Buying a home is a costly affair, from the downpayment to the closing costs and everything in between, but how does getting a rebate at closing sound? Awesome right? We think so.
Buyer rebates are legal in 40 states and savvy real estate agents use them to attract clients. It is so effective at creating competition between brokers and lowering costs for buyers that the Department of Justice actively encourages buyer rebates, and is aiming to repeal anti-rebate laws in all states.
Saving buyers money is one of the reasons Clever Partner Agents offer $1,000 rebate or a rebate of up to 1% on homes over $500,000 provide this benefits to qualifying clients. They want to help find you the home of your dreams without breaking the bank.
In this article, we are discussing five frequently asked questions about real estate commission rebates for buyers and how they might affect your taxes. Spoiler alert: They don’t.
Can a realtor give a buyer rebate at closing?
According to the U.S. Department of Justice, 40 states currently allow real estate agents to give rebates to their home buyers. This includes every state except:
What is a home buyer rebate?
Also known as commission rebates, home buyer rebates are money back to a buyer through their real estate agent. The real estate agent agrees to help their buyer with closing costs by giving a portion of their commission back to them.
A home buyer rebate can be an enormous help to a home buyer, as it enables them to put money toward their closing costs or purchase discount points on their mortgage. A rebate could also allow a buyer to buy a home that is more expensive than they could initially afford because they can be added to the down payment.
Where does a home buyer rebate come from?
A home buyer rebate comes from the commission of the buyer’s agent. In most real estate transactions, the seller agrees to pay 6% to the agent who lists their home for sale. The listing agent offers around half of this amount (3%) to the agent representing the buyer. If the buyer’s agent provides a commission rebate, they will give a portion of their commission to their buyer at closing.
Is a real estate commission rebate to buyers taxable?
A commission rebate is not taxable. According to the IRS, a taxpayer does not have an obligation to report payment or credit at the closing of a real estate transaction. This is because a rebate is classed as an adjustment to the overall purchase price of the home, not a taxable income.
It’s important to remember that if you’re financing the purchase of your home through a lender, the lender will typically have to approve how you use the rebate. For example, not every lender allows buyers to take the rebate as cash at closing.
Are real estate agents commission negotiable?
Although many agents may refuse to negotiate their commission, it’s important to discuss with your real estate agent upfront about how flexible they are with their commission.
A home buyer rebate could make a massive difference to your financial situation, so it’s wise to partner with a real estate agent who guarantees a buyers rebate at closing — with no negotiation necessary.
Clever Partner Agents make up a nationwide network of top-performing real estate professionals who have already agreed to offer a commission rebate on the purchase price of your home. Our experienced and knowledgeable agents receive a constant stream of business, enabling them to provide substantial buyer rebates to their clients.