We regularly receive questions about the difference between rebates, referrals, and other promotions like drawings and client gifts. First, when you are considering offering any of these make sure your advertisements are upfront and clear about what you are offering. If there are terms and conditions to qualify then you should have them in writing and provide them in your advertisement. If you are a sales agent, seek approval of your sponsoring broker before you start offering rebates, referrals, or other promotions.
A rebate is part of a license holder’s commission that the license holder gives to a principal in a transaction in which the license holder represents one of the parties. A rebate can be cash or anything of value and there is no limit on the amount of rebate paid to a principal of the transaction. All rebates should be reflected in the closing disclosure form and any cash rebate to a buyer should be made with the consent of the buyer’s lender. A license holder may not pay a rebate outside of the transaction. Further, if the rebate is being paid to a party the license holder does not represent, the license holder must obtain the consent of the party the license holder represents before making the payment. If a license holder donates a portion of the commission to a church or other non-profit organization, this would be considered a donation and not a rebate. Any advertisement for rebates must disclose if the payment of a rebate is contingent upon, or subject to, certain restrictions.
A referral is part of the license holder’s commission that is paid to another person for sending a client to the license holder. If a person wants to be paid for a referral, the person receiving the referral fee must have an active real estate license at the time the referral is made. However, a license holder may give an unlicensed person a gift or a gift card worth up to $50. The card may only be redeemable for merchandise. A gift card from a bank that can be converted into cash is impermissible. If a license holder donates a portion of the commission to a church or other non-profit organization for a referral from an unlicensed person, the person making the referral may not receive anything that may be defined as valuable consideration from the organization or the license holder.
If you plan on offering a giveaway, drawing, or similar contest to the public you must make sure that it is not considered an illegal lottery under Sections 47.01(7) & 47.03(5) of the Texas Penal Code. If you determine that the giveaway is not considered an illegal lottery, keep in mind that it cannot be offered to unlicensed people for referring business to you if it has a value greater than $50. An example of an improper drawing is requiring people to like your Facebook page and forward or share your listing to be entered into a drawing for a prize valued over $50.
You can give a gift of gratitude to a client for using your brokerage services to lease, purchase, or sell their property. Often license holders give home improvement store gift cards and other items in appreciation to their clients. These gifts can be more than $50 and given to clients after closing. A gift is different from a rebate because it is not the result of an agreement with the client for providing brokerage services.
Still have questions on rebates, referrals, and other promotions? TREC staff recently hosted a live event discussing these matters. Check out the video below: