Buyer rebates. Good business or potential fraud?

 On Friday, I had written a post, that facilitated quite a discussion about our commissions and how we justify what we charge. If you read my post and the 110+ comments, it generated, you saw that the consumer, Mr. CandiBags showed up. He asked a pretty good question, that I would like to expand upon here.

How do you feel about Buyer's Agents rebating a portion of their commission to the Buyer? Well my immediate answer was that I could not care less. I am a listing side Realtor and it does not effect me at all. But then I started thinking about it. My new questions are:

 

  • How is a Buyer's rebate handled without it becoming mortgage fraud?
  • What do you do if the rebate is not allowed by the Lender?
  • When and how do you disclose this rebate?
  • Is this rebate credited on the HUD-1 statement at closing or do you cut a separate check after closing?
  • How can companies like Zip Realty, that offer rebates, overcome the legal ramifications?
  • What do you do if you got the Buyer's business, by the promise of a rebate, only to find the Lender will not allow it?

In Florida the law states: According to Florida Administrative Code rule 61J2-10.028(2), the sharing of brokerage compensation by a licensee with a party to the real estate transaction with full disclosure to all interested parties is not considered a violation of Chapter 475, Part I, Florida Statutes

What does your State's laws say about this?

One more thing, as a Realtor working for the Seller, if I receive an offer for my listing and there is a disclosure stating the Buyer is going to get a rebate, should I know the amount of the rebate and make sure, the rebate plus any Seller concessions, that the Buyer may be asking for, do not exceed the maximum amount allowed by the Lender i.e. 3% or 6%. And, should I make sure that any rebate is fully disclosed on the HUD-1 statement? If not, could we, inadvertently, be involving our Seller in a fraudulent transaction?

Buyer rebates. Good business or potential for fraud?

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