Page 2 of comments on Cash Back Rebates to Home Buyers - Why Most Agents Aren't Talking!
by Bill Brynelsen
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In my opinion, I think the DOJ is attaching the rebate to brokerage services, not the transaction with the buyer, seller & lender. I know this sounds counterintuitive, but that is how I am understanding it from the DOJ's writings. A rebate is not a sales concession for a particular home, but an inducement attached to buyer-brokerage services. These are two separate transactions. I know lenders would disagree, but that is my understanding.
To Mike Will: If the rebate can only be handled according to your understanding, then why would the DOJ need to articulate this concern: Do refunds and incentives pose any risk to consumers? Some have argued that refunds and incentives can tempt consumers into closing on real estate transactions against their best interests. The Antitrust Division has found no evidence that refunds and incentives harm consumers. On the contrary, they can dramatically lower the price that consumers pay for brokerage services. Respectfully,
The DOJ intends for the net cash to go to the buyer. Read how the attorneys from the DOJ explain it: "Rebates are an important form of price competition under the traditional structure of real estate transactions because the seller and seller's broker, not the buyer's broker, determine the amount of the buyer's broker's commission via the listing agreement. Without rebates, if the buyer's broker were simply to reduce his or her commission, the savings would go to the seller's broker, not to the home buyer. As one panelist explained: the mechanics of the typical real estate transaction make it difficult for a buyer's broker to reduce the price of his or her services because the "custom of the industry" is for the listing broker to split his or her commission with the buyer's broker.70 Rebates, therefore, can be powerful tools for price competition between brokers. And by returning money to home buyers, rebates can also benefit home sellers, because buyers will have more to spend on the home as opposed to commission payments."
Stephen Graham thanks for your comments! It seems that Mike Will went to some great lengths just to try and say a rebate would not do a buyer any good. Mike, I do thank you for your comment! I’ll try and tell my last buyer that the $18651.00 he received from me really didn’t do him much good! And, while I am at it maybe I’ll drop a line to the other 17 buyers so far this year (2008) that have purchased and closed and let them know the same thing. The question is “do rebates need to be disclosed to the lender?” And it always comes back that someone is partly right and partly wrong. And, again no one can produce any kind of law, rule or anything even close to one! Violet from Atlanta, Ga: I send the buyer their rebate check 7 to 10 days after the closing. It’s just that simple! Try giving away money! You will not be able to handle all that business by your self. That is a for sure true fact!
HUD/RESPA is about to roll out a new HUD-1. I would like to post the link, but searchwarp doesn't allow links. The new HUD-1 does not provide places for POC rebates or rebates that are credits. Apparently, HUD is not concerned about rebates at all. If rebates were of a concern to all parties, then HUD certainly would have considered them when proposing the new HUD-1. Has anyone else seen the proposed new HUD-1?
Stephen I think that Hud / banks have a whole lot more to worry about than a buyers rebate. And, I am very pleased to let folks know that rebates will remain legal in the state of Illinois!!!!! My thanks to Matthew Bester and Bennett Matelson of the U.S. Department of Justice (Antitrust Division) and the Illinois Association of Realtor for all their efforts in defeating HB 4313! I would also like to personally thank Rep. Robert S. Molaro for introducing this Bill. I personally received a ton of free press! My business is booming! Thanks, Bill Brynelsen, AKA – Rebate Bill
Bill - I did hear that the rebate ban in Illinois did not pass. I still do not understand why the amendment was ever introduced. Regarding lenders, I, too, do not think these rebates impact them since the funds are coming from the agent‘s commission; however, there seems to be massive confusion over this issue. There needs to be a clear protocol. The DOJ’s attorneys should expound on this issue. As Mike Will noted, the purchaser usually has to acknowledge in the attachment to the HUD-1 that it is "True and accurate of all receipts and disbursements made on my account". Since the lender will not let it be recorded as a POC item, then this could be an issue. Given this declaration attachment, then the USDOJ needs to establish whether or not the rebate is in connection with transaction between the buyer & lender; or, is it only in connection with buyer brokerage services. From my understanding of their writings, it would be the later scenario -- though I am not certain.
News: Montana to roll back their rebate-ban.
"The undersigned hereby acknowledge receipt of a completed copy of pages 1 & 2 of this statement & any attachments referred to herein. I HAVE CAREFULLY REVIEWED THE HUD-1 SETTLEMENT STATEMENT AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, IT IS A TRUE AND ACCURATE STATEMENT OF ALL RECEIPTS AND DISBURSEMENTS MADE ON MY ACCOUNT OR BY ME IN THIS TRANSACTION." Question for USDOJ Attorneys: Is a broker rebate considered a RECEIPT AND/OR DISBURSEMENT ? The answer to that question will determine whether or not HUD-1 disclosure is a must.
Whenever innovative Realtors and brokers want to break away from the traditional 6-7pc or 3pc BAC, the Mafia comes along, under the name of protecting the public and tries to squash any changes that affect their financial monopoly. They did it with flat-fees by instituting minimum services, now they're doing it against rebates. The public should protect themselves from THEM. In America, we're supposed to allow people to choose what's best for them by providing them options, choices, alternatives. The Real Estate Mafia - which is what they are - wants to control, lobby, monopolize and penalize anyone who strays from the fold. What needs to happen is this: Owners and buyers need to get together and bypass the middleman, just like WalMart, Dell, etc. A new MLS needs to be created and they need to take away the power from State Divisions which are primarily controlled by current mafiosi or former mafiosi who instigate no alternatives for home buyers and home owners. The current system MUST be dismantled like the Berlin wall that kept everything "inside" just like they do now. This crap about banning anything that benefits the public has gotten even the DOJ up and arms with Anti-Trust issues. But remember this, the real estate industry is very powerful. It has a lot of money so small brokers and revolutionaries can only count on the public and anti-trust bodies to protect and help them. Show the public over and over how much money they can save when they list or sell and flood the Internet with that information. Once the public realizes that they're NOT saving money, especially in the current economic scenario, they will embrace, welcome and even promote flat-fees, rebates, etc. to their friends and family and when the monopolist mafia comes knocking, the public will say: No thanks. I can save money doing things my way. I predict that in 5 years, the mafia will be dismantled and the public will be able to CHOOSE the services they need and brokers won't be forever worried about the mafia passing state laws that are biased, unilateral and disguised as beneficial to the public!
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