Freebies OK if Terms Are Clearly Disclosed

It's OK to advertise freebies or money-back deals, but the terms must be clearly disclosed up front.

October 1, 2010

Q:To attract more clients, I would like to advertise a free home warranty or $500 back at closing. Is it OK to do this, and what are the restrictions, if any?

A:Advertising free premiums, giveaways, and rebates is covered by the Code under Article 12’s requirement to present a "true picture" in our advertising, marketing, and representations to the public. The key is to be sure your advertising clearly states any conditions or requirements to receive the benefit.

Standard of Practice 12-1 says, "REALTORS® may use the term ‘free’ and similar terms in their advertising provided that all terms governing availability of the offered product or service are clearly disclosed at the same time." Standard of Practice 12-3 addresses this issue as it relates to you requiring that consumers who take advantage of the offer use you as their real estate agent. It states that "Premiums, prizes, merchandise discounts, or other inducements" are not, in themselves, unethical even if the benefit "is contingent on listing, selling, purchasing, or leasing through the REALTOR® making the offer."

However, the offering of any inducements to do business is subject to the limitations and restrictions of state law. Most state license laws don’t prohibit such offerings, but there are some states that regulate the advertising of the inducement and several states that prohibit their use. If the Code allows a practice that state law prohibits, the state law will always take precedence. So carefully check on your state laws before offering these "freebies."

Bruce Aydt

Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.