New Jersey bill seeks to lift rebate ban
Measure passes state's General Assembly
By Inman News, Tuesday, March 17, 2009.New Jersey's General Assembly on Monday voted 46-25 to pass a measure that allows real estate brokers in the state to give rebates to homebuyers -- counterpart legislation has not yet been passed by the state Senate.
The New Jersey Association of Realtors, a statewide real estate trade group, has earlier opposed legislation (see Inman News article) that sought to lift the state's rebate ban.
A spokesperson for the New Jersey Association of Realtors could not be reached for comment after hours on Monday.
The U.S. Department of Justice has taken action to reverse statewide real estate rebate restrictions, and lists New Jersey at an Antitrust Division Web site among the states that prohibit real estate brokers from offering rebates to consumers. "New Jersey consumers are unable to benefit from rebates that consumers in other states may receive," the Competition and Real Estate" site states.
Derek Eisenberg, a flat-fee broker who has operations in New Jersey, said, "I could not be happier about the (possible) repeal. It's a huge boon to consumers that will indirectly let buyers negotiate commissions on the purchase the same way sellers can negotiate at time of listing.
"I regret the fact that this legislation was ever necessary. I never believed that returning a portion of the commission to the buyer or seller was sharing commission with an unlicensed person."
He added, "However, one concern I do have in light of the financial calamity we are in is that the rebate be recorded on the HUD-1 and the lender be made aware of the rebate before funding the loan. Undersecuritized loans are why we are in this financial mess so it's important that rebates are on the up and up and not a cash kickback on the side."
Other supporters of the legislation include the U.S. Department of Justice, the Consumer Federation of America, the National Association of Exclusive Buyers Agents, the American Real Estate Broker Alliance (an organization of flat-fee brokers), and the American Homeowners Grassroots Alliance.
The Assembly bill, A373, had sought to allow brokers to give rebates to both buyers or sellers, though the Assembly Regulated Professions Committee removed the provisions in the bill that would allow sellers to receive a rebate and clarified that "a rebate may only be paid to a purchaser of residential real property," according to a committee report.
In order to receive a rebate on home purchases, "the broker and the purchaser (must) contract for such a rebate at the onset of the broker relationship in a written document, electronic document or a buyer agency agreement," according to the bill text, and the broker must comply "with any state or federal requirements with respect to the disclosure of the payment of the rebate."
Also, the broker must recommend that the buyer "contact a tax professional concerning the tax implications of receiving that rebate," and that the rebate be paid as "a credit, reducing the amount of the commission payable to the broker, or a check paid by the closing agent" made at the time of closing, the bill text states.
The Senate version of the bill is S139.
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Submitted by Derek Eisenberg on March 17, 2009 - 3:51am.
Just because the seller sets the commission and offers it to the listing broker who in turn cooperates with the buyer’s broker does not mean the buyer does not pay part of the commission. It's important to keep in mind that the buyer brings the funds to the closing table. In reality, commission is paid by both parties to the transaction and just comes off the top of the deal. As such, a rebate is really just a return of the buyer’s own money.” While courts may have ruled otherwise in cases challenging this ideology, courts also used to say that both brokers worked for the seller and look how that has changed.
Derek Eisenberg
http://www.mls2u.com
Submitted by Larry Whited Sr. on March 17, 2009 - 6:15am.
Our constitutional amendment 14 section 1 was adopted in 1866 to limit a states right to limit the privileges of any US Citizen.
"AMENDMENT XIV
Passed by Congress June 13, 1866. Ratified July 9, 1868.
Section 1.
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."
This is another states rights issue at the cost of the citizens of a state. We need a national license law that states can not abuse and creates a level playing field for all involved.
Larry A. Whited, Sr., CRB, CRS, GRI
President & Founder
www.maxUnet.com & www.WebMLS.net - Virtual Real Estate Franchise Systems.
P.O. Box 757
West Chester Ohio 45071
Direct - (513) 543-2727 Fax - (513) 297-7497
Submitted by Joseph Bridges on March 17, 2009 - 8:48am.
What is the real percentage of agents who give rebates back to their buyers?
There are still plenty buyers who don't look for rebates but they demand, and should, a certain level of service for the amount of money that is being paid to the agent.
I find it funny that buyers want rebates and when you ask them:
"If you did your job at work at the end of the month would you give back 25% of your pay?"
I have never had a buyer answer that question with yes and I love to give my employer money back.
