The Department of Justice Says yes!
“In most states, listing and selling agents are permitted to rebate a portion of their commission fees to home buyers and sellers. The immediate impact of a rebate is to reduce directly the overall commission fee paid to listing and selling agents. In this sense, rebates are no different from simply charging a lower commission fee, and one should ask why the ability to rebate can mitigate the disincentive to compete through lower commission rates.
The ability to rebate should not change listing agents’ incentives at all. Offering a rebate to attract home sellers is not appreciably different from directly offering a lower commission fee — an option already available to listing agents. As a result, for listing agents the same disincentive to lower their commission fee described above applies to rebates.46
In contrast, rebates clearly alter selling agents’ ability and incentive to lower their commission fee. Without rebates, selling agents have no control over the commission fee paid by the home buyer and seller.47 Rebates give selling agents the ability to control the commission fee. As a result, with rebates, selling agents can compete for additional business by lowering their commission fee. While it might appear that giving selling agents the ability to compete on price may be offset by a disincentive to use this ability, this is not the case.
Home buyers primarily desire to find the house that best matches their preferences at the lowest net sales price possible. As a result, a selling agent might attempt to attract more customers by offering home buyers a higher rebate than her rivals; other things being equal, a higher rebate decreases the net sales price paid by the home buyer. Unlike the case with listing agents offering lower commission fees, a selling agent can offer a higher rebate while keeping other things equal. Namely, offering a higher rebate than her rivals will not change a selling agent’s ability to help a buyer find the house that best matches their preferences at the lowest net sales price possible.48
Selling agents still require the cooperation of listing agents to bring transactions to closing, and listing agents may have an incentive not to cooperate with selling agents that offer rebates by steering listings away from the these selling agents’ buyers.49 However, listing agents will not have the ability to steer. The selling agent can easily see all available listings in the MLS, and when she finds the best match for her buyer, she will contact the listing agent directly.50 The listing agent has the fiduciary duty to convey all offers to the home seller.51 Even in the event that the listing agent attempts to steer the listing away from a buyer, the selling agent will already know where the desired property for sale is located and can notify the home seller without going through the listing agent if necessary (and the listing agent knows this).52
In sum, rebates provide a means for cutting price that mitigates quality degradation. First, rebates allow selling agents the opportunity to directly compete on price. Second, a price cut by a selling agent is not as susceptible to steering as a price cut by a listing agent. As a result, rebates are a particularly useful vehicle for increasing price competition.53 A rebate ban would prevent selling agents from competing on price. Moreover, a rebate ban would eliminate a type of price cut that is not susceptible to steering. Currently, in eleven states agents are banned from offering rebates.54″
The Connecticut Association of Realtors Says yes!
“Question: I wish to provide purchasers who buy through me a rebate or coupon. May I
do so?
Answer: Yes, a licensee may give a rebate or coupon to the broker firm’s client with whom
there is a signed, valid agency agreement. Connecticut Real Estate Regulations
prohibit the payment of any portion of commission to someone who is “engaging
in the real estate business” without a license. This restriction does not apply to a
broker firm’s own purchaser or seller client in a transaction. Agents must obtain
their broker’s approval of such a rebate or coupon before offering or advertising
this promotion.” Learn More
