Real Estate Information

Luxury Real Estate Information


Rancho Palos Verdes, California Homes
Palos Verdes, California Homes
South Bay, California Homes
Luxury Mexican Beachfront Homes

Featured Properties


Oceanfront Estate Near Trump National

Related Information


Loan Information
Real Estate Information
Mortgage Refinance Information

How Home Buyer Rebates Work


In today's tight housing market, many buyers are looking for ways to stretch their dollars far enough to make that dream home a reality. One little-known strategy that's gaining popularity with consumers is the home buyer rebate. At the same time, rebates have become a hot-button legal issue for the traditional real estate industry and the U.S. Justice Department's Antitrust Division.

Buyer rebates are loved by consumers, at least those who know about them, because they can make getting into a home more affordable. More and more so-called non-traditional real estate companies ¬- those offering alternatives to full-service, full-commission brokers - are offering to share their paydays with buyers. At the same time, many traditional brokers around the nation are trying to block rebates because they threaten fat margins with price competition in the form of commission discounts.

Since buyers pay the lion's share of closing costs in addition to down payments, many are interested in receiving rebates to ease the cash crunch of moving into a new home. This can be a real advantage for buyers who have a solid income and credit history, but little cash up front.

In this case, the term "rebate" is little confusing because home buyers are not getting a portion of their cash outlay back. The buyer representative (agent, broker or both) is rebating a portion of his or her commission back to the buyer.

The rebate process seems confusing to some buyers because it runs counter to the common belief that home buyers don't pay real estate commissions. In fact, commission costs are passed on to buyers as part of the home's sales price. Buyer-agents typically are paid half the standard 5-6 percent of sales price commission. That money doesn't come from thin air?chances are that the sellers have factored commission into their price. When traditional listing agents tell sellers not to stress over commissions, because they can recover the costs through a higher sales price, someone is paying the freight.

So how do home buyer rebates work, and what's in it for you?

- In traditional real estate transactions, buyer representatives and seller representatives typically share commissions of 5 to 6 percent. Selling brokers usually offer half this commission to a broker who brings them a buyer. As an incentive to drum up business, some brokers now offer to rebate a portion of their buyer-representative commission to home buyers. For example, suppose you buy a $400,000 home on which the seller pays a six percent commission. The buyer and seller representatives split the $24,000 commission evenly. In this case, a one percent rebate means that the buyer representative receives $12,000 from which they pocket $8,000 and "rebate" $4,000 back to the buyer.

- Buyer rebates generally depend on the home's sales price, total amount of commission and the commission split. Some rebates may be advertised as a percentage of the buyer-representatives commission. In the example above, the rebate is $4,000, or about 33 percent of the $12,000 buyer-side commission. Other companies offer fixed-amount buyer rebates, such as $1,000 in cash or a $1,000 gift certificate.

Homebuyer rebates: To ban or not to ban?

At the same time consumers are looking to rebates to help relieve the high cost of home buying, traditional real estate brokers are trying - and succeeding in some cases - to prevent their use. Broker lobbying groups around the nation, concerned about price competition and downward pressure on commissions, have successfully lobbied lawmakers in 10 states to make home buyer rebates illegal. Four more states limit home buyer rebates to credits at closing. Fortunately for Florida buyers enduring record-setting home prices, rebates remain legal in the Sunshine State.

Industry watchers recently have looked to the state of Kentucky to see where the rebate debate might lead. In March, the U.S. Department of Justice sued that state's Real Estate Commission, alleging that its rebate ban violated antitrust laws. The DOJ investigation alleged that Kentucky's rebate ban may cost consumers "several thousand dollars" extra for each real estate transaction. In July, rebate fans received a victory when the DOJ and the Kentucky Real Estate Commission reached an agreement permitting rebates in that state.

If you're shopping for a rebate, get the facts:

Some points to keep in mind if you are a home buyer looking to take advantage of rebates:

- Shop around. Some rebate programs included other buyer services, such as contract preparation or review, or escrow services. Even in a sellers' market, buyers have some leverage. After you have established the rebate amount, ask what else is in the package to help simplify your purchase and control transaction costs.

- Consider your tax picture. Getting a rebate in the form of funds applied to closing can be double-win because that money may go untaxed when applied to closing costs. If the rebate or a portion of the rebate is not available until after closing, it may need to be reported as taxable income. Of course, this isn't an issue if you have plans for your rebate other than closing costs. Be sure to consult your tax advisor for this and other tax consequences of home buying.

