How does buyer rebates increase competition?

US Department of Justice – Economic Analysis Group Discussion Paper

Home buyers primarily desire to find the house that best matches their preferences at the lowest net sales price possible. As a result, a selling agent might attempt to attract more customers by offering home buyers a higher rebate than her rivals; other things being equal, a higher rebate decreases the net sales price paid by the home buyer.

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As a result, rebates are a particularly useful vehicle for increasing price competition.

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There exists considerable evidence that persistently high commission fees generate wasteful rent seeking behavior. Any factor creating a disincentive to compete on price, contributes to the wasteful behavior. By supporting, or strengthening, the disincentive to reduce commission rates, rebate bans, discriminatory MLS listing policies, and minimum service requirements exacerbate technical inefficiency (i.e., raise the costs) of providing residential real estate services and decrease consumer welfare.