Updated August 13th, 2019
When a buyer’s agent offers a rebate, that means they’re willing to give back a set portion of their commission fee (which is typically 2-3% of the final sale price) to their client after closing.
Legal in 40 states (read on to learn which ones), you can use these rebates to buy points on your mortgage, cover closing and/or moving costs, or, in some cases, even take as cash.
The thing is, unless the agent is in a slow market and desperate for new clients, chances are you’re going to have a hard time negotiating a commission rebate on your own.
Agents know what their services are worth and have a bottom line to look out for.
One simple workaround is to find your buyer’s agent through an established referral network that pre-negotiates commission rebates on your behalf.
In qualifying states, Clever connects you with top-rated, local buyer’s agents who have agreed to offer rebates of $1,000 — or up to 1% on homes over $500,000. No negotiations needed.
Interview as many agents as you’d like until you find a great match. Our referral service is free and there’s no obligation to sign with any of the agents you speak to.
If you’re still interested in trying your hand at negotiating a rebate on your own, here are a few things you should consider.
What is a home buyer rebate?
Home buyer rebates, also known as commission rebates, are when a buyer’s agent who's helping their client buy a home gives a portion of the commission they receive from the seller to the buyer.
The buyer can use this rebate for their down payment, closing costs, to purchase points on their mortgage, and sometimes can even take the rebate as cash at closing. It’s important to note that if you’re using a mortgage lender to finance your home, they have to approve how you use the rebate. Many lenders won’t let you take the rebate as cash at closing.
Commission rebates allow you to afford a more expensive home, or to save on your down payment for your dream home.
In a seller’s market, a home buyer rebate is a powerful tool that savvy buyers can use to stand out from their competitors. If a home is listed at $400,000, a buyer that’s receiving a rebate could potentially offer more, depending on the amount of the rebate.
For homes that receive multiple offers, this could be the difference between your offer being accepted, and months of searching for another home.
How do home buyer rebates work?
In a traditional real estate sale, the seller hires a listing agent and offers ~6% to their agent to sell the home. Their agent then offers about half of that to the buyer's agent.
If the buyer has hired an agent that offers a commission rebate, the agent will give them a portion of the commission offered by the seller's agent. This amount varies based on the agent you select, and can even vary based on how many homes you tour, but is usually capped to around 1% of the sales price.
*$150,000 minimum purchase price. Homes over $500,000 are eligible for up to 1% back.
Where are home buyer rebates legal?
Commission rebates are legal in 40 states, and the US Department of Justice supports making rebates legal in all 10 remaining states.
In fact, the Department of Justice actively investigates any organization that tries to regulate real estate commissions. The DOJ is also leading a broad effort to educate states about the benefits of competitive real estate commissions to legalize rebates in all 50 states.
Are commission rebates taxable?
If you’re wondering if a commission rebate is taxed as regular income, we have good news for you: they aren’t
After much speculation among real estate brokers across the country, the IRS released confirmation on Nov. 30, 2006, that stated:
“In the present case, Taxpayer does not have an information reporting obligation under section 6041 of the Code because, as concluded above, a payment or credit at closing represents an adjustment to the purchase price of the home and generally is not includible in a purchaser’s gross income.”
In the eyes of the IRS, your rebate is part of the settlement from purchasing the home. Since it’s treated as one small part of a real estate transaction — instead of as an independent payment afterward — it’s not taxed as a source of income.
How much of a rebate will I receive?
Typically, home buyer rebates are negotiated on a one-to-one basis between you and your agent. Your ability to negotiate ultimately determines the rebate that you receive.
To receive a higher rebate, it’s smart to shop around and interview multiple agents to compare quotes until you find an agent that’s willing to give you a large rebate.
However, you don’t want to sacrifice on quality—and it’s hard to find a top agent who's willing to offer a rebate.
The process of searching for an agent great on both price and quality can take many hours of interviews and negotiations. And while it’s important to push for the best terms for yourself, remember that long and unpleasant negotiation isn’t the best way to start a relationship with your agent.
How can I get a home buyer rebate without negotiating?
Getting a commission rebate doesn’t have to be difficult. Clever has a nationwide network of top-rated real estate agents who have already agreed to offer a commission rebate of $1,000* of the purchase price of your home. No negotiation is necessary.
Clever has partners from every major brand and top-rated local brokerages across the country. Our Partner Agents know that if the buyers we send don’t have an incredible experience working with them, we won’t send any more referrals. Our Partner Agents are experienced helping buyers find the home of their dreams, making a competitive offer, and helping you through inspections, paperwork, final walk through, and any unforeseen hiccups.
When agents work with Clever, they know that we send them a constant stream of business. While they might not normally offer such a large rebate to an individual client, we send them enough business to make it worth their time.
If you’re thinking of buying a home, make sure you're working with a top-rated, flat-fee real estate agent from Clever.
*A rebate of $1,000 is available on homes over $150,000 in value and rebates of up to 1% may be available on homes over $500,000 in states where rebates are legal.
Top FAQs About Home Buyer Rebates
Can real estate agents pay closing costs?
While real estate agents can’t technically pay closing costs, realtor commissions are negotiable. If you’re selling a house, you’re responsible for commission for both the buyer’s agent and your own listing agent. You can negotiate for a lower commission with your listing agent, which can save you during closing. For a buyer, in the 40 states where it’s legal, you can negotiate a home buyer’s rebate, which you’ll get at closing and can help reduce your costs.
Can a real estate give part of their commission to their buyer?
Since buyer’s agent usually get half of the typical 6% commission the seller pays when selling their home, they can rebate part of this amount to their clients. In a competitive buyer’s market, buyers looking to save want home buyer rebates, which can range in amount, often up to 1% of the home’s value.
Are real estate rebates legal?
Real estate rebates are legal in most states (40 out of 50), and the Department of Justice is working to educate the American public about commission rebates and make them legal in more states. The amount of a home buyer rebate is not fixed and varies based on what your real estate agent can offer.