What are Home Buyer Rebates?

Real estate rebates are not only legal according to the U.S. Department of Justice, but they are also often encouraged. This is because negotiation of rebates is often seen as a way of increasing competition among real estate agents. The high demand for real estate rebates has also made them increasingly popular and many buyers are now openly asking real estate agents for rebates where that is possible. 

In the United States, real estate rebate is allowed in 40 states with the states listed below being the exception as they have bans on rebates. If you are located in one of those states it would be illegal for you to receive a rebate as a homebuyer. 

• Alabama
• Alaska
• Iowa
• Kansas
• Louisiana
• Mississippi
• Missouri
• Oklahoma
• Oregon
• Tennessee

Are real estate broker commission rebates legal in Florida?

Real estate broker commission rebates are legal in most states, including Florida. What makes the case even more interesting is that in Florida rebates are not taxable which means that the commission rebate is not taxed as regular income. The amount that you will receive in real estate rebate in Florida will entirely depend on the negotiations that you partake in with your real estate agent. Therefore, if you are looking to purchase a home it is best to openly discuss with the different real estate agents that you are contacting the type of rebate that would be available to you. 

Are home buyer rebates taxable?

Homebuyer rebates are not taxable in the states that they are legal. This means that when you are filing your income taxes, in the section where you would disclose any extra income you do not need to disclose the amount that you received as part of your rebate as taxable income. This is because the IRS views the rebate not as cash that you receive back, but rather as an adjustment to the price of the house that you purchased. For this reason, you cannot include the rebate amount in your taxable income form when filing your taxes. 

How do I do a rebate?

To understand how you can receive a real estate rebate for the home you are purchasing you will need to understand how rebates work. This means that you will need to understand that a rebate is something offered by a real estate agent, much like cashback may have been offered by a certain store. Knowing this makes it clear that if you are looking to get a real estate rebate for the home you are purchasing the only person you can direct that request to is the real estate agent that is handling your case. 

To ensure that as a home buyer you will be able to get a rebate you will need to do the following things:

1. Legality: Check that rebate is legal in your state. If a rebate remains illegal in your state, then there is no reason for you to negotiate with your real estate agent to receive a rebate. This is because no matter what you do, this will be a home buyer incentive that your real estate will be unable to provide because of the law. Contacting a different real estate agent will also not help you with getting a rebate as the state law is something that every real estate agent in your area will have to follow. 

2. Shop Around: If you have determined that rebate is, in fact, legal in your state then you may wish to conduct some research to see which agents in your area are able to provide you with a house rebate. By knowing and contacting several different agents you will be able to distinguish which ones are willing to give you a real estate rebate and at what percentage or amount they are willing to provide you that ‘cash-back’. By having multiple real estate agents that you are talking to you may also find that you will have greater negotiating power as you will have more options and you will know what else is available out there. 

3. Negotiate: Possible the most important step is negating broker rebates with your real estate agency. This means that even before you decide on which agency you will purchase the house through you will need to discuss with them the closing cost incentives so as to see what type of rebates, they would be willing to offer so as to ensure that you will be purchasing the house through them. Do not be afraid to negotiate rates and rebates with your real estate agent, even if they are unable to offer you something better, you will have still taken the chance, which means that you would at least know that the deal you are getting is the best deal available. 

What is a rebate at closing?

A rebate at closing means that upon closing the deal for your new house your realtor will return back to you a portion of their commission in the form of cashback. This is used as a buyer incentive by real estate agents who are trying to be the ones selected by prospective buyers. A real estate rebate is something that many agents will be able to provide you with if you are in a state where rebates are not illegal. The amount may vary from real estate agent to real estate agent and it may also vary based on the negotiations you carried out. A rebate is a great way of getting back some non-taxable cash after the sale of your home. 

What is a lender rebate?

