Understanding Real Estate Commission Rebates

Summary

• Real Estate commission rebates are now legally available in Pennsylvania.
• Sellers typically pay the real estate commission.
• Rebates can be used to lower buyer closing costs.
• Home Buyers can save up to $10,000 or more!

When a property owner hires a real estate broker the real estate agency contract they sign will often include a provision stating the amount of the broker fee that will be offered to cooperating buyer brokers via a multiple listing service. The listing broker would state the amount of commission to be offered to a cooperating buyer broker in the multiple listing service as a percentage of the purchase price or a flat dollar amount.

Real estate brokers are paid their commission from the sale proceeds at the conclusion of the real estate settlement by the title company facilitating the settlement. Some real estate brokers may also charge the buyer a additional fee listed as "additional commission" or "conveyancing fee" or some other dubious name. Buyers should question any fee that their broker is charging. Brokers who do charge these type fees may agree to waive them when questioned. Brokers should clearly disclose their fees before you sign a contract with them.

Some progressive real estate brokers have begun to offer their buyer-clients a commission rebate as an incentive for buyers to hire that brokerage. While many brokers routinely offer to pay other brokers and 3rd party lead generating companies referral fees, the progressive brokers realize the win-win benefit of offering buyer rebates to buyers who refer themselves to the broker.

Commission Rebate Example:

Sale Price: $500,000

Buyer Broker Commission: $15,000

Rebate offer: x 20%

Rebate paid to buyer = $3000.00

A real estate brokerage may establish some requirements for a buyer to qualify for a rebate. Requirements may include a minimum purchase price, a minimum broker commission, ancillary service providers, buyer agency contract, number of properties shown and more.

Are real estate rebates legal? Yes, the Department of Justice has written that providing commission rebates to buyers promotes healthy competition among agents. For more details visit: https://www.justice.gov/atr/consumers-save-thousands-commissions

Are real estate rebates taxable? The IRS has said that real estate rebate credits don't count as taxable income to the recipient buyer. The IRS has ruled that commission rebates are an adjustment to the basis a buyer has in his or her home. For more details visit: https://www.irs.gov/pub/irs-wd/0721013.pdf

Should you use a real estate broker who offers a rebate? Absolutely! As long as you are receiving qualified service from an experienced Realtor there is no downside to getting money back. My brokerage, Realty Broker Direct, offers buyer rebates up to $10,000 or more based on the final purchase price and commission collected. Realty Broker Direct has offered commission rebates to their buyer-clients since 2010.

Visit: https://www.realtybrokerdirect.com