Gifts and Inducements
May 19, 2020
Author: Kreg Wagner (UAR)
We aren’t having a live Legal Hotline event today, but stay tuned for the next time we do. In the meantime, I wanted to address some frequent questions I have received on the Hotline about gifts.
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 you want to surprise your Buyer or Seller with a new bike, computer, swing set, etc., you can legally do so. The only consideration I would mention is that you may want to check with your principal broker to see if your brokerage has any policies regarding closing gifts.
Second, what if you want to advertise and incentivize the use of your real estate services. May an agent do that? The short answer is yes!
This type of gift is 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 $2,000 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 may not 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.