Real estate brokers in New Jersey will be able to offer rebates to homebuyers with the passage of a law that leaves just 10 states with laws against rebates to consumers on the books.
The New Jersey Association of Realtors remained opposed to the law, but did not actively lobby against it, after it was amended to address several issues of importance to the group, said NJR Executive Vice President Jarrod Grasso.
"The bill that was introduced and what was signed into law, in regards to consumer protections, are dramatically different," Grasso said.
As introduced, Asembly Bill 373 would have permitted all real estate licensees to offer rebates to both buyers and sellers. The bill passed by the New Jersey Senate on Jan. 7 and signed into law by Gov. Jon Corzine stipulates that only brokers can offer rebates, and only to buyers.
Rebates must be spelled out in a buyer agency agreement or similar contract at the beginning of a brokerage relationship, and must be provided in the form of a credit or check that’s listed on the HUD-1 settlement statement, rather than provided as an incentive such as a vacation.
Buyers must also be informed that they may have an obligation to pay any applicable taxes for receipt of the rebate.
The law took effect immediately upon signing, but the New Jersey Real Estate Commission must adopt new regulations to implement it.
Derek Eisenberg, a flat-fee broker who has operations in New Jersey, called passage of the bill a "great boon for consumers."
"Rebates are really a way to negotiate the buyer agent’s commission," Eisenberg said. "Since the seller typically sets the commission, a buyer could always pay his buyer’s agent more than what is offered but could never pay the buyer’s agent less. Buyers should have the same ability to negotiate commissions as sellers have."
Patrick Lashinsky, president and CEO of ZipRealty, which operates in 22 states including New Jersey, also welcomed the move, saying ZipRealty has worked closely with New Jersey officials on the issue of rebates for three years. …CONTINUED
"We’ve attended countless committee hearings, and I’ve personally testified to New Jersey real estate committees about the fact that offering a rebate to homebuyers can help stimulate local housing markets, and offers buyers … more real estate brokerage choices," Lashinsky said in a blog post. ZipRealty typically pays a 20 percent rebate to buyers who pay $100,000 or more for a home.
Eisenberg said he is disappointed that the bill does not apply to commercial transactions, because "there are a lot of little commercial properties bought by small investors who are consumers just like homeowners and deserve the same benefits of this law."
Permitting rebates on commercial transactions would help ease the transfer of properties and help address the "pending commercial meltdown," he said.
The flat-fee broker said he’s also concerned that borrowers could use rebates to meet minimum downpayment requirements, facilitating "zero down" deals that some analysts say helped inflate home prices.
Banks, he said, should "seriously consider how much rebates can be used to offset … downpayment requirements."
The law allowing real estate rebates in New Jersey, Assembly Bill 373, was introduced in January 2008. The bill spent more than a year tied up in committees and amended before it was reported out and passed by the New Jersey Assembly in a 45-26 vote in March 2009 (see story).
It would be nearly another year before the bill passed the Senate in a unanimous 34-0 vote Jan. 7, 2010, and Gov. Corzine signed the bill into law.
"Our members felt consumers should focus on the Realtor providing the best service, not the bigger discount or rebate," Grasso said of the New Jersey Association of Realtors’ opposition to the bill.
According to the U.S. Department of Justice, other states that have rescinded bans on real estate rebates in recent years include Kentucky, West Virginia, Montana and South Dakota.
The Department of Justice lists 10 states that continue to ban real estate rebates: Oregon, Alaska, Kansas, Oklahoma, Iowa, Missouri, Louisiana, Mississippi, Tennessee and Alabama.
Lashinsky said ZipRealty plans to work with officials in those states, asking them "to reconsider their stance against real estate rebates, so that more buyers and sellers will hopefully one day have the same choices that those in New Jersey now do."
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