Great post, Tony. They are bribes, IMO. Agents should show properties that their buyers want to see and not where they make the most money (but I know lots don't operate that way).  Wonder if these bribes REALLY make a difference? If I were the buyer I would want a piece of the action, wouldn't you?

Jeff

Jeff - Great to hear from you!  I absolutely would want a piece of that if I were the buyer.  Some builders decline to allow their own salespeople to take advantage of these incredible deals - they won't let them purchase a property - even as a primary residence - and allow them to enjoy the same incentives they are waving at everybody else! 

I agree that they are bribes. In our market we are seeing up to $20,000 from the builders in some communities. I never look to see which home has a bonus before I show...I just pick the ones I think are the best fit for my clients. Our company passes a bonus directly to the agent 100%.

I personally would have a tough time trying to explain to my clients that the home they are buying has a $20,000 commission bonus but they are not paying more for the home because of it.

Bribes.  Why not just lower the price to get it sold faster?  With the internet people direct their own searches (for the most part) anyhoo!

Clients are fairly savvy to price and know a bargain when they see one! 

Tony,

If the property is in my Buyer's price range and in their desired area, sure I show them the property. This includes the compensation. Illinois license law requires disclosure of agents commission.

Another question, do you know of new housing developments in the Florence,Coolidge area?

The builders are desperate in our area. So they are offering 6% to Buyer Agents, unfortuanately most re-sellers can't do that so it is hurting our area.

Talk about desperate?  I'm not an agent, but I did stage a luxury home that was originally listed at a very competitive price for the area.  When I went back to destage the house a couple months later, I noticed that the lsiting flyer (which was a copy of the MLS listing), now included several incentives - such as $25K towards closing cost, free one year golf membership and a full 6% to the buyer agent. What really caught my eye was the fact that the owner/agent/seller had raised the price $100K to cover these incentives.  How nice is that?

Pam - Sounds like you have a great approach to dealing with this.

Renee - Some builders are stuck between the proverbial rock and hard spot.  If they lower the price too much the folks who have contracted to build new will cancel and buy a spec instead!

David - As long as it's a good fit for the Buyer that's great.  And yes - I do know of new builds in the areas you mention.  Do you have a Buyer to refer? :-)

Missy - A real Catch-22

Calie - Some folks just don't get it!

Tony,

RE: Florence, I may have some Chicago and Canadian Greeks looking for home sites around the Monastery. 

David - Works for me - send them forward!

"Don't forget - any rebating of commissions MUST be disclosed on the HUD-1.  Any other way and you risk your license and a spell in the pokey!"

Please expound on your assertion. Better yet, site the law that states a post-closing rebate from the buyer's broker to the buyer must be recorded on the HUD-1?

 Kindly Regards, Ralph

Ralph - So you disagree?  Also - did you mean "cite" rather than "site"?

Sorry, you're correct. It is "cite", not "site". That's what you get when posting too quickly.

Yes, I disagree. Obviously, if the rebate is used for settlement charges, then it must be approved by the lender and recorded on the HUD. A post-closing rebate directly from the buyer's broker to his/her client is another issue. Once again, anyone can prove me wrong by "citing" the law that requires it.

How about 12 USC Section 2607?

RESPA was established to prevent kick-backs among the professionals in the transaction. The purpose of disallowing kick-backs in real estate transactions is to keep the costs incurred by borrowers to a minimum. Obviously, a rebate of commission is not increasing the buyer's costs, but lowering them. Thus, your "cited" law is not applicable.

"Ralph" - I understand you don't want the law to be applicable - but all you need to do is simply read it to know that your "thus" is invalid.

On a separate note - payment of commissions or "referral fees" related to a closing of a real estate transaction must be broker to broker - unless the money will be paid regardless of closing.  Therefore if you calculate what the rebate amount is - and pay the buyer that amount whether the transaction closes or not - then you're OK.  Out of pocket - but OK.

I would challenge you to find support for your perspective from your Designated Broker - or from your State Licensing Board for your interpretation.

