What is a buyer's rebate

What is a buyer's rebate Buying a home will most likely be the biggest purchase of your life!   In addition to the cost of the home, you have inspections, closing costs, and that “admin fee” that brokerages try to charge you (we have yet to get a legitimate answer from anyone as to why this fee exists).  While there are a lot of costs associated with your home purchase, did you know that there is a way to get some money returned to you?  It is called a buyer’s rebate (or buyer’s refund), and it is paid back to you from your agents earned commission.

You would think that buyer’s rebates are uncommon since they are typically not discussed unless you, the client, bring it up.  However, buyer’s rebates are legal in 40 states (sorry Alabama, Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, Tennessee, and in most cases, Iowa).  In states where rebates are legal, some newer brokerages are starting to make buyer’s rebates or refunds a standard part of their agreement.  

So how do buyer rebates work, and how do you ask for one?  

We talked with our friends at HomeOpenly to get a clear breakdown of how a rebate or refund works, when to ask for it, and the best way to negotiate one.

What is a buyer’s rebate or a buyer’s refund?

A buyer’s rebate is the exact same thing as a buyer’s refund, stated differently. A buyer’s rebate is negotiated as the percentage of the commission to be refunded to the client, and buyers refund is the dollar amount. The reason why the buyer’s rebate is often quoted as a percentage is that it is difficult to predict the exact commission amount buyer’s agent will collect after the transaction is closed.

A refund is the only mechanism available to buyers to negotiate commission savings. Asking for a rebate or refund can help buyers receive thousands in fees back from their real estate agent.

When do you negotiate a buyer’s refund?

It is essential to know that as a home buyer, your window to negotiate a buyer’s refund with a real estate agent is before entering into a representation agreement. Once the representation agreement is signed, it is unlikely that your agent will be willing to re-negotiate for a reduction of their fee.

How can I best negotiate a buyer’s refund?

The most important thing to remember when searching for a buyer’s agent is that referral platforms (learn more about them here) cost agents money and even cut into their commission earned when you purchase a home.  It will be harder for an agent to agree to a refund for you when they already have to pay 20% to 40% of their earned commission back to a referral company.  In addition to loosing negotiating power, your personal information could be sold by the referral platform to additional third parties without your knowledge (which is hidden in their terms). 
The best way to avoid referral platforms is to contact the agent directly on their personal website or their social pages.  

Things to be aware of in your contract with your agent:

  • Some buyer refunds require that the agent has to make a certain amount of commission before you get a refund.  
  • All rebates should be from the gross commission, but how you get it will vary based on the brokerage.  Some offer you a check at closing, will others apply your rebate to your closing costs.   
  • Be aware that some brokerages will decrease the amount of your refund if you tour over “x” amount of homes.  
  • Lastly, some brokerages only rebate if your purchase price is over a set amount.  
  • These stipulations are usually hidden somewhere in your written agreement with your agent, so be sure to read the fine print carefully.