MAR Legal Hotline

Legal Hotline Weighs in on Rebates

Q:      I would like to start a new marketing program where I offer a rebate to either my buyer or seller client, is this legal?  Is it ethical?

A:    It is both legal and ethical; however, 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.

From a legal standpoint, REALTORS® cannot share in their commissions, fees or other valuable consideration with others who are not licensed and are performing brokering activities. REALTORS® may, however, offer gifts to the buyer or seller in a specified real estate transaction.  An example of providing a gift within a real estate transaction is either the payment of closing costs or a cash rebate at closing to the buyer or seller.  The gift or incentive, however, must be paid to someone within the transaction; it cannot be paid to an outside entity such as a charity on behalf of the person within the transaction.

Ethically speaking, Article 12 of the National Association of REALTORS ® Code of Ethics states that the offering of prizes or merchandise discounts is not unethical even if it requires a person to list or purchase a home through a REALTOR®. This Article does require that all advertisements clearly state what the customer must do in order to receive the gift (e.g. Must he/she buy a home that is one of the REALTORS’ ® listings? Must he/she purchase a home when you are acting as a co-broker on another firm’s listing?).

MAR advises all REALTORS® who provide gifts or incentives to consult an accountant or tax attorney regarding potential tax consequences resulting from this practice. Furthermore, the rebate should be disclosed on the Closing Disclosure.