REX Uncovers New Documents Showing Opposition to Rebate Bans

1985 settlement shows courts and states agree rebate bans are unconstitutional and cost consumers millions of dollars

REX today filed recently uncovered documents, detailing successful efforts to end real estate rebate bans in numerous states more than 30 years ago. The documents lend support to REX’s ongoing lawsuit to overturn Oregon’s rebate bans, which cost homebuyers in the state nearly $250 million a year. 

The uncovered documents are from a 1985 Federal court order and injunction, in which the Louisiana Real Estate Commission agreed that the state’s rebate bans were unconstitutional. The settlement came after the plaintiff submitted numerous judicial and other opinions from similar disputes in other states concluding that anti-consumer rebate bans are unenforceable as a matter of law.  

“These documents convincingly demonstrate that rebate bans are indefensible,” said REX’s General Counsel Michael Toth. “The only thing that has changed from when courts across the country declared rebate bans to be unconstitutional is that today’s home buyers need rebates more than ever because of soaring home prices. REX was founded to use technology to deliver affordability and accessibility in housing. We’re going to continue innovating and fighting against old industry rules like Oregon’s rebate bans.” 

REX filed the uncovered documents today with the federal court in Oregon presiding over REX’s challenge to the state’s rebate ban. The documents include statements from a range of leading legal authorities against anti-competitive rebate bans, including a unanimous opinion from 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 Illinois Supreme Court concluded that rebate bans violate the federal and state constitutions.: The Alabama Attorney General subsequently embraced the opinion of the Illinois Supreme Court and concluded that “there is a substantial likelihood that an Alabama court would declare the Alabama section unconstitutional.”

Oregon’s rebate ban makes it illegal for brokers in the state to rebate a portion of their commissions back to the consumers. The bans drive up the cost of buying a home and constrain competition by prohibiting tech-based firms like REX, which uses predictive analytics and advice machine learning to match buyers and sellers at up to a 70 percent savings, from giving thousands--if not tens of thousands of dollars--back to consumers. Further, rebate bans fuel the affordability crisis. Roughly 8,000 more households in Oregon could purchase homes if the state’s rebate ban ended. 

Several states still maintain anticompetitive rebate bans, though REX is taking the lead to end anti-consumer rebate bans everywhere. Along with the lawsuit against Oregon’s rebate bans, REX has 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. 

Rebate bans prop up the old industry models that force home buyers and sellers to pay 2 to 3 times more in commissions than consumers across Europe and Asia. As an Ohio court, whose ruling against the state’s rebate ban is included in the REX materials, pointed out: rebates are “acceptable in other areas of commerce,” so “why are they not acceptable in real estate transactions?” In this case and its separate lawsuit against Zillow and the National Association of Realtors (NAR)], REX has shown that the combination of established brokers and powerful private trade groups like NAR has allowed big brokers to continue to collect commissions at pre-Internet rates levels despite the fact that 97 percent of consumers now shop for homes online. 

REX obtained the uncovered documents by making a formal request to the National Archives in Fort Worth, Texas, where the settlement documents are held. A copy of the uncovered documents and REX’s filing can be viewed here.

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