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Legal IssuesDo commission rebates violate RESPA?
Hotline callers often want to know if it’s legal to rebate or refund part of their commission to their clients. It is legal, provided the licensee is rebating or refunding commission to her own client and the rebate or refund is listed on the HUD-1.
Licensees need to be aware that rebating a portion of their commission is something the lender needs to know about before settlement, as it may affect underwriting guidelines, special loan programs or other criteria the agent (and his client) may not know about. In its Nov.17 update to the RESPA FAQ’s, HUD says:
Q: May a real estate agent rebate a portion of the agent’s commission to the borrower? If so, how should the rebate be listed on the HUD-1?
A: Yes, real estate agents may rebate a portion of the agent’s commission to the borrower in a real estate transaction. The rebate must be listed as a credit on page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business.
Each transaction is different, and unique circumstances can arise that may call this general rule into question. When in doubt, call the Hotline or consult with your local attorney.
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About Brett: Brett Woodburn, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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The specific question was rebating to the “buyer”. What about rebating to the “seller”. Does anything change? It certainly should not affect buyers financing, underwriter gudelines, etc.