Finally - if it's not on the HUD - it changes the picture regarding contributions to the Buyer to help them close a loan which they might not be able to close otherwise - and unless the loan is not a "federally related mortgage loan" (try and find one that isn't) - you and the buyer will perhaps spend some time discussing this error in judgement!

Ralph - Seems that this topic is quite a hot button for you given your many comments:

http://activerain.com/action/search/search_results?searchfields=blog_comments&search=ralph+hicky&commit=Search

I'd really like to hear from you on the topic of payment of money (rebate) to a non-licensed party (Buyer) contingent on the transaction closing.  At least in Arizona, that's a no no - not to mention that it does indeed change the qualifying picture for the Buyer for the loan - if they KNOW they are receiving a "gift" of "$x" if they close escrow, it's easy for them to factor that in.  If they couldn't/wouldn't close escrow if they weren't guaranteed this "gift", don't you think it needs to be disclosed on the HUD?

The information that I cited doesn't come from me, but from RESPA is Washington DC.

Secondly, I have certainly been on the blogs giving clarity to this issue. There are many misinformed and many more disingenuous people out there trying to "muddy" the waters for consumers. A consumer only buys a house, on average, every 7 years. Any confusion in this area could prevent the consumer from seeking out a rebate.

Lastly, legitimate commissions are not part of loan proceeds and thus would not alter the LTV. As explained to me, a post-closing rebate is a "gift" to your client. This gift happens to be cash. These funds help, as explained by the DOJ, to offset moving expenses.

Moreover, RESPA created the HUD-1 for the purpose of disclosing mortgage costs to the borrower. Now, if anyone conspires to inflate commissions in an attempt to disguise a seller concession, then obviously that is illegal. RESPA affirms that too. However, if a buyer's broker receives a legitimate co-op commission that is identified on the HUD-1 (say 3%), then that broker can give a cash gift (1% or so) to his or her client after settlement. This is a viable means by which a buyer's agent can compete to be the agent for the buyer. There are some states that disallow this, but the DOJ is working on them.

I suppose you think this is a crime too: $10K to the buyer from the co-op fee.

http://webreprints.djreprints.com/1010850475994.html

Ralph - Here is the "acid test".  Try disclosing to the Lender (if there is one involved) that you will be giving cash back to the Buyer AFTER close of escrow and see if that affects their decision to fund the loan.  According to you - it shouldn't - therefore - why not disclose it since according to you it makes no difference?  I think you and I both know the real answer - it will make a difference.

Also - try disclosing to your Department of Real Estate that you are paying cash directly to a non-licensee CONTINGENT on a closing of a real estate transaction.  Whether to the Buyer - or another unlicensed individual who "referred" the buyer to you to - it's still a "no no" to make this payment CONTINGENT on a close of escrow.  If you plan to give them the money regardless of whether the transaction closes OR NOT - that's a different story.

From the comments you've made here and elsewhere my observation is that this is a key part of your business model - you want your position to be true - and that you may at some point in the future if someone is holding your toes to the flames want to rely on a consistent pattern of behavior - "I challenged it here, I challenged it there".

Here is a simple way to PROVE your position - although it relies on me taking your word for something.

Can you unequivocally tell me that you have informed a lender of your intent to give cash back after close of escrow to the Buyer, to not include that on the HUD-1, and that the lender agreed it was no problem and funded the loan anyway.

Can you unequivocally tell me that the State of Texas - which is where you are located according to another comment elsewhere - does not prohibit the payment of money or something of value to an unlicensed individual if that payment is CONTINGENT on the closing of a real estate transaction.

If you waffle or dodge the above - we both know the answer. 

Personally - I think you SHOULD be able to do as you describe - however - the LAW trumps what I personally think - and also trumps your personal preferences in this case.

Ralph,

I suppose you think this is a crime too: $10K to the buyer from the co-op fee.

http://webreprints.djreprints.com/1010850475994.html

No - I have a healthy respect for alternative business models.  Providing the rebate was on the HUD, and not cash outside of closing without the knowledge of the lender, and not paid in violation of laws relating to how commissions can be paid - I have no issue with it.

