The Department of Justice has never ruled on the taxability of refunds.

The IRS ruling is clear that a Redfin refund is not taxable as income; we cannot be involved in the individual tax returns of each client. I am not sure what more we could do to give our clients guidance on the taxability of their refunds, as the IRS ruling was the most definitive type of ruling that the IRS makes, one based not only on precedent but one that specifically evaluated Redfin’s business and its clients. According to our lawyers, there is no further action that it would be possible for us to take in this area.

More than 1,000 of our clients have received a commission refund. None has ever paid taxes on that refund. Our average commission refund when we last measured it earlier this year, after one year of operations, was 1.952% of the purchase price, so it seemed fair to tell clients they could usually expect to get around 2% of the purchase price refunded at closing. If we could, we would tell clients the actual commission on each property along with all the other listing details. Most MLSs don’t allow this. Instead, it is our policy to inform every client as soon as we engage that client what the listing’s actual commission is.

Our objective in explaining our service is to be simple; of course this involves making claims, but we try to base them on what has happened in the past or in this case on clear legal rulings. The objective of some critics seems to be to be complex, to create fear or uncertainty among potential clients, even in cases where there is none.

Out of curiosity, who is the former Redfin employee? Is there any reason to be anonymous?

That way everything is simply applied against the buyers basis in the house, no different that if the seller pays the buyers closing costs.

If the buyer walks away with cash at the closing, that’s no different than a mail in rebate on a TV. It’s not a form of income. Though as I say, everything should be on the HUD-1, and happen “on the table” at the closing. Not after the closing as a seperate transaction.

I don’t think that marketing money as being ‘free’ when there are (dire) consequences for not handling the money properly is more than mis-leading. Especially when the company fully discloses that a good portion of its customer base are First Time Home Buyers. I think its comical that Redfin spends ad $ on these videos that hand hold through their process but mentions on the sly that while they say the rebate is ‘tax-free’ you should absolutely talk to your financial adviser to be sure.

To me it always seemed like the IRS said, Redfin- it would be a great marketing play to use our ruling that its not your responsibility to make sure your customers are taxed on this rebate to attract more customers.

Just so long as the 2 point asterisked disclosure is included.

Bottom line, if you want to take the risk you dont claim their rebate on your income tax. If you dont want the risk, you’ll need to claim it. However, in the end you still are getting a sweet check at the end of your transaction, if you also took the risk to use a (possibly) inexperienced agent.

Because Redfin doesn’t have a local army of agents, they rely on the politeness or stupidity – take your pick – of other agents to open the door for their “clients” to view properties.

Their “clients” are oftentimes solely reliant on – as Redfin intimates – those greedy, unethical agents to provide access to homes, and of course ask any questions they like creating what? Creating agency and liability. Redfin agents are typically not local. They’re relying on my local expertise to get them and their client through the deal.

I think this is important because I would imagine a very large percentage of Realtors actually do rebate (when it’s a must do thing at least), the question is, do we 1099 or just pretend the money never was disbursed to us? I’m not paying tax on it.