A Lender rebate is something that your home loan lender or mortgage lender may be able to provide you with if you fit certain terms. In most cases when you agree to a mortgage that has higher interest rates the lender may give you some rebate, that is some money from the fees that you had to pay for the mortgage back so as to incentivize you to choose their service. In this sense, a lender rebate will give you some cashback that you can then use to cover other closing costs, but the drawback of that is that you will have to pay a higher interest rate on your mortgage, and therefore the money that you receive back from the rebate is likely going to cost you more in the long run due to the higher interest rate. 

What is a mortgage rebate?

A mortgage rebate and a lender rebate are essentially the same things. When you are applying for a mortgage, chances are you will be informed that you will need to pay an interest rate on the amount that you are taking and a fee paid to the lender. If you want to eliminate that lender fee, or rather to reduce it you can agree to pay a higher interest rate on your mortgage. In this case, the lender may be willing to provide you with a mortgage rebate. This mortgage rebate is a cashback of part of the amount that you paid for the lender fee. In most cases, this is more beneficial to the lender than the borrower as the lender will benefit for years from the higher interest rate while the buyer will just receive some initial cashback for choosing the lender they chose. 

A smarter way to buy your home.

Buy your home and get up to 1% cashback.

Book a Call

Can a realtor share commission with a buyer?

For most realtors sharing part of their commission with the buyer is not common practice. While the commission gets divided among the different real estate agents that were part of the real estate dealings, the buyer does not normally receive any part of that commission. However, some real estate agents do give a rebate to their clients upon closing on a home. This means that as the homebuyer you may receive a small amount of cashback back from your real estate agent. This is an incentive used by many agents who want to attract more clients. Normally, that amount is much smaller than the full commission that the agent is receiving, but in some ways, the rebate is like sharing the commission with the buyer. 

What is a commission refund?

A commission refund is another name for a commission rebate, which is a cashback given to homebuyers by their agents as a means of incentivizing them to buy a house through them. The way the commission refund works is the following. 

1. Buyer is looking to buy a home

2. As a buyer incentive a real estate agent offers a $500 rebate on their 3% commission if a buyer buys with them. 

3. The buyer purchases a home of $100,000

4. The real estate agent receives a commission of $3,000

5. The real estate agent gives back a commission refund of $500 to the buyer

Are commission rebates tax deductible?

Commission rebates are tax-deductible, this is because they are not viewed as cashback but rather they are viewed as an adjustment on the price of the house that the buyer purchased. That means that if the house you purchased costs $500,000 and you got a rebate of $5,000 then in regards to taxation that $5,000 would be reduced from the price of the house. Making it appear in this way as if you purchased the house for $495,000 instead of $500,000. For this reason that $5,000 does not need to be declared in the other income section of your income tax form. 

Can Realtors give kickbacks?

For real estate agents kickbacks are illegal. This means that they are not able to receive payment for referrals or services that they did not render. Real Estate Agents who request kickbacks are violating the law and are thus heavily fined.

Can you use a rebate as a down payment?

Using your rebate as part of your down payment is potentially an option, however, it is not one usually recommended. This is because there are many fees that come with closing on a house and before you start the process of looking at houses you should be aware of what it is that you can afford in your area. Using your rebate as part of your down payment but then spending more due to a higher mortgage with a high-interest rate does not save you money in the long run. In fact, it does more harm than good and as such, it is not always recommended. Still, you are able to use a rebate as part of your down payment if you so wish. [8]

How to get cashback at closing?

Upon closing the deal on the property that you are purchasing you may be able to receive a real estate rebate from your real estate agent. Essentially, your real estate agent may provide you with some cashback as part of the closing deal. This rebate will need to have been negotiated ahead of time but is in general a great way of getting back part of that commission fee that you initially paid. Real Estate rebate is not legal in every state so before requesting a rebate from the real estate agent that you are collaborating with make sure that it is legal in your state. 

Summary:

Real Estate rebate is cashback offered by real estate agents as buyer incentives. This buyer incentive is meant to help convince buyers that they should use one real estate agent over another. Negotiating those rates is extremely important for prospective buyers that want to gain the most out of their real estate purchases.