What is a Home Buyer Rebate/Cash Back? Home buyer rebate/cash back is a rebate given to the home buyer by a Realtor, from the commission received by the Realtor calculated on the purchase price of the home
How a Home Buyer Rebate Program Works: Typically the Realtor receives a 3% commission on the purchase price of the house from the seller. When the sale is completed, the 3% commission is disbursed to the Realtor by the Title Company. The Realtor can then provide the rebate to the buyer. The Realtor gives a cash back rebate to buyers who are savvy in their search and have a shortlist of houses they want to preview.
An example of the rebate: If the buyer is buying a house for the purchase price of $250,000, the typical 3% commission received by the Realtor calculated on the purchase price of the house is $7500. The Realtor can rebate a portion of the $7500 commission received from the seller. If the rebate is 2% on the $250,000 home, it would amount to $5,000.
Since the Realtor is giving a rebate to the buyer, it needs to be disclosed on the Good Faith Estimate. If the buyer is financing the purchase of the home, it needs to be approved by the lender, depending on the lender’s regulations.
The amount of rebate is based on the agreement between the buyer and the Realtor. The agreement to give a rebate and the percentage of the commission given as a rebate is agreed upon by the buyer and the Realtor before they start the Buyer – Agent relationship.
How can the Realtor Afford to Give a Rebate: Searching to buy a home has changed since the onset of the internet. Now-a-days, buyers can search for homes on the internet; see pictures of the homes and details of the homes they are interested in.
Home buyers have some access to the MLS information of home listings and can shortlist the homes they are interested in from their search on the internet. They don’t require a Realtor to know about the basic details of the homes they want to preview because they can learn more about how a home looks like through the pictures and read the basic details of the home provided by the MLS on the internet. By not needing to show every house the buyer is interested in, the Realtor saves money and time and can concentrate on negotiating for the best price on the home from the seller. Due to the saving of time and money, the Realtor can pass on the savings to the buyer.
Conditions to Receive a Rebate: Each Realtor has different conditions to rebate a portion of the commission received. You should check with the Realtor individually and confirm the terms directly with the Realtor. The terms have to be signed by both parties before the agreement is valid and for you to get a rebate. Here are usually the guidelines the Realtor goes by:
1. The Rebate is a portion of percentage commission received by the Realtor on the purchase price of the home. There might be a minimum percentage of commission to be received by the Realtor to give you a rebate.
2. The lender needs to approve the rebate if the home is being financed. Most lenders usually approve the rebate. However, if the lender does not approve, you will not receive the rebate.
3. Maximum shortlist of homes to preview is usually 15 homes.