Commission Rebates are Threatening Quality of Services

eric lee

Ever since the government introduced a series of cooling measures, sales in the primary housing market have been continuously taking up more market shares. New developments hold huge appeal for buyers partly because they can get a mortgage directly from the developers with a significantly reduced payment; meanwhile, zero commission from the buyer's end is another strong selling point.

However, commission rebate has become a popular market trend in recent years. While welcomed by buyers, it’s understandably resented by real estate agents, who see it as an exploitation of their hard work. Full disclosure: I work in a real estate agency, and we make our living through commissions, so of course agencies are against rebates. That said, I don’t think we should avoid discussing this issue.

Many people are mistaken in thinking that commission rebate is illegal. In actual fact, it is not against law for an agency to offer buyers a rebate for primary market sales. However, giving rebates to a third party may violate the Prevention of Bribery Ordinance, unless it is with the knowledge and approval of the buyer. For example, if someone deliberately arranges for their company to purchase a property through a specific agency, and subsequently receives a rebate from said agency as reward, it constitutes as an illegal act. Consequently, although it is technically legal to do so, some developers do have rules against agencies offering commission rebates, and agents are reluctant to give legal rebates in a very public manner.

Commission rebates can lead to unpleasant experiences for real estate agents. A typical scenario would be that of an agent spending months hunting down different developments with a client, and the client losing the lucky draw multiple times despite the agent’s time and effort. In the end, the agent suggests the client select from the leftover homes of a new development, so that they can own a home without having to go through the lucky draw. The client follows this piece of advice, but, lured by promises of commission rebate, goes to another agent when buying the home. One can only imagine what it would feel like to be the agent who put in the work but got abandoned at the last minute.

Every home buyer should understand that a reliable, professional and ethical real estate agent is crucial to finding a dream home. If the rebate trend continues, good agents will be slowly driven out of the business as their unethical competitors dominate the market, which, ultimately does not bode well for clients either. It’s also very possible for deceptive agents to lure in clients with commission rebates (that can sometimes be even higher the developer’s commission) then refuse to deliver on their big promises after closing the deal using various excuses. This is a vicious cycle that can potentially drive the industry to ruin. 

I believe that most home buyers out there are reasonable clients willing to reward good service, instead of only caring about saving money through commission rebates. On the other hand, real estate agents should ask themselves whether the quality of their services are deserving of the commissions they charge. It is only through mutual understanding and respect that the industry can grow.   

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