How Do Homebuyer Rebates Work?
Updated: Jan 28, 2021
Buyer’s agents need to be competitive to attract clients. In many cases, an agent will offer a client a rebate, or a refund of part of the agent’s commission. Agents also sometimes offer non-cash incentives, such as gift certificates for home inspections or moving services, to bring in business.
Why Do Some Agents Offer Rebates? Buyer’s agents may offer a portion of their commission as a rebate because they use technology to operate efficiently and keep their operating costs low. They may be willing to pass some of those savings on to their clients to attract more business since they can more than make up for the lost commissions through higher volume. In a competitive buyer’s market, or in a market with high home prices, agents may feel comfortable offering rebates since they can still earn a substantial profit. While some agents consider rebates an effective way to attract clients, others believe rebates devalue their services.
How Do Rebates Work? Buyer’s agent commissions are negotiable, and in most states it’s legal for agents to offer rebates. Rebates are usually capped at 1 percent of the purchase price. Since a commission rebate is considered a price adjustment, in most cases the value of the rebate isn’t taxed.
You might use the money from a rebate to lower closing costs, to make some upgrades to your new home, to beef up your emergency fund or to cover part of the down payment. If you took out a mortgage to buy a home, your lender would have to approve of the way you decided to use rebate money. In many cases, a lender won’t allow a buyer to take cash at closing.
A rebate could let you buy a more expensive house than you would otherwise be able to afford. In a seller’s market, that could allow you to make a competitive offer and increase your chance of getting the house you want.
How Can a Homebuyer Find an Agent Who Offers Rebates? You can try to negotiate with a specific agent one on one, but an easier option is to explore online services that have identified agents across the country who offer rebates. If you go through such a service, you’ll be able to read agents’ reviews and speak to several so you can choose the one who is best for you, and you won’t have to negotiate a rebate yourself.
In a seller’s market with low inventory, it may be difficult to find a house that suits your needs. That means your agent will have to do a lot of work. An agent may be more amenable to offering a rebate under those circumstances if you have already been pre-approved for a mortgage and have narrowed down your home search.
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