- Rebates won't be available on many homes, including sale-by-owner homes and some homes sold by discount brokers. That's because in these cases, the traditional commission percentage and split - from which the rebate is derived - doesn't apply. Some real estate companies don't offer buyer-agent commissions, and owners selling their own homes probably are doing so to avoid commissions.

Finally, check to see if rebates are legal in your state. Money Magazine's 2005 Real Estate Guide reported that rebates were banned in Alaska, New Jersey, Kansas, Oklahoma, Rhode Island, Louisiana, South Carolina, Mississippi, West Virginia and Missouri. Rebates were reported as restricted to credits at closing in Alabama, South Dakota, Oregon and Tennessee. If rebates aren't available in your state, you might ask your buyer agent what incentives are available. After all, for being a smart buyer in today's challenging real estate market, you deserve some type of reward.

You can estimate your rebate savings at http://www.homekeys.net. Charles Warnock is Interactive Marketing Manager at Homexperts in Miami, Florida. Their Web site is http://www.homekeys.net.

Charles writes frequently on real estate, finance, advertising and interactive marketing. This entire article can be reproduced without permission with author bio and link to author's Web site.


MORE RESOURCES:

CNBC

Trump lawyer: Moscow Trump Tower 'solely a real estate deal'
CNBC
An abandoned proposal to develop a Trump Tower in Moscow during the 2016 presidential election was "solely a real estate deal and nothing more," President Trump's lawyer told congressional staff on Tuesday. The discussions about the potential ...
Moscow Trump Tower 'solely a real estate deal'KALB News (press release)

all 89 news articles »


Forbes

Two Smart Long-Term Real Estate Options
Forbes
But if you think you're going to make it, now might be a good time to take a serious look at where you want to establish your business. Long-term business real estate planning means either direct ownership or long-term lease. I've covered the direct ...



Exclusive Videos
Inman.com
Uncertainty is the name of the game in real estate -- right now, and always. Brad Inman took the Connect stage with Ken DeLeon of DeLeon Real Estate, Mauricio Umansky of The Agency, Dolly Lenz of Dolly Lenz Real Estate and Glenn Kelman of Redfin to ...



CoinTelegraph

First Bitcoin-Only Real Estate Transaction Completed in Texas
CoinTelegraph
In a new and interesting twist, an entire real estate transaction has taken place via Bitcoin. In other words, you can now buy your house with Bitcoin…at least in Texas. The transaction was for the purchase of a newly built custom home, and the full ...

and more »


Business Insider

Step inside the extravagant wedding of a Russian real estate heir and a social media star, where there were ...
Business Insider
This past weekend, Karen Karapetyan — son of Russian real estate mogul and billionaire Samvel Karapetyan — married social media star Lilit in a glamorous wedding at the Armenian Apostolic Church in Moscow. There were reportedly thousands of flowers, ...

and more »


Toys 'R' Us Shows Real Estate Can't Save Retailers
Bloomberg
There's a common belief that retailers that own real estate are in a better position than those that don't. This makes sense from a theoretical perspective. Property holds value that's independent of a specific brand and is less prone to the ...

and more »


Seeking Alpha

Xinyuan Real Estate: The Tide May Finally Be Turning - Seeking Alpha
Seeking Alpha
Is investor sentiment finally starting to improve? I think so. The bull case for Xinyuan Real Estate shares has been in place for years now. Xinyuan Real Estate.

and more »


OregonLive.com

Lack of homes for sale weighs on Portland-area real estate market
OregonLive.com
A short supply of homes for sale is stifling activity in the Portland-area real estate market. Despite a competitive environment where certain homes are still attracting several offers, sales for the year through August have dropped 2.7 percent ...



Forbes

A Modern Romance: Yield Hunters And Real Estate
Forbes
I'm an investment professional, rather than a real estate pro. But my wife is involved in real estate as are many others we know and as a lawyer in New York, I availed myself of the opportunity to quickly get a Real Estate Broker's license. And to keep ...

and more »


Motherboard en_us

Miami's Close Call with Irma May Make Climate-Blind Real-Estate Developers More Reckless
Motherboard en_us
Harvey and Irma killed dozens of people and destroyed many thousands of homes, but, we're told, look on the economic bright side.The Miami real-estate market, already blazing hot before the storm, will feed off of the temporary disruption and heat up ...

and more »

Google News

home | site map
© 2006 TIGER MEDIA