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Question:
I am on the legal 1 class for my licence renewal for agent.
I see in my material: Don’t Forget the Conditions It’s another rebate rumble. The sales agent in this case said yes to his buyer getting some money back … but the lender said no. Here’s what happened:
• A buyer executed a contract after being assured by his agent he would receive a credit towards closing costs.
• The rebate was not included in the contract documents.
• The lender later informed the buyer’s broker that the rebate could only be applied towards closing costs, but the seller had already paid those costs.
• The lender also did not permit the buyer to accept the rebate outside the transaction. So, the buyer did not receive the money as agreed upon with his agent and broker. Keep in mind, when offering a rebate to a buyer, a license holder must disclose:
• A rebate is subject to lender approval.
• A lender may not allow a rebate in the transaction and prohibit the buyer from being paid outside the transaction. And brokers, your written policies and procedures must ensure that your sponsored sales agents are competent to conduct their authorized activities, including the way rebates must be offered and administered to achieve fair notice to the buyer.
The sales agent’s license was put on probated suspension for one year and he was ordered to pay $1,000 and take 30 hours of an agency law course.
I want to ask a question/clarrification to the tutor, write an email with my question. all my clients negotiate for a cash back on any transaction.
i add the buyers cash back in the CDA.
If lender couldnt accomadate the whole amount, i adjust the CDA as per lender condition and buyer expects me to give back the difference after the closing from my personal account. in this situation, as an agent what trouble iam in to? please advise.
Answer:
Subject: Question regarding rebate procedures and post-closing payments
Dear Instructor, I am currently reviewing the “Don’t Forget the Conditions” section of the Legal 1 course material regarding buyer rebates.
I would like to request clarification on a specific practice to ensure I am operating within TREC rules and avoiding the disciplinary issues described in the case study.
In my practice, I frequently negotiate cash-back rebates for my buyers. I include these rebates in the Commission Disbursement Authorization (CDA).
If a lender cannot accommodate the full rebate amount within the transaction, I adjust the CDA to comply with the lender’s requirements.
However, in those instances, I have been paying the remaining balance of the agreed-upon rebate to the buyer from my personal account after closing.
Based on the disciplinary case provided in the course material, I am concerned about the potential risks of this practice.
Could you please clarify:
1. Is it a violation of TREC rules or license law for a license holder to pay a buyer a portion of a commission (or a “rebate”) from personal funds after closing if the lender did not permit it within the transaction?
2. Does the fact that the lender prohibited the rebate within the transaction make it a violation to pay the buyer outside of the transaction?
3. What are the specific risks or potential disciplinary actions associated with paying a buyer outside of the closing statement when the lender has already restricted or denied the rebate? Thank you for your time and guidance in helping me ensure my business practices are compliant. Best regards