Legal Library

Gifts and Inducements

July 31, 2018

Author: UAR

Frequently on the hotline, REALTORS® will ask about giving gifts to clients or prospective clients. Let me explain what is allowable under the Administrative Rules.

First, if you want to give a closing gift to a Buyer or Seller after the transaction has closed, you are allowed to do so. The Utah Administrative Codes states that a closing gift “means any gift given by a principal broker, or a licensee affiliated with the principal broker, to a buyer or seller, lessor or lessee, in appreciation for having used the services of a real estate brokerage.” The Administrative Code continues and states that a “closing gift is permissible and is not an illegal sharing of commissions.”

So for example, if I want to surprise my Buyer or Seller with a new T.V., patio set, refrigerator, etc., I can legally do so. Before you do give a closing gift, you may want to check with your principal broker to see if your brokerage has any policies regarding closing gifts.

Second, what if I want to advertise and incentivize the use of my real estate services? Can an agent do that? Yes. This would be classified as an inducement gift. The Administrative Code defines an inducement gift as “any gift given by a principal broker, or a licensee affiliated with the principal broker, to a buyer or seller, lessor or lessee, in a real estate transaction as an incentive to use the services of a real estate brokerage.”

Now an inducement gift is permissible and is not an illegal sharing of real estate commissions, but you must ensure that you are in compliance with the underwriting guidelines that apply to Buyer’s loan. What does this mean?

Say a REALTOR® advertises that they will rebate $1,000 to any Buyer that uses them as their REALTOR®. This is permissible as long as the Buyer’s underwriter approves of this rebate. If the underwriter won’t allow the inducement gift, then you cannot pay it. Simple as that. So always check with the underwriter and set clear expectations with your Buyers on how an inducement gift can be properly given.

If you have questions about gifts and inducements, feel free to call the UAR’s Legal Hotline at 801-676-5211 on Monday, Wednesday, or Friday from 8:30 a.m. to 4:00 p.m.

Resource:

Relevant Topics

Gifts and Inducements