As a homebuyer or seller, you may be wondering if you can give your realtor a little thank you gift after they’ve helped you find your dream home or sell for top dollar. It’s a nice gesture to show your appreciation, right?
Well, when it comes to realtors accepting gifts, things aren’t as simple as just handing over a gift card or bottle of wine. There are certain laws and regulations in place around real estate kickbacks and referral fees that mean realtors have to be very careful about what they can accept from clients.
In this guide, we’ll walk through the ins and outs of realtor gift rules so you can better understand what’s allowed and what’s not. You’ll learn about:
- Laws and ethics around realtor gifts
- Types of gifts realtors can and can’t accept
- How to show appreciation without gifting cash
- Marketing agreements and proper disclosure
- And more!
By the end, you’ll have a complete understanding of gift guidelines for realtors so you can avoid any awkward situations and stay compliant. Let’s dive in!
Laws and Ethics Around Realtor Gifts
When it comes to realtor gift regulations, there are a few key laws and ethical codes that real estate agents must abide by. These help prevent kickbacks and referral fees that could create conflicts of interest.
RESPA Regulations
The main law governing realtor gifts is the Real Estate Settlement Procedures Act (RESPA). Under RESPA, realtors cannot receive kickbacks or referral fees for recommending settlement service providers like title companies or mortgage lenders.
RESPA covers all settlement service providers involved in a real estate transaction. This includes:
- Real estate brokers/agents
- Mortgage lenders
- Title companies
- Appraisers
- Home inspectors
So gifts from any of these parties to realtors are regulated under RESPA to prevent illegal kickbacks.
State Real Estate Commission Rules
In addition to federal RESPA laws, many state real estate commissions have their own rules about gifts and kickbacks. For example, in California realtors cannot receive gifts worth over $100 annually from service providers.
State laws may be even more strict than RESPA, so realtors must abide by both their state’s real estate commission regulations and RESPA.
Realtor Code of Ethics
As members of the National Association of Realtors (NAR), real estate agents also have to follow the Realtor Code of Ethics. Article 16 of this code states Realtors must avoid any interest or activity that could be perceived as a conflict of interest.
So even if a gift doesn’t explicitly violate RESPA or state laws, it still may be against the Realtor Code of Ethics if it could be seen as a conflict of interest or impropriety.
Acceptable Gifts for Realtors
Now that you understand the regulations, let’s talk about what kinds of gifts realtors are actually allowed to receive from clients and affiliates.
In general, small token gifts are acceptable, as long as they aren’t given in direct exchange for referrals or business. Appropriate realtor gift ideas include:
Small Token Gifts
- Gift cards
- Food baskets
- Flowers
- Personalized gifts under $25 in value
These types of small gifts show gratitude without becoming a kickback. According to RESPA regulations, gifts less than $15 are generally deemed nominal and acceptable. But always double check your state’s specific real estate commission rules too.
Disclosing Larger Gifts
If you want to give a larger or more expensive gift, it’s recommended that realtors disclose these gifts to their broker. This ensures there’s oversight and that the gift isn’t being given improperly in exchange for client referrals.
The broker will usually allow the realtor to keep the gift, but the disclosure prevents any perceived conflicts of interest or RESPA violations.
Recommended Gift Ideas
To stay compliant with realtor gift regulations, here are some recommended ideas for gifts to give your realtor:
- Gift card to a local restaurant
- Small flower bouquet
- Box of chocolates or cookies
- Personalized notebook or pen
- Holiday ornament with their name
- Handwritten thank you card
Tasteful gifts such as these show your appreciation without raising any red flags. They also align with the NAR Code of Ethics provision about avoiding the perception of impropriety.
Prohibited Gifts and Scenarios
While small tokens of thanks are permissible, there are certain types of gifts realtors simply cannot accept from clients or affiliates. These prohibited gifts include:
Cash Gifts
Cash gifts are never allowed, whether it’s handing over an envelope of money or gifting a realtor a cashier’s check. Cash too closely resembles payment for referral of services, so regulators prohibit realtors from accepting it.
