Real Estate Broker Rebates Benefit Consumers

Posted on: October 4, 2013

Brokerage commissions should be established by a written listing agreement between the seller and their listing broker. The commission split between listing broker and cooperating brokers in the event of a buyer’s default, or in the event of closing, should also be established by writings between the licensees involved. Additionally, whether commercial or luxury residential real estate, the buyer’s broker may agree to rebate part of the purchase price to their clients.

Brokers may compete for homebuyers by offering to rebate a portion of their commission earned. The Department of Justice reported that a 1% rebate on a median-priced home would save a homebuyer $1,843 on average. While ten states have enacted laws that forbid brokers from offering refunds, Florida is not one of them.

Real estate brokers offer consumers incentives to encourage the use of that broker’s services. Usually, the rebate is a cash payment from the broker to the client after closing. For example, a broker may offer to refund one-third of its commission to the homebuyer. If the buyer purchases a home for $100,000 and the purchase price includes a 6% commission, the buyer’s broker will receive $3,000. The broker would then pay one-third of the commission earned as a rebate to the buyer, saving the buyer $1,000.

Some brokers may offer other incentives such as gift certificates, closing-cost payments, or free home inspections. The rebates and incentives help lower the price that consumers pay for brokerage services. Those against rebates believe the benefits provided to consumers negatively affect price competition among brokers.

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