Real Estate Brokerage

State Support for Anti-Rebate Prohibitions Weakens

Decisions in Two States Address Anti-Competitive, Anti-Consumer Real Estate Rebate Bans

Washington, D.C. – Recently, state bans on rebates to buyer brokers were the subject of two government decisions:

  • The Louisiana Real Estate Commission ruled that state laws “do not prohibit consumer commission rebates.” On October 26, 2021, the commission issued an opinion that reversed an earlier interpretation of these laws that banned rebates.
  • Earlier this month, the Oregon District Court rejected a lawsuit against that state’s ban on rebates but also found that: “Plaintiff makes many compelling arguments that Oregon’s anti-rebate law hurts consumers and artificially increases home prices…Plaintiff makes compelling arguments that excessive fixed broker commissions harm consumers and the housing market itself.” The discount firm REX had filed the lawsuit, which was supported by an amicus brief filed by the Consumer Federation of America (CFA) and Oregon PIRG.

“The Louisiana decision removes an important barrier to price competition while the Oregon court decision helps expose the anti-competitive, anti-consumer nature of the ban,” said Stephen Brobeck, a CFA Senior Fellow.  “However, rebate bans would not be an issue if the real estate brokerage marketplace were a normal marketplace where sellers and buyers each compensated their own agents,” he added.

“In the Alice-in-Wonderland world of real estate brokerage, where things are often not what they seem, then make no rational sense, real estate rebates emerged as an attempt by discount brokers to lower commission costs for their clients,” stated Brobeck.  Today, home sellers and their listing brokers set the commission rate paid to buyer brokers then add that amount to the sale price of the property.  Recent research by CFA supports the widespread belief that these commission rates are highly uniform.  Rebates provide a way for discount brokers to essentially reimburse buyers for a portion of the buyer commission added to the sale price.

These rebates, however, would be irrelevant if buyers could negotiate the commission received by their agents.  Major lawsuits have challenged the industry’s coupling (or tying) of commissions.  The Biden administration’s antitrust agenda has targeted coupled commissions.  And the Department of Justice has evidently prioritized the issue.

For decades, DOJ has been challenging anti-competitive practices by the residential real estate brokerage industry.  These challenges have persuaded several states to eliminate their rebate bans.  Yet in seeking this goal, DOJ has confronted the same legal barrier that led to the recent Oregon court decision.  As this court put it:  “States are generally immune from Federal antitrust laws.”

“The huge influence of realtors with state legislators is the key reason that rebate bans continue to exist in nine states,” noted CFA’s Brobeck.  These states are:  Alabama, Alaska, Iowa, Kansas, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee.  The National Association of Realtors (NAR) has taken no position on these bans.


Contact: Stephen Brobeck, sbrobeck@consumerfed.org