Different type of example - same principle.  A Buyer (who used to work for me in the corporate world) wanted to purchase a "New Build".  The Builder offered a 6% commission to the Co-op Broker.  I asked how much of that could be rebated to the Buyer.  The answer was 2%.  The Buyer had a 2% Credit against the purchase price due to that contribution, which was disclosed on the HUD and authorized in writing by our Designated Broker.  Doing it that way met the Lender requirements and the legal requirements regarding commissions.

Ralph - Surprise Surprise - No record of you being a licensed real estate agent:

TREC Licensee Info Search includes sponsorship Info & completed education (MCE and Core SAE)
	License Type: Salesperson or Broker   Inspector   E.R.W.   All   License Number or Name: "LastName, FirstName" or "Business Name"       (see search tips) Optional: any part of name (for name searches only)
Search Result: Could not find a licensee with name like: hicky for Salesperson or Broker class of licenses.

Any rebate is disclosed to the lender. If they want it used as closing costs, then that is how it is handled. If not, then it is a cash gift after closing. I've had lenders, not brokers, handle it both ways.

FTC quote: "Rebates typically are cash payments from the broker to his or her client after closing."

You know, the FTC has many legal attorneys.

Why are you so concerned about who I am?

Ralph,

This question still is awaiting a response from you:

Can you unequivocally tell me that the State of Texas - which is where you are located according to another comment elsewhere - does not prohibit the payment of money or something of value to an unlicensed individual if that payment is CONTINGENT on the closing of a real estate transaction.

Why are you so concerned about who I am?

Why are you so concerned about people knowing who you are?  Perhaps this is a "pokey avoidance" tactic? :-)

Either your name is NOT Ralph Hicky or you are NOT a real estate licensee in the State of Texas - or I suppose - BOTH!

Ralph,

I received the following email from you:

You've received a contact message from your Contact Form on the ActiveRain network.

Message details:
From: Ralph
Email: ralph@ralph.com
Subject: Rebate Blog

Tony,

Unfortunately, you seem to be focused on who I am and not the merits of my contention. If you wish to share your thoughts, this is a good forum.

http://searchwarp.com/swa31942.htm

Kindly Reagrds

Email sent from IP: 68.219.46.174

According to the IP address - this is where you are located in Kennesaw, Georgia:

Comment continued...

I imagine if I were to go to the tax records for the house identified above, I would find the "real" Ralph. 

If you're so confident of your position, why all the mystery?

Ralph - I have no problem with continuing this discussion - providing you abandon your cloak of anonymity.  The message I'm getting is that you are "ashamed" of the position you espouse because you are unwilling to be publicly associated with it.  If you can enlighten me on why the need for anonymity - I may rethink that position - but until then - it means I really don't take your commentary seriously.  Not trying to offend - just letting you know where I stand.

Actually no, Tony. I don't want hundreds of agents calling me wanting the information that I have gathered. I suggest any agent do their own homework on this issue instead of listening to anything they read on blogs.

Lastly, you my friend might be in the "pokey" for displaying personal information. I was trying to be kind, but you have over-stepped your bounds. I'll forward this to the appropriate entity to see.

Anonymous (Ralph I presume):

The IP address from which you sent email to me through Active Rain is PUBLIC information.  When you sent it, you chose to do so. 

Also - the site that identifies locations of IP addressess is PUBLIC - with no account or password required.  That site is http://www.ip-address.com/ . 

My IP address places me in Buckeye, AZ - but not at my precise location.  I suspect the same is true of your IP address. 

In your PUBLIC comment on another Blog http://activerain.com/blogsview/Cash-Back-At-Closing-All-Over-Again?7783you claimed to be in Texas "In Dallas Texas now, but use to live in West Cobb years ago (near Macland Road)."  The only "problem" with that statement is that Kennesaw, GA (associated with your IP address - is about 10 miles from Macland Road, West Cobb) where you used be "years ago" - which would give the impression that's where you are now - not years ago.

Lastly, you my friend might be in the "pokey" for displaying personal information. I was trying to be kind, but you have over-stepped your bounds. I'll forward this to the appropriate entity to see.

