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How real estate rebate bans harm consumers

Posted on September 27, 2021 at 5:10 PM

A real estate rebate is a percentage of the agent's commission that the agent returns to the client. Some companies have a set amount no matter how much the property costs, while others calculate the rebate based on every deal. It is essential to know that not all countries allow real estate rebates. In fact, they are illegal in some states. Today we want to talk about how real estate rebate bans harm consumers and how that affects the entire real estate market.





How does real estate commission work?


To better understand why rebate bans harm consumers, let's start from the beginning and see how real estate agents are compensated. The job of a real estate agent is to help both buyers and sellers to complete the deal as quickly as possible. They are here to make things easy, help prepare the paperwork, and lead both sides through the process. They make money by charging a commission. Most real estate agents take a percentage of the total price, and some charge a flat rate.



What is the role of a real estate rebate?


The main reason why real estate agents started offering rebates is to gain new clients. It is not easy to stand out in the real estate market, especially when the competition is fierce.

 

The rebate is a percentage of the commission they charge to the client, and they usually give it back when the deal is closing. You can look at a rebate as a form of credit for closing the deal. As such, you can only spend it on paying closing fees:


• transfer or escrow fees;


• to buy mortgage points;


• pay appraisal fees;


• loan origination fees.


It becomes obvious how valuable a rebate is. It helps the consumer to pay for expenses and save some money.


With that in mind, if you are selling or buying a property, it is best to find real estate agents that will give you a rebate at closing.



Which states do not allow rebates?


If we look at how the rebate is used, it makes no sense to make it illegal. However, not all states allow it. States that prohibit the use of rebates are:


• Alaska;

• Kansas;

• Oregon;

• Mississippi;

• Alabama;

• Louisiana;

• Oklahoma;

• Iowa;

• Missouri;

• Tennessee;


For example, if you plan to relocate to Louisiana, you are probably looking for affordable ways to handle tasks related to this move. If a rebate was possible, you could use it to cover closing expenses and save money for the relocation. However, because rebates are banned in Louisiana, you cannot use this option.



Why is rebate banned?


Simply speaking, a rebate ban is just another way to inflate the costs of real estate services. Consumers now have to pay thousands of dollars more to close the deal.


Another consequence is that there is no more competition on price between real estate agents; they are all forced to charge the same amount. At the same time, consumers are forced to pay the same inflated fees.



How to find real estate agents that offer rebates?


States that do allow rebates have a more flexible real estate market. Because real estate agents offer additional refunds, there is no monopoly over the price. It is in their best interest to provide the best terms to their clients.


An excellent way to find a real estate agent that offers rebates as high as 15% is through a company that connects buyers and sellers with real estate agents. They will do all the research and connect you with the best people in the area while ensuring that you get your rebate at closing.


If we consider how many real estate agencies there are, this is an excellent option. It frees the time you would otherwise have to spend researching and comparing agencies to find the one that meets your requirements. This way, you can relax, and the right person will come to you!



Real estate rebate bans harm consumers and affect the housing market


With the ban on real estate rebates, the housing market will quickly start to change. The prices can only go up because there is no competition between the agencies. They will have to look for other ways to attract new clients.


Another danger is that the percentage of bought and sold properties for these states might go down. People will look for better opportunities where they can get their rebates and save money. The moving industry has been very busy for the past two years, and there are no indications that it will slow down. People will move in search of a better opportunity, and that includes better buying terms.


As for people that already own properties in the states where rebates are banned, there is a chance that they might have to sell for a lower price. If the buyers go elsewhere, the market will have to adapt and find a new way to get them back. Lowering the costs is the first thing that comes to mind.


It is obvious that real estate rebate bans harm consumers, both sellers and buyers. In the end, even the real estate agencies might face the fact that the number of clients is dropping down. They can either lower their commission, which is not productive or move to a market that allows rebates. That can spell doom for any market hit by this ban.



 

Written by: Lisa Roberts with US Moving Experts

 

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