Are Rebates Legal?

YES! Rebates Are 100% Legal in Texas Real Estate Transactions

YES! Rebates Are 100% Legal in Texas Real Estate Transactions
If you’re buying or selling a home in Texas, you may have heard about real estate commission rebates and wondered, "Are rebates legal in Texas?" The answer is an emphatic YES! Rebates are completely legal in Texas and several other states across the U.S. Not only are rebates allowed, but they are also backed by the Texas Real Estate Commission (TREC) and supported by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) as a pro-consumer, pro-competition practice.

 
What Are Real Estate Rebates?
In simple terms, a rebate is when a licensed real estate broker or agent shares a portion of their commission with a party to the transaction—typically the buyer, but sometimes the seller. Rebates can come in the form of cash, closing cost credits, or other financial incentives. They’re essentially a way for brokers to pass savings back to consumers.

Rebates are especially valuable to buyers because they can help reduce the overall cost of purchasing a home by offsetting expenses like:

• Closing costs
• Moving expenses
• Home improvements
   
  Rebates Are Legal in Texas – Backed by the DOJ and FTC
  Many people assume there’s a “catch” or worry that they could get into legal trouble for accepting a rebate. This is absolutely NOT true. According to the Federal Trade Commission (FTC) and the Department of Justice (DOJ), rebates are completely legal and actually promote healthy competition in the real estate industry.

The FTC’s report on the real estate industry emphasizes the importance of rebates, stating:

“Rebates are an important form of price competition under the traditional structure of real estate transactions... By returning money to home buyers, rebates can also benefit home sellers, because buyers will have more to spend on the home as opposed to commission payments.”
You can read the full report by the FTC and DOJ on the importance of rebates starting on page 20 of this document.

 
Why Are Rebates Good for Homebuyers and Sellers?
Rebates offer real, tangible savings to buyers and sellers in Texas. Here’s why they matter:

Rebates Save Buyers Money: By returning part of the commission to the buyer, rebates lower the overall cost of buying a home. Buyers can use the rebate to pay for closing costs, reduce their loan balance, or handle post-closing expenses like furniture or renovations.
Rebates Encourage Competition: The real estate industry has traditionally been structured to split commissions between listing brokers and buyer’s agents, with both typically earning around 3% of the sale price. Rebates disrupt this model by encouraging brokers to offer competitive incentives to attract buyers or sellers.
Consumers Do More Work Than Ever: With the rise of online tools like Zillow, Realtor.com, and Redfin, many buyers do much of the legwork themselves—researching neighborhoods, identifying properties, and even narrowing down their options. Agents who recognize this trend often share their commission to reflect the buyer’s active role in the process.
Rebates Create Transparency: Rebates provide a clear, upfront financial benefit to the buyer or seller, rather than hiding costs in the transaction.
 
How Do Rebates Work in Texas?
In Texas, rebates are applied directly at closing and disclosed to all parties involved in the transaction. Here’s a quick overview of the process:

Agree on the Rebate: Before signing a buyer representation agreement, discuss the rebate amount with your agent or broker. The rebate is usually a percentage of the commission they’ll earn.
Get It in Writing: Texas law requires rebates to be disclosed in writing to all parties in the transaction. Make sure the rebate is clearly documented in your agreement with the broker.
Lender Approval: If you’re financing your home purchase, the rebate must be disclosed to your lender, as it may impact your loan terms. Most lenders allow rebates, but you’ll want to ensure they’re informed upfront.
Receive Your Rebate at Closing: Rebates are typically credited at closing, reducing the amount of cash you need to bring to the table or offsetting your closing costs.
 
Common Misconceptions About Rebates

“Are rebates illegal in Texas?”
Absolutely not! Rebates are 100% legal and regulated by TREC. They are a powerful tool for buyers and sellers to save money.
“Are rebates a trick or scam?”
No. Rebates are straightforward. A broker shares part of their commission with you—it’s that simple.
“Will I get into trouble for accepting a rebate?”
No. Rebates are completely above board and even encouraged by federal agencies like the DOJ and FTC.
 
Why Don’t All Agents Offer Rebates?
While rebates are perfectly legal, many traditional real estate agents choose not to offer them. Why?

Higher Commissions: Many agents prefer to keep the full 3% commission, which is standard in most real estate transactions.
Taboo Topic: Talking about commission sharing is often seen as a taboo topic in the real estate industry, even though it’s perfectly legal.
Effort vs. Earnings: Some agents argue that offering rebates reduces their earnings, especially if they still put in significant effort to guide buyers or sellers through the transaction.
However, many modern agents recognize that buyers today are more educated and do much of the home-search process themselves. This shift has led to an increase in agents offering rebates as a way to stay competitive and reward their clients.

 
Ready to Save Money on Your Next Real Estate Transaction?
Real estate rebates are a simple, legal way to save thousands of dollars when buying or selling a home in Texas. By working with an agent who offers rebates, you can:

Lower your out-of-pocket costs at closing
Offset your moving expenses or home improvement costs
Maximize the value of your transaction
 
Learn More About Real Estate Rebates in Texas
If you’re ready to learn more about how rebates can help you save money, contact us today! For additional information on rebates, visit these helpful resources:

TREC Rules and Laws on Rebates

Visit: https://www.trec.texas.gov/rules-and-laws/rules-governing-texas-real-estate-license-holders
Look for the section related to rebates (e.g., Rule 535.147) and either save the page or copy the text you need.
FTC Report on Competition in Real Estate

Visit: https://www.ftc.gov/sites/default/files/documents/reports/competition-real-estate-brokerage-industry-report-federal-trade-commission-and-u.s.department-justice/v050015.pdf
The rebate information starts on page 20. You can download the entire PDF by clicking the download icon in your browser or selecting File > Save As.
Texas Occupations Code Section 1101.652

Visit: https://statutes.capitol.texas.gov/Docs/OC/htm/OC.1101.htm#1101.652
Scroll to Section 1101.652 and copy/paste the text into your document. Alternatively, you can save the webpage.
HUD RESPA Guidelines

Visit: https://www.hud.gov/program_offices/housing/ramh/res/respa_hm 

Don’t leave money on the table! Partner with us, we are a rebate-friendly real estate broker  and can make your home purchase or sale more affordable. Contact us now to find out how much you can save!