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Legally speaking: Can agents offer incentives to buyers or sellers?

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves inducements…

Q: My agent would like to advertise that he will give a $500 gift card to any  buyer or seller who buys or sells a house through him. I’m worried this would be an inducement. Can he do this or would he be violating the license law?

A: While such incentives are considered to be inducements, that doesn’t necessarily mean they are “illegal.”

Ohio Revised Code Section 4735.18 (A)(14) prohibits a licensee from “offering anything of value other than the consideration recited in the sales contract as an inducement to enter into a contract for the purchase or sale of real estate.” This section has been interpreted by Ohio courts as only prohibiting undisclosed inducements to purchase or sell real estate. If an inducement is disclosed in the purchase agreement as part of the consideration, a licensee does not violate the license law. Thus, REALTORS can offer incentives such as a gift certificate, a free home warranty, discount coupons, etc. to a buyer or seller as long as it is disclosed in the purchase agreement.

It should be noted that Section 4735.18(A)(14) only applies to inducements that are offered as an incentive to someone to enter into a purchase agreement. It does not require disclosure of items that are offered to merely entice a seller to enter into a listing agreement or get buyers to attend an open house. Thus, if the seller or buyer will receive the offered item (i.e. the gift certificate) for merely listing their property or attending the open house and no purchase or sale of property is required, disclosure in the purchase agreement is not required.

As far as advertising such inducements, both the NAR Code of Ethics and the license law require that all advertisements be accurate and not misleading. When marketing inducements, REALTORS must assure that the terms of any offer are clear.  It’s also recommended that any limitations or restrictions be disclosed. For example, if there is a time limit or price restriction on the offer that should be indicated.

To summarize, when analyzing whether something that is being offered constitutes an inducement that must be disclosed in the purchase contract, REALTORS should ask themselves the following questions:

  • Does the item being offered have value?
  • Is it being offered to a party to a purchase agreement?
  • Will the person only receive the item of value if he enters into a purchase agreement?

If the answer to all of these questions is yes, then the item or money being offered to the buyer or seller must be disclosed in the purchase agreement.

OAR has a few resources for you if you want to learn more about Ohio’s law on inducements — OAR’s White Paper on Referrals, Inducements and Gifts;  a short video we posted on the topic last year; and a previous OAR Daily Buzz post pertaining to inducements.

Tags: legal, Legally Speaking