any offer of a prize or discount must clearly state the conditions that must be satisfied in order to qualify.

 

Any rebate made to a client must be included on the Closing Disclosure.

The Massachusetts Association of Realtors advises all REALTORS® who provide an incentive of this type to their clients to first consult with a tax attorney or accountant to discuss the potential tax ramifications of this practice.

ABOUT THE REALTOR® LEGAL HOTLINE

The REALTOR® Legal Hotline offers authorized callers access to staff attorneys who can assist members with questions about current state and federal laws and regulations, permissible business practices, and important court rulings affecting real estate practitioners.  To take advantage of the Legal Hotline service, a member’s designated broker must first complete and sign an Authorization Form and return to the MAR Legal Department.  Once approved as an authorized caller, MAR members may access the Hotline by calling 800-370-LEGAL (5342), sending an e-mail to legalhotline@marealtor.com, or faxing questions to 781-890-4919.  The hours of operation are Monday-Friday, from 9 a.m. to 1 p.m.

2018-01-16T19:38:18+00:00
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