REX Makes Case for Ending Louisiana’s Rebate Ban

Rebate bans impose a material and detrimental burden on homebuyers already strapped for cash because of the record rise in home prices since COVID-19

REX submitted a brief to the Louisiana Attorney General’s Office setting forth the reasons why the state should end the current policy of banning consumer rebates in real estate. The brief is supported by a 1985 Federal settlement agreement that REX recently uncovered, in which the Federal Court declared a prior version of Louisiana's rebate ban unconstitutional and found “no evidence” that the state’s rebate ban “directly advances the State’s substantial interest in the protection of the public from incompetent or dishonest real estate salesmen and brokers.” 

REX’s brief describes the material and detrimental effects of rebate bans on consumers. These policies prohibit real estate brokers and agents from reducing their commissions. In the typical real estate transaction, the seller pays a commission of 5 to 6 percent of the sale price of the home--two to three times higher than what consumers pay to buy and sell homes around the world. The buyer’s agent commission--typically 2.5 to 3.0 of the home price--is fixed at the time the home is listed and is virtually impossible to negotiate. Rebate bans protect sky-high commissions even as 97 percent of homebuyers now shop for homes online. Buyers are doing the work themselves. Rebate bans prevent buyers from earning any cash back for that work.

“It is unbelievable that it would be illegal for real estate agents to give back thousands of dollars to homebuyers anywhere in the United States,” REX’s General Counsel Michael Toth. “REX is proud to stand up for Louisiana’s homebuyers forced to pay too much in real estate fees—and the millions more of potential homebuyers shut out of the American Dream because of real estate protectionism. We won’t stop until anti-consumer rebate bans are relics of the real estate industry.” 

REX’s brief comes after the company sent letters to state authorities in Louisiana, Missouri, and Tennessee, asking these states to allow cash-strapped home buyers to receive money back at closing. In response to REX’s letter, Louisiana’s Real Estate Commission asked the Louisiana Attorney General’s office to issue an opinion on the legality of the state’s rebate ban. REX’s brief provides a detailed rationale, supported by legal authority from courts decisions in Louisiana and other states, for ending the state’s rebate bans.  

In addition to describing the 1985 Federal settlement agreement declaring the former Louisiana rebate ban to be unenforceable, REX’s brief points to numerous decisions and state attorney general opinions concluding that rebate bans are unlawful. For example, REX cites the Illinois Supreme Court finding that, “[n]o evidence has been presented which would demonstrate that the use of commission discounts or discount coupons is inherently harmful or dishonest or likely to confuse or mislead the consumer.” The brief points further to a 1985 opinion from the Alabama Attorney General concurring “fully with the Illinois Supreme Court in its reasoning,” and recognizing “a substantial likelihood that an Alabama court would declare the Alabama [rebate ban] unconstitutional.” The brief also documents the long list of states that voluntarily ended their rebate bans without litigation, including Maryland, New York, South Dakota and West Virginia. 

Apart from REX’s efforts in Louisiana, the company filed a lawsuit to overturn Oregon’s rebate bans, which cost home buyers in the state nearly $250 million a year and price as many as 8,000 households out of being able to afford a home. REX filed the lawsuit against Oregon after the company expanded to the state and received a letter from the state’s real estate agency, threatening to prevent REX from doing business in Oregon because the company wanted to reduce fees for consumers. REX plans to expand to 15 new markets in 2021, including Louisiana. 

A copy of REX’s brief to Louisiana can be viewed here

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