How does a real estate rebate work?

Real Estate Rebates are legal in 40 states for buyers and 39 states for sellers.

Since real estate commission is 100% negotiable, for sellers it’s just easier to lower the listing fee so the rebate is built in and then it can be offered in any of the 50 states to sellers.

In most areas, the commission is paid by the seller for existing homes or the builder for new construction homes.  Even if a buyer has an agent representing them in the transaction, the seller or builder typically pays the commission.

The rebate comes from this commission.

Real Estate Agents are licensed under Real Estate Brokers.  The Broker and the Agent must agree to offer a rebate.  If the Broker won’t allow the rebate, then none of the agents under that Broker can offer the rebate.  So even if you are buying in a state that allows rebates, you still need to find an Agent that can and will agree to a rebate.  In other words, not all Agents can or will offer rebates.

If a lender is involved the lender must know about the rebate and usually will direct how the rebate can be given to the Buyer.  It’s typically a credit toward the closing costs.  Which makes it important to not ask for too many seller concessions to go above the max concessions allowed.  There are usually other program guidelines that can’t be exceeded as well.  Careful planning and discussing the rebate early is key.

Since the rebate is not taxable and is a credit to you at closing, just like seller concessions, there is no negative for receiving a rebate.  It’s true money in your pocket!