Rebates and Referrals – What’s the difference?
Definition of a RebateA rebate is part of a license holder's commission that the license holder gives to a principal in a transaction in which the license holder represents one of the parties. A rebate can be cash or anything of value and there is no limit on the amount of rebate paid to a principal of the transaction. All rebates should be reflected on the HUD-1 settlement statement and any cash rebate to a buyer should be made with the consent of the buyer's lender. A license holder may not pay a rebate outside of the transaction. Further, if the rebate is being paid to a party the license holder does not represent, the license holder must obtain the consent of the party the license holder represents before making the payment. If a license holder donates a portion of the commission to a church or other non-profit organization, this is a donation and not a rebate. Any advertisement for a rebate must disclose if the payment of a rebate is contingent upon or subject to certain restrictions.
Definition of ReferralA referral is part of the license holder's commission that is paid to another person for sending a client to the license holder. If a person wants to be paid for a referral, the person receiving the referral fee must have an active real estate license at the time the referral is made. However, a license holder may give an unlicensed person a gift or gift card worth up to $50. The card may only be redeemable for merchandise. A gift card from a bank that can be converted into cash is impermissible. If a license holder donates a portion of the commission to a church or other non-profit organization for a referral from an unlicensed person, the person making the referral may not receive anything of value from the organization or from the license holder in return for that referral.