Are rebates in real estate deals legal? Here’s a guide from our legal team


IAR's Legal Hotline Attorney Betsy Urbance leads a Legal Webinar covering a multitude of topics that come in through the association's hotline. The webinar was held Aug. 20, 2015 at IAR's headquarters in Springfield.

Real estate brokers can use rebates as a business strategy in most cases, but those they seek to attract should become clients or be a party to a transaction, said IAR’s Legal Hotline attorney in a webinar held Aug. 20, 2015.

While the practice generally is legal, there may be restrictions which are mandated by mortgage lenders. And brokers should be aware the payments would have to be disclosed on a HUD-1 form under current regulations, said IAR’s Betsy Urbance.

She said under new TILA/RESPA Integrated Disclosure Rules, any such payment appears to be optional on the new forms, according to industry experts.

IAR holds the members-only Legal Webinars every two months, and the topics for Thursday’s session were taken from reoccurring questions which Urbance fields from the hotline. The full audio of the hour-long session can be found online for IAR members here.

Brokers cannot pay a referral fee to someone who is not a party to the transaction and who is not licensed. Referring and selling leads requires a real estate license under Illinois law. As a result, if you pay an unlicensed person something of value, you would be aiding and abetting the practice of real estate brokerage.

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About Jon Broadbooks

Jon Broadbooks is Vice President/Communications for Illinois REALTORS®. He serves as editor of online and print content for the association’s communications including the Illinois REALTOR® magazine and e-newsletters. He conducts spokesperson training seminars and oversees website development for the Association.

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