In my opinion focus on the value that your provide not the amount that you are willing to give back.
Visit the blog at: http://www.InternetRealEstateSuccess.com
Real Estate Resources at: http://www.OnlineRealEstateSuccess.com
Submitted by Paul Howard on March 17, 2009 - 1:35pm.
When someone is given a rebate that means they were overcharged to begin with.
Derek Eisenberg said: "Just because the seller sets the commission and offers it to the listing broker who in turn cooperates with the buyer’s broker does not mean the buyer does not pay part of the commission."
Herein lies the problem. Why on earth is the premise that the seller sets the commission (or an agreement between the seller and their agent) acceptable. What that does is suppress competition between buyer agents resulting in higher commissions than would otherwise be the case. Getting rid of the provision in the MLS for a co/op fee would start to get to the heart of the problem - rebates do not. And on top of it rebates may have tax consequences? OK.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Denise Canell on March 17, 2009 - 2:10pm.
Realtors already have a pretty low level of respect out there....so let's remove what little respect is left, and give the public our hard-earned paychecks, as well. Offering rebates is only going to hurt the public. Buyers will not be looking for the agent with the most experience...the one who is most familiar with the area....or the one who will go the extra mile for them. Instead, they will go from agent to agent, bargaining to see which agent will toss away the highest amount. These are generally the agents who can't get clients playing on a level playing field, anyway...and shouldn't even be in this business.
Funny how the only agents that support this bill are the "we'll slap you on MLS for a flat fee" agents....the one's who don't know the meaning of customer service. These aren't rebates....let's call them by their REAL name...they are BRIBES!
Denise M. Canell
RE/MAX Hills and Valley
Branchburg, New Jersey
Submitted by Paul Howard on March 17, 2009 - 4:38pm.
I agree with Denise. There is one positive aspect though.
quote "In order to receive a rebate on home purchases, "the broker and the purchaser (must) contract for such a rebate at the onset of the broker relationship in a written document, electronic document or a buyer agency agreement," "
Hopefully that provision will result in more buyer agent agreements being signed and less of the agent jumping. With the effect that buyers should be a little more selective in choosing an agent than without the contract requirement.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Derek Eisenberg on March 17, 2009 - 5:04pm.
Paul you hit the nail on the head. Rebates will be the start of broad based use of buyers agency agreements in NJ and they won't only provide for rebates but also a term of service and provisions should the buyer purchase a FSBO after the buyer's agent labored for the buyer for 3 months and would otherwise be out of luck.
If the average agent factors in all their time wasted on buyers that never bought through them but did buy something, the rebate will seem like a small price to pay to contractually make sure they are reimbursed for their time.
As for decoupling commissions as you suggest 3 posts above, that is a novel concept but highly unrealistic. The seller set commission needs to be thrown out there as a starting point. Rebates and buyer's agency agreements can always alter that offer later.
Derek Eisenberg
http://www.mls2u.com
Submitted by Richard Stabile Bergen County Real Estate on March 17, 2009 - 9:18pm.
I think this is being done today in a different way. It is done in negotiations and the agents may lower the commission as the buyer doesn't have to pay as much.
To naively think, that a buyer is going to sign your buyer representation agreement of exclusivity, because of the rebate is fool hearty.
Once it is common, most brokers will do it, many will do it without exclusivity. Many will do it, for no other reason at all, then to just promote. Buyers ask agents now to cut commission so they don't pay as much when they offer low. Some Agents offer a commission cut on their own to make deals happen. It just a formality I guess, but it will then promote wholesale, up front commission promotion rebates as the main event.
Will this cause buyers to jump ship and go with a second agent who gives them a upfront rebate, after they find a home they want to offer with an agent they did have a rebate deal with?
Richard
http://newhomesbyrichard.com
Submitted by Derek Eisenberg on March 18, 2009 - 3:41am.
Richie, I am honored by your input since you were my first broker when I started in the business some 22 years ago.
I am for rebates regardless of the buyer's agency agreement so my comments vis a vis that aspect were only supplementary.
That said, being a broker in 12 states and my firm operating in 15 states, I am privvy to how things work in other markets besides NJ. Buyer's agency agreements are commonplace in many markets and seldom forgone. The adoption of their use is a growing trend; not a declining one.
So since we've know each other 22 years, you and I can take up this conversation in 10 more years and we will see where things go.
Derek Eisenberg
http://www.mls2u.com