TO REBATE OR TO NOT REBATE. THAT IS THE DEBATE and it's a lot more complicated than some would think.

DO YOU REBATE A PART OF YOUR FEE TO BUYERS OR SELLERS???

IF YOU DO, WHY DO YOU?

IF YOU DO NOT, WHY NOT??

There is an interesting discussion circulating on ActiveRain about commission rebates that sparked my interest.  J. Philip Faranda posted an interesting discussion about rebates that generated not only comments but a post or two describing in length why agents don't rebate and don't believe any agent should.  They state that rebates are:

1.  Not cost effective (in the writer's present business model).

2.  Not ethical.  I've tried and tried but simply cannot find anything unethical about rebating part of your broker fee to a buyer or seller.  Sure, some states have made it illegal (I've heard).  That doesn't make rebates unethical, merely illegal under those states' license law. 

Since one of the most interesting and detailed post objecting to rebates is MEMBERS ONLY, I WAS THWARTED, couldn't Re-Blog and had much to much to say for a comment (you don't have to say "as usual").

Let's get the big question out of the way.  ARE REBATES ETHICAL?   Or, as I believe, are rebates simply way of promoting your services.  IMO, offering a buyer rebate is, for me, no more and no less than charging less to new home buyers where my time and involvement with the transaction is minimal.  TOTOH, representing a resale home buyer requires very intense and time consuming duties for search, negotiate and contract management through settlement. 

IS FREE ANYTING UNETHICAL???  WHAT ABOUT THE FREE CMA??

I first offered NEW HOME BUYER REBATES back in 2003 when the first of several "rebate brokerages" opened in my market area and they were making a splash on the Internet.  In fact, my Saturday and Sunday a.m. phone traffic was usually buyers shopping rebates.  This was before many builders has effective web sites.  That has changed and the builders now have a very effective Internet presence.  So, the competition for rebates has subsided simply because THE CONSUMER IS GOING DIRECTLY TO THE BUILDERS. 

Let's go back to basics.  Is the objection to rebates (the disparagement of agents providing rebates) based on sound business analysis?  Or, is it simply a way to Demonize agents who DO give rebates??? 

PAY THE BROKER SPLIT, THE FRANCHISE FEE, THE REFERRAL FEE, ETC., ETC..  Clearly there is only so much money to go around if an agent is working in a company that takes a large percentage of their fee and most of these "mega brokers" do not permit rebates by their agent sales persons.

HOWEVER, IF YOU PACK YOUR OWN CHUTE, you can make your own decisions and, in many cases, advertising rebates, if effective, may well produce a higher net to an agent than traditional advertising/marketing with which so many agents are familiar.  I have just about a third less work involved when selling a new build and rebate that third of my broker fee to the home buyer.  It's that simple. 

1.  Rebates are no more and no less than a promotion for the purpose of attracting new customers or clients.

2.  The rebate model for promotion works very well for brokers who either keep all of their commission (that would be Lenn), or for agents employed by brokers who do not have a high split (that would be agents or brokers to whom Lenn refers buyers with a 20% referral fee).   Perhaps rebates is, for some, a better business model. 

3.  It is entirely possilbe that, even with the rebate, the bottom line earnings of the agent or broker who gives rebates reduces other costs to a point where it is a much more productive form of promotion than others. 

4.  There are schools of thought that believe that with Internet advertising, self promotion is less important than in times past, at least for buyers, not so much for sellers.

IS IT UNETHICAL TO PAY FOR A BUYER'S HOME INSPECTION OR ONE YEAR HOME WARRANTY??? 

Rebates are simply no more nor no less than one way of promoting our services.  For years, agents have disparaged other business models, "discounted listings" being the most "evil" business model around every. 

Now we have "fee for service" or "limited service" model model brokers who disparage the "full service broker" model. 

I believe that there is room in our business for many business models.  Some will thrive and some will not.  However, it's not usually the business model that fails, but the agent who didn't follow the business plan and execute the business model faithfully. 

OR, ARE THE OBJECTIONS TO REBATES SIMPLY BECAUSE SOME AGENTS/BROKERS DON'T WANT TO GIVE THEM?

Finally, I do not negotiate my commission.  I've had new home buyers try to get more than the 1/3 of my fee and my answer is NO.  I set my fees.  Buyers do not.

Finally, finally, I will NOT agree to a reduction of my fee to "make the deal work".  Goodness knows, I've been asked to do so many times over the years and the answer is NO.  I have never had a contract not settle because I wouldn't "chip in".  Of course, if I have made a mistake, I pay for it.  I won't subsidize a buyer or seller or pay for another agent's mistake.   I'm disappointed when agents to whom I refer buyers agree to chip in to "make it work".  However, it's their call.  Once I refer a buyer, I don't get involved unless the agents asks for advice or suggestions. 

Understand what your fee is, make sure that the buyer or seller knows what your fee is and stick to it.  BTW, if a buyer or seller threatens to not settle unless you "rebate" or "credit" to them XXXXX, use the work extortion in your refusal. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

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