To borrow a phrase: Please expound on your assertion. Better yet, site the law that statesthat it is a crime to check IP addresses that are knowingly provided without any restriction on confidentiality and to publish the results.

You, my friend, are simply miffed at being "outed" - if your claims on the topic in this thread are as truthful as your claims to where you are - it sort of brings your contentions down in flames.

I don't want hundreds of agents calling me wanting the information that I have gathered.

Why not?  If the information is so valuable - why not package and sell it?

I understand your motivation for gathering "sound bites" and repackaging them to attempt to build a case for your position - because you WANT it to be true.  The biggest problem I see here is that your credibility is suffering due to at least one of your claims - your location - being shown to be untrue.

"Ralph" - I challenge you to come out of the closet and provide any support for your contentions.  So far - all I've seen is you ask for information - which you then disagree with!

Wow, Tony. The market must be really slow for you, as you have the time to hunt down anonymous posters who offer a differing opinion. You should use that energy elsewhere. I gave you the reason for not using my real name, which is my right in the blogosphere. Unfortunately, you want to create your own theory. I have also given you a blog to share your thoughts, but you have chosen not to engage dissent. You only want cheerleaders for your blog.

To all consumers, use the blog that Tony cited in my e-mail to gather information on this topic. There is another side to the spin. My job is complete.

Cheers! 

Ralph - Five minutes effort over morning coffee does not a slow market make! :-)  I thought the discussion was about the law - not about spin.  One glaring omission still outstanding - a very specific question you continue to dodge:

Can you unequivocally tell me that the State of Texas (we'll need to make that Georgia) - which is where you are located according to another comment elsewhere - does not prohibit the payment of money or something of value to an unlicensed individual if that payment is CONTINGENT on the closing of a real estate transaction.

Tony,

What you are citing is a law regarding the payment of referral fees or anything of value to an unlicensed person. An unlicensed principle, who is a party to the transaction, is not providing brokerage services and therefore what you are citing doesn't apply.

From the Maryland Real Estate Commission:

http://www.gcaar.com/legalcorner/docs/rebates_closing_costs.pdf

Hope this helps!

Ralph,

"not providing brokerage services " - true - but they ARE being paid CONTINGENT on the closing of a real estate transaction - which is the issue at hand.

The link you provide leads to an "opinion" in Maryland - which is not Georgia or Texas.  Can you point out something similar for either of those states?

Tony

Tony,

I give up! That opinion comes from the Maryland Real Estate Commission. They specialize in real estate matters.

Elizabeth H. Trimble
Assistant Attorney General
Counsel to the Commission

http://www.dllr.state.md.us/license/real_est/renews.htm#rebates

Most legal matters have differing opinions. Lastly, are you citing a RESPA law? I have never heard of your CONTINGENT assessment. However, I -- unlike you -- am open to delving into your viewpoint.

Ralph,

Isn't the Maryland Real Estate Commission limited in their jurisdication to the State of Maryland, and subject to any overriding State and Federal Laws?

The reason I'm focused on Georgia and Texas is that at least one of those states is where you do business - not Maryland. 

I will do my research to find and post re: the CONTINGENT aspect.  Believe it or not - I am open to your exploring your viewpoint - I make my decisions on relevant facts - and if that means I'm wrong - I'll be the first to fess up and publicly change my position. 

It may not be for a couple od days - but I will post again here re: the above.

Hope you have a great 4th of July!

Yes, the Commission is limited to Maryland, but it still has to adhere to Federal HUD-1 disclosure requirements. Remember, RESPA created the HUD-1. Secondly, the Maryland Commission is one of the few States that has given a clear & concise interpretation of the HUD-1 issue regarding a legitimate commission rebate. The Commission in NC has stated that any rebate must be on the HUD. Two separate and differing opinions. Who's right?

In my sole opinion, any HUD-1 disclosure requirement must come from your State authorities, as there is nothing that I can find that requires in on the Federal level.

But in any event, I'm interested in other opinions.

Cheers! You have a Happy 4^th too!