Tuesday, May 15, 2007

TAR's antics in Tennessee (H.B. 2095)

The recently released FTC/DOJ Report on Competition in the Real Estate Brokerage industry notes that the Tennessee Real Estate Commisison has for some time been in the process of reversing its anti-rebate rule. The Report notes, at footnote 251, that the final repeal of the rule would likely take effect this month. In fact, the DOJ letter discussed below suggests that final repeal has already been achieved.

Obviously wise to the Commission's intentions, the Tennessee Association of Realtors has apparently been pressing the state legislature to counter the effect of a repeal by essentially codifying the rule in a state statute (Amendment 1 to House Bill 2095). Yesterday the Justice Department faxed a letter to the Speaker of the TN House of Representatives, emphasizing the anticompetitiveness of prohibiting rebates to consumers. DOJ's press release notes that passage would "deny Tennesseans the opportunity of receiving cash rebates from real estate brokers when they buy and sell their homes . . . [thereby] imped[ing] real estate brokers from competing on price and force Tennesseans to pay more in real estate commissions."

CommercialAppeal.com reports that TAR's lobbying efforts have paid off.
Last night the Tennessee legislature apparently passed HB 2095 (including Amendment 1), which is now headed for the Governor's desk.

I don't know the Governor's intentions. But price competition may be about to take a hit in Tennessee, and I'll be not a single member of the Tennessee legislature that voted for this amendment could point to a single piece of evidence that rebates harm buyers, sellers, or, for that matter, brokers. Here's the best rationale a TAR official could offer:
"Unfortunately rebates, in too many cases, take the form of cash incentives that could be used to lure consumers into risky real estate transactions. And in some cases, you could see a rebate used as part of a down payment, which could amount to mortgage fraud," said J.A. Bucy, director of governmental relations for the Tennessee Association of Realtors." (emphasis added).


  1. Michael,

    How much of your paycheck do you rebate back to your clients???

    Good for one, good for all; no?

  2. Thank you for your comment Jim.

    Nowhere in this country, Tennessee included, is a broker obligated to give a buyer-client a rebate. But if the proposed TN bill becomes law, brokers in Tennessee would lose their freedom to give rebates when they deem it appropriate.

    Lawyers are not prohibited from adjusting clients' bills, or offering them a discounted rate. Why shouldn't TN brokers enjoy the same freedom?

  3. Tennessee real estate brokers are also not prohibited from adjusting client's fees or offering them a discounted rate either.

    We just can't give them cash back.

    Real estate commissions are, and have always been, fully negotiable between a consumer and a real estate licensee.

  4. I don't believe there is anything that legally and/or ethically prohibits a lawyer from giving a cash rebate to his or her client.