What is a real estate rebate? Home buyers can negotiate discount savings when buying real estate with their real estate buyer broker. Real estate commissions or fees should not be fixed and are negotiable. Since commissions are negotiable, buyers can negotiate a discount in the form of a buyer broker rebate when buying a home with a buyer broker. Many home buyers do not understand this and miss the opportunity to save money when purchasing a resale home or from a new home builder.
How can the rebate savings be accomplished? For example, if you are planning to buy a home that is worth $500,000 that is listed in the MLS (multiple listing service), the commissions offered in the MLS may vary, but in this instance, let’s assume it is 3%. Total commissions paid to your buyer broker would be $15,000. If you negotiated a 50% rebate, then your broker to buyer rebate would be 1.5% of the sales price or $7,500. As you can see, this real estate rebate can provide significant savings as the buyer broker is discounting the fees that he/she receives and rebating the difference to the home buying consumer. Clearly, real estate rebates are essential to price competition amongst real estate buyer brokers.
Why is the buyer broker discount in the form of a rebate? Buyer broker’s fees or commissions are typically paid by the seller and built-in to the sales price, cash back or rebates from your real estate broker are the principal method by which a buyer’s broker can negotiate a discount otherwise the commissions on the buyer’s side are essentially fixed. As such, broker to buyer rebates are morally good because such rebates are the principal method by which a buyer’s broker can negotiate or discount their commissions. Buyer broker rebates are good for the consumer because these rebates reduces the cost of housing for the consumer and promotes healthy competition and innovation amongst real estate brokers. As such, cash back at closing from your real estate broker is one way to reduce your home purchasing costs.
Is cash back at closing from your real estate broker legal? Yes! The “built-in” buyer broker commissions are negotiable (not fixed) as rebates or cash back from your real estate broker are legally protected by federal anti-trust laws (U.S.A. vs Kentucky Real Estate Commission). In fact, the Department of Justice has indicated that such broker to buyer rebates are beneficial to the home buying consumer and are “key to broker competition”. According to the Department of Justice, real estate broker rebates or cash back to buyers makes home purchases less expensive. It should be noted that there a few lingering states which still have a “rebate ban” in place even though there is no justification for such a law. If you reside in such a state, it would be a good idea to contact your state legislature and request that they change the outdated law which impairs fair trade, price competition, and artificially inflates the home buying costs for consumers.
Overall, buyer broker rebates on resale and new home purchases are a smart way for home buyers to save money when purchasing real estate. Cash Back Realty offers real estate rebate savings to home buyers for real estate home purchases.
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