The South Dakota Real Estate commission, prompted by a U.S. Justice Department investigation, has lifted rules that restricted the offer of real estate rebates and other inducements in the state.

The Justice Department notified commission officials in early June that it was investigating the state’s rebate policies, and the commission acted later that month to nullify its earlier rulings on rebates.

The commission has repealed a 1993 ruling stating that “any rebate of a commission to a client buyer or client seller” is prohibited by state statutes. Also, the commission cancelled a 2003 ruling that found that the use of inducements for potential real estate clients or customers would be considered unprofessional conduct.

“Subsequently, the commission notified all South Dakota real estate brokers that they now are free to offer commission rebates, incentives, and other discounts to buyers and sellers,” the Justice Department announced in an Aug. 17 statement.

The commission assured the federal agency that it “will refrain from instituting any kind of prohibition that would ban licensees from offering rebates and inducements,” the Justice Department said.

Several other states maintain a ban on real estate rebates, including Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, New Jersey, Oklahoma, South Carolina and West Virginia.

That list earlier included Kentucky, though the Justice Department filed a lawsuit over that state’s anti-rebate stance in March and the Kentucky Real Estate Commission in July agreed to scrap its rebate restrictions to settle the lawsuit. The Justice Department has said that regulations prohibiting inducements restrict competition and cause consumers to pay higher prices for certain real estate services.

Dee Jones Noordermeer, executive director for the South Dakota Real Estate Commission, said the state’s previous rulings on real estate rebates and inducements did not draw a lot of complaints from real estate professionals.

“Licensees would call from time to time asking if they could offer certain incentives. When quoted the declaratory rulings, they seemed to accept the prohibition,” she said.

Now that the rulings have been withdrawn, Noordermeer said she has received positive and negative feedback. “I’ve had calls from licensees who are happy with the change and calls from licensees who feel offering rebates and inducements will tarnish the industry’s image,” she said. “Those licensees, however, understand the commission’s reason to ban the prohibition and not be put in a position of being involved with a lawsuit.”

The commission notified agents about the lifted real estate rulings through direct mailings and notices on its Web site and in its newsletter.

Tom Reddin, CEO of real estate for InterActiveCorp Financial Services and Real Estate, which owns Lending Tree and RealEstate.com among other real estate-related Internet companies, said in a statement, “This is a great win for South Dakota consumers who are buying or selling a home. We’re pleased to know that the South Dakota (commission) has decided to promote competition and choice in the real estate marketplace that will truly benefit South Dakota consumers.”

Lending Tree offers rebates to consumers who agree to be matched with a real estate agent affiliated with the company’s agent network. Some other real estate companies also choose to offer discounts to consumers in the form of rebates, and all real estate companies can adjust their commission rates or cost for services to give consumers a non-rebated discount.

Reddin added, “We feel that states that ban real estate rebates essentially deprive consumers of an offer that they really value, and it denies brokers and agents a great marketing tool and differentiator. South Dakota is leading the way for its consumers and hopefully for those in states where rebates are still unavailable.”

Thomas O. Barnett, acting assistant attorney general in charge of the Justice Department’s Antitrust Division, said in a statement that South Dakota consumers “can expect to benefit from increased competition through broker-offered rebates, incentives and discounts. We are pleased that the commission took quick action to address the competition issues raised during the division’s investigation.”

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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