Gifts Over $100
As mentioned earlier, gifts valued at over $100 should be disclosed to the realtor’s brokerage to avoid any RESPA issues. But some states prohibit realtors from accepting gifts over $100 altogether, no matter if it’s disclosed or not. Always check your state regulations.
Lavish Gifts
Lavish or exorbitant gifts should also be avoided by realtors. Even if not technically illegal, a luxury watch or new car could be perceived as a conflict of interest by RESPA regulators. Avoid lavish gifts as a client.
Direct Compensation
Finally, the most prohibited type of gift is anything acting as direct compensation or a kickback for referral of services. This is the exact type of gift giving RESPA aims to prevent. Never compensate a realtor directly with “thank you” gifts handed over in private.
To avoid running afoul of RESPA laws, here are some specific gift-giving scenarios realtors should avoid:
- A mortgage lender giving gift cards to top realtor referrers.
- A home inspector taking a realtor on a golf outing and paying for it.
- A title company giving a realtor a luxury vacation under guise of “education”.
- An appraiser paying a realtor’s fees to attend a professional conference.
These all imply gifts in direct exchange for referrals, which RESPA prohibits. As a client, avoid putting your realtor in any of these situations.
Can Realtors Accept Cash Gifts from Clients as a Thank-You for Helping Them Find a House?
It is not uncommon for realtors to receive cash gifts from clients as a token of appreciation for helping them find a house. However, there are both benefits and drawbacks of cash purchase for realtors. While it can be a nice gesture, accepting cash gifts may raise ethical questions and potential conflicts of interest.
Alternative Ways to Show Appreciation
Given all these gift-giving rules and restrictions, what’s the best way to show your realtor appreciation without handing them a gift? Here are some smart alternative ideas:
Positive Online Reviews
The best thing you can give your realtor is glowing online reviews. Positive reviews help realtors generate more business and referrals, so take a few minutes to leave 5-star reviews on Google, Facebook, and any other local directories. This simple act can mean more than any gift card to a realtor.
Referrals
Similarly, referring your real estate agent to any friends, family, or colleagues looking to buy or sell a home is huge. Referrals are essentially priceless gifts to realtors, since referrals convert to new business. If you appreciated your realtor, pass their name along anytime home sales come up in conversation.
Small Closing Gifts
While cash gifts and extravagant presents shouldn’t be given, realtors can accept small tokens of appreciation at the closing table. A gift valued under $15 that’s given at closing and isn’t tied to any referrals is permissible. Just avoid overt displays that could seem improper.
So if you really want to gift your realtor something, make it a small memento at closing and focus more on reviews and referrals as your way of saying thanks.
Marketing Agreements and Disclosures
The other time that realtor gifts often come up involves marketing service agreements (MSAs). In these arrangements, a real estate broker agrees to market a certain settlement service provider (like a mortgage lender) in exchange for gifts or fees from that provider.
However, these relationships are tightly regulated and must avoided being disguised kickbacks. Here are some important considerations:
- The gifts or fees paid as part of an MSA must represent fair market value in exchange for identifiable marketing services provided by the realtor.
- There must be a written agreement detailing exactly what marketing services are being provided in exchange for the gifts or fees.
- The realtor must provide documentation that the marketing services outlined in the agreement are actually being performed.
- Proper disclosure must be provided to clients if referring them to any affiliated service providers under an MSA.
As long as these conditions are met, MSAs do not violate RESPA regulations on their own. But realtors must take care to comply with all legal and ethical requirements in entering into marketing service agreements.
The world of real estate gifts, kickbacks, and disclosures is admittedly complex. But the underlying principles are fairly straightforward: Small tokens of appreciation are fine, but avoid direct compensation through cash or extravagant gifts. Focus instead on providing great reviews and referrals.
As long as you steer clear of giving your realtor any form of payment in exchange for services, you’ll stay safely on the right side of RESPA regulations. And your realtor will certainly appreciate the thoughtfulness of a small gift or heartfelt reviews.
So next time you want to say thanks to the realtor who helped you find your perfect home, stick to a gift card instead of cash! It shows your gratitude without causing any headaches down the road.