Rebates have been used to attract consumers or undercut competition since the 1800s. Today, it’s common to see rebate offers on everything from cars to your vacuum-insulated stainless steel tumbler on Amazon. What’s not as common but just as real is a home buyer rebate. A home buyer rebate can put some money in your pocket when you might need it most, when closing on a home purchase. In this post, we’ll explore what a home buyer rebate is, how it works, and how you might make it part of your home shopping plans. A home buyer rebate, often referred to as a commission rebate, is a portion of the real estate agent’s commission that’s returned to the buyer at closing. This financial incentive is a way for agents to attract clients in competitive markets by offering a share of their commission as a rebate. While not all agents offer rebates, those who do view it as a compelling way to stand out and provide added value to their clients. There are some real estate broker companies that have built their entire business model on offering commission rebates. The process for receiving a home buyer rebate begins when you engage a real estate agent who offers this incentive. Typically, the agent agrees to rebate a portion of the commission they earn from the sale of the home back to you, the buyer. The exact amount of the rebate can vary and is usually negotiated between the buyer and the agent at the start of their working relationship. In most cases, the agent or broker offers the rebate as a closing credit, meaning that it will reduce the total amount of money you need to complete your home purchase. However, closing credits are subject to a number of terms and restrictions and are subject to lender approval. They are also not widely available. Unless buyer rebates are built into their business model, many real estate agents and brokers will balk at the idea. In addition, home buyer rebates are not legal in all states (more on this in a minute). Below are two examples of how a home buyer rebate might play out. For both examples, we’ll base the rebate on the purchase of a $400,000 home. In this scenario, the rebate is calculated as a percentage of the agent’s received commission. Since real estate commissions are typically a percentage of the sale price (often around 5%-6%, split between the buyer’s and seller’s agents), your rebate could be a portion of your agent’s share. For instance, if the agent agrees to rebate 20% of their 3% commission on a $400,000 sale, you would receive $2,400. Alternatively, some rebates are based on a percentage of the home’s purchase price. For example, if your agent offers a 1% rebate on a home purchased for $400,000, you would receive a $4,000 rebate. This method is straightforward and allows buyers to easily estimate their potential savings. Below is an infographic to illustrate this second example.What is a home buyer rebate?
How do home buyer rebates work?
Example home buyer rebate scenarios
1. Percentage of the agent’s commission
2. Percentage of the purchase price
