There are a few brokerages in the marketplace that offer rebates to Buyer clients. Before you choose the agent who is going to help you make the important decisions required for what is probably the biggest purchase of your life, make sure that you’re not doing so solely because you think you’re going to get some cash back at the end of the transaction. Here are the three biggest reasons that you won’t get that rebate, no matter what the agent, or the lender, has promised (read the fine print in their rebate program disclaimer):
1. Lenders, underwriters and mortgage insurers simply do not like it when a Buyer gets cash back at closing – cash that the Buyer did not have in the transaction to begin with. Most will disallow any rebate. If your agent tells you that “they” will never find out, you better hope “they” don’t. Not disclosing it falls in to the category of loan fraud. Your agent, you and whoever is on the loan may be fined $10,000 each.
2. If you are purchasing a Short Sale, the lender is actually paying the real estate commission (where that rebate is coming from) and requires that every penny left over go to the Seller’s deficiency, not to the Buyer. See #1 for penalties.
3. Ditto when purchasing Foreclosures, aka REOs, aka Bank Owned Properties. Especially if they are HUD, Fannie Mae or Freddie Mac owned homes. See above for explanation and penalties.
THE REALTOR LEGAL TIP (re-posted from the Salt Lake Board of Realtors)
Giving ‘Rebates’ to Your Buyer
A question that often comes up is whether a Realtor® can offer an inducement or a rebate to a buyer. The short answer to this question is yes, but there are a few things to remember. Utah Administrative Rule 162-2f-401a requires that the Realtor® follow three steps before an inducement is offered to the buyer. (1) Authorization from his/her principal broker must be obtained; (2) any underwriting guidelines that apply to the buyer’s loan must be complied with; and (3) notice that the inducement is being offered to the buyer must be given to the seller’s broker (if represented) or to the seller (if not represented).
Look for other legal issues here, or contact the Utah Association of Realtors® Legal Hotline at 801.676.5211. The hotline is a free member benefit on Mondays, Wednesdays, and Fridays.