What is the term for a broker paying part of their commission to the buyer?

The correct term for a broker paying part of their commission to the buyer is "rebating." This practice involves returning a portion of the commission earned from a transaction back to the buyer as an incentive to encourage them to use the broker’s services. Rebating can be a strategic way for brokers to differentiate themselves in a competitive market by offering financial benefits directly to buyers.

Understanding rebating is important because it comes with specific regulatory considerations. For instance, some states have restrictions on rebating in real estate transactions or may require that the buyer be informed of the rebated amount. Knowing the rules surrounding rebating can help real estate professionals navigate their business practices effectively while ensuring compliance with state laws.

The other options relate to different practices in real estate. Commission splitting generally refers to the division of commissions between brokers or agents, a common arrangement in cooperative transactions. A referral fee is a payment made between brokers for passing along clients but does not specifically pertain to rebates given to buyers. Upfront payments could imply a fee paid before services are rendered, which is not directly related to the practice of rebating a commission. Understanding these distinctions is crucial for aspiring real estate professionals.