Can My Agent Give Me a Rebate?

I hear this questions a lot in the daily real estate game, "can you give us part of the fee back after the closing?"

The answer is yes but only if done in a certain way.

RESPA, the Real Estate Settlement Procdures Acts, requires a couple of things that need to be mentioned. The first thing is that payment cannot be made for services not performed. The second one is that if any payments are made, they must be disclosed on the HUD-1 Settlement Statement.

Futher, Alabama License Law, and most states License Laws, require that no "rebate" be made to any party in a real estate transaction from another party. Another section of the code also requires that the TRUE terms of a real estate transaction be diclosed to the lender or lending institution.

What does all this mean? For starters, if your agent says they can give you cash back after the closing, in nearly every case, this is both against case law and the license law governing the licensees in your state. So - in short - don't do it. If you are a participant in a transaction and you recieve cash back later, after the closing takes place, then you are participating in loan fraud. Fraud is a crime. Because the lender didn't know that you were receiving additional cash proceeds from the sale, they are not aware of the TRUE details of the transaction. Almost every loan program for the purchase of a home has the provision that the buyer cannot receive what is called "cash out" - that is - get money back when they make a purchase. This, in essence, would be overfinancing the home. on a refinance, however, this is okay.

The way to get a credit back from your agent is to have the credit put on the settlement statement as a CREDIT to you and then the credit is applied to any costs you have to pay at the closing table. This applies whether you are buying or selling.

Basic Rule of them: If you can put the cash payment on the HUD-1 settlement statement so that it is disclosed to all parties, including the lender, chances are it's AOK to do it.