Are Real Estate Commission Rebates Legal in Connecticut?

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What are commission rebates?

“Commission rebates”, “buyer commission rebates” or just “buyer rebates” are when a real estate agent shares some of their commission with the person buying that home. In a typical real estate transaction, the seller is technically the only one paying the commission. Many buyer’s agents tell their clients that it is “free to be represented” while this is really a half-truth because most buyers receive no financial benefit from the commission paid to their buyer agent when they actually could.  Commission rebates are typically delivered as a check from your agent post closing.

Are commission rebates legal in Connecticut?

The answer is they are absolutely legal and the United States Department of Justice is encouraging this practice as it is pro-consumer and helps make homes more affordable. There are states that ban commission rebates but Connecticut is not one of the 10 states that currently doesn’t allow them. Other states such as New York have even gone so far as to publicly  encourage them with the New York Attorney General penning a letter on the matter.

Agents have told me they are illegal, what gives?

If you read some of the message boards on popular real estate websites you might come across agents saying something like “sorry commission rebates are illegal in Connecticut.” This is misinformation. The fact is that it is illegal to pay anyone related to a real estate transaction who is not licensed. This does not apply to the buyer of the property. For example, if an unlicensed person found a property that you ended up buying, it would be illegal to compensate that person if they are not licensed in the state of Connecticut. Buyers themselves are exempt from this.

How are rebates documented?

It depends who you are working with. At Prevu, we always recommend you have a contract in writing from the buyer’s brokerage so the terms of the rebate are clear and straightforward. Handshakes might seem sufficient but at the end of the day we are talking about significant amounts of money and if you don’t have something in writing then you generally would have less recourse than if you did otherwise.

 


Prevu is a licensed real estate brokerage in New York and Connecticut and a member of the Real Estate Board of New York (REBNY).

Categories: Buyer Rebates