Cashbacks: Real estate’s ‘Kevin’ moment

Picture this: Somewhere between the offer and the closing, a buyer gets an e-transfer. Nobody put it in writing. Nobody told the brokerage. Nobody filed anything with RECO. Everyone involved considers this normal.

It isn’t.

Cashbacks, also called rebates, buyer incentives, or nothing at all, depending on how carefully the agent wants to avoid a paper trail, are arrangements in which a buyer’s representative returns a portion of their commission to the buyer after closing. They’re not new. They’re not rare. And in Ontario, they exist almost entirely outside the disclosure framework that TRESA was supposed to tighten.

Here’s what the math looks like

A property sells for $800,000. The cooperative commission offered to the buyer’s agent is two per cent or $16,000. The agent has promised the buyer 30 per cent back after closing. That’s $4,800, moved by e-transfer, mentioned nowhere in the agreement of purchase and sale, not disclosed on any RECO form, not reported to the brokerage, and not reflected in the buyer’s net cost of the transaction.

The buyer paid $800,000 for the property. Factually, they paid $795,200. The seller doesn’t know. The listing agent doesn’t know. The lender, who advanced a mortgage based on the purchase price, doesn’t know. And, for all intents and purposes, that last part has a name. It’s called misrepresentation.

Have you done the math?

Most agents haven’t. Not carefully. A buyer’s agent offering 30 per cent back on a two per cent co-op on an $800,000 sale might sound reasonable until you work through what it costs at volume. Ten transactions a year at that rebate rate is $48,000 off the top, before brokerage splits, HST and business expenses. And here is the part the buyer’s salesperson often forgets: they pay income tax on the full commission before the cashback leaves their account. The $16,000 flows to the brokerage, gets disbursed to the agent, and CRA taxes it as earned income. The $4,800 that gets e-transferred to the buyer afterward is after-tax dollars, money the agent has already paid tax on and will never see again. Depending on the agent’s bracket, that rebate costs them closer to $6,500 or $7,000 in real terms, not $4,800. Agents who lead with cashbacks to win clients are often discounting themselves into a business model that doesn’t survive contact with a slow market. The client gets the e-transfer. The agent gets the tax bill.

Here’s what should have been disclosed, and it wasn’t

Under TRESA and RECO Bulletin 3.3, an agent who may receive a financial benefit in connection with a trade is required to disclose that benefit in writing and make best efforts to obtain a written acknowledgement from the client. The obligation runs both ways, to the client and to the brokerage. Most brokerage agreements are explicit: all remuneration related to a trade flows through the brokerage. An e-transfer from the agent to the buyer after closing doesn’t go through anything. It flows around everything.

The representation agreement the buyer signed said nothing about a cashback. The offer said nothing. The statement of adjustments said nothing. The buyer’s salesperson accepted the agreement, but it was verbally agreed upon early on and conveniently forgotten until the day of closing, when, trust me, the buyer will remember.

RECO’s enforcement is complaint-driven. Buyers who got the money aren’t complaining. Agents who didn’t offer cashbacks may not know it happened. Brokerages that weren’t told have nothing to report. The whole arrangement is structured, not always deliberately but effectively, to produce silence.

That’s not a grey area. That’s a gap that silence maintains.

The fix isn’t complicated

Which is what makes the industry’s silence on it so hard to excuse.

If a buyer’s agent intends to return any portion of their commission to a buyer, that arrangement should be in writing before an offer is submitted. It should appear in the representation agreement. It should be disclosed to the brokerage. And it should be reflected accurately in the transaction record, which means the purchase price, the commission and the net benefit to the buyer all tell the same story to the same people at the same time.

Texas and Colorado are two examples from the states if we look further afield. In both states, cashbacks are legal, disclosed on the closing disclosure and processed through the title company. The sky did not fall. Consumers benefited. The paper trail exists.

Ontario isn’t opposed to cashbacks in principle, and TRESA doesn’t prohibit them. What Ontario lacks is any requirement that they be visible.

RECO could issue a practice guideline. OREA could build a disclosure field into the representation agreement. Brokerages could add explicit cashback language to their agent contracts and require sign-off before closing. None of this requires new legislation. It requires the industry to stop treating a known practice as though naming it would make it worse.

Naming things is not the problem. The problem is what happens in the silence.

Lionel Shriver’s novel, We Need to Talk About Kevin, ends the way it had to. Everyone saw it coming. Nobody said anything in time.

Ontario’s cashback problem isn’t a thriller. Nobody gets hurt in a single dramatic moment. What happens instead is quieter and more corrosive — a practice that undermines transaction integrity one e-transfer at a time, normalized by repetition and protected by mutual benefit.

We need to talk about it.

Not because cashbacks are inherently wrong. Because the silence around them is.

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