How Home Buyer Rebates Work

In today’s tight housing market, many buyers are looking for ways to stretch their dollars far enough to make that dream house a reality. At exactly the same time, rebates have become a hot-button legal dilemma for the standard real estate industry and the U.S. Justice Department’s Antitrust Division.

Buyer rebates are adored by consumers, at least those who know about these, because they can make getting a home cheaper. A growing number of so-called unconventional property companies – those offering options to full-service, full-commission brokers – are offering to discuss their paydays together with buyers. At the exact same time, many traditional brokers around the country are trying to block rebates since they threaten fat margins with price competition in the kind of commission discounts Dallas Home Buyers.

Since buyers pay the lion’s share of closing costs along with down payments, many are interested in getting rebates to ease the cash crunch of moving into a new home. This can be a real benefit for buyers who have a good income and credit history, but little cash up front.

In cases like this, the word “rebate” is a little confusing because home buyers aren’t getting a portion of their money outlay back. The buyer agent (broker, broker or both) is rebating some of his or her commission back to the buyer.

The rebate procedure sounds confusing to a buyer because it runs counter to the frequent belief that house buyers don’t pay real estate commissions. Buyer agents typically compensate half of the standard 5-6 percent of sales price commission. That money doesn’t come from thin air. . Chances are that the sellers have factored commission in their price. When conventional listing agents tell sellers not to worry about commissions, because they can recover the costs through a higher sales price, somebody is paying the freight.

So how can house buyer rebates work, and what’s in it for you?

– In traditional property transactions, buyer representatives and seller representatives typically share commissions of 5 to 6 per cent. Selling brokers usually offer half this commission to your broker who brings them a buyer. As a bonus to drum up business, some brokers currently offer to rebate a portion of their buyer-representative commission to home buyers. For instance, suppose you get a $ 400,000 home where the vendor pays a six percent commission. The seller and buyer agents split the 24,000 commission evenly. In this case, a one percent rebate implies that the buyer agent receives $ 12,000 by which they pocket $ 8,000 and “loan” $ 4,000 back to the buyer.

– Buyer rebates generally count on the home’s sales price, total amount of commission and the commission split. Some concessions could be promoted as a proportion of their buyer-representatives commission. In the example above, the rebate is $ 4,000, or about 33% of their $ 12,000 buyer-side commission. Other businesses offer you fixed-amount buyer rebates, such as $ 1,000 in cash or a $ 1,000 gift certificate.

At the same time consumers are looking for rebates to help alleviate the high cost of home buying, conventional real estate agents are trying – and succeeding in certain cases – to prevent their use. Broker lobbying teams around the nation, concerned about price competition and downward pressure on commissions, have lobbied lawmakers in 10 nations to make home buyer rebates prohibited. Four more countries limit home buyer rebates to credits at closing. Luckily for Florida buyers enduring record-setting home prices, rebates remain legal in the Sunshine State.

Industry watchers recently appeared to the state of Kentucky to observe where the lien discussion could lead. The DOJ investigation alleged that Kentucky’s loan ban could cost customers “a few thousand dollars” extra for each property transaction. In July, rebate fans received a success when the DOJ and the Kentucky Real Estate Commission reached an agreement allowing rebates in that state.

If you are looking for a rebate, get the details:

Some things to keep in mind if You are a home buyer looking to take advantage of rebates:

Some rebate programs contained other buyer services, such as contract preparation or review, or escrow services. In a sellers’ market, buyers have some leverage. After you’ve established the rebate amount, ask what’s in the package to greatly simplify your control and purchase trade costs.

– Take your tax picture. Getting a rebate in the form of funds applied for closing can be double-win since that money can go untaxed when applied to closing costs. If the rebate or portion of the rebate is not available until after closure, it may need to be reported as taxable income. Obviously, this isn’t a problem if you’ve got plans for your own loan aside from closing prices. Be sure to consult your tax advisor with this and other tax implications of home buying.