May I offer to rebate part of my commission to a buyer?

QUESTION: I am thinking about offering a rebate of a portion of my commission to buyers who work with me. Is that okay and if so, may I advertise the offer?

ANSWER: The answer to both your questions is yes, provided you do it properly.

First of all, although the license law generally prohibits a broker from sharing his or her commission with an unlicensed person, he or she can share commissions with a party  to the transaction. Any such arrangement should be put in writing, and if the buyer is getting a loan, any such payment must be disclosed to the buyer’s lender prior to closing and must be reflected on the HUD-1 settlement statement (see Real Estate Commission’s Broker-in-Charge Guide, Chapter 5).

Regarding advertising, Standard of Practice 12-3 of the REALTOR Code of Ethics confirms that advertising a commission rebate to buyers is not unethical, subject to the  following proviso:

…However, REALTORS® must exercise care and candor in any such advertising or other public or private representations so that any party interested in receiving or  otherwise benefiting from the REALTOR®’s offer will have clear, thorough, advance understanding of all the terms and conditions of the offer.

Thus, for example, any advertising should make it clear that the rebate is subject to lender approval. Also, although it may seem obvious, it should be clear that the rebate will be made from commissions actually received.

If you haven’t already, you should discuss this idea with your broker-in-charge. Your firm may have a policy on the offering of rebates or other inducements, and your BIC is  responsible for the proper conduct of advertising by or in the name of the firm. Remember that you must disclose the name of your firm in any advertisement of real estate  services or listed property in any medium (see Standard of Practice 12-5 of the Code of Ethics).