Home buyers are looking for a means by which to reduce the cost of buying a home. The act of buying a new home is pretty daunting -- not to mention expensive. However, there is some relief to be found by taking advantage of a buyer rebate. Given the advent of the internet and the efficiencies that come with it, there is a somewhat new idea that has come about to help offset these costs. Rebates from buyers’ agents to their buyers are an effective way by which to accomplish a lower transaction cost.
“[real estate rebates] give consumers monetary benefits from the transaction that they otherwise would not have obtained.” - USDOJ (Unites States Department Of Justice)
How so? Well, separate from the incentives negotiated with a home builder for a particular new home, a rebate from the buyer's agent generally gives thousands of dollars back to the new home buyer. Typically, if a home buyer buys a home without their own licensed buyer broker (agent) , then the entire marketing fee (sales commission) that has been predetermined for any particular home is retained by the builder’s agent; however, if the buyer has a licensed buyer broker (agent), then that marketing fee will be split with the buyer's agent and an extra incentive worth thousands can be passed along to the buyer by means of a rebate. Irrespective of the price & terms that have been negotiated between buyer and builder, the marketing fee is generally still due at closing via a predetermined marketing agreement between the marketing company & the home builder. A portion of the sales commission is designated for the buyer's licensed buyer's broker if the buyer opts to be represented. If not, then the builder or builder's agent (onsite agent) retains the overage.
"In a typical home sale, there are two real estate pros: one who works with the seller — called the listing agent [onsite agent]— and one who works with the buyer — called the selling agent [buyer's agent]. The listing agent [onsite agent] generally shares the sales commission with the selling agent [buyer's agent] who finds the buyer for the home. But the seller pays both agents, usually from the proceeds of the sale." - FTC (Federal Trade Commission)
What does that mean for the new home buyer? By working with us, the buyer still gets all home builder promotions, discounts, incentives and/or anything else that can be negotiated, plus a cash back rebate. There is no obligation to us. There is no charge from us. Use your own lender or any preferred builder's lender. It's that simple.
"Although the sales commission usually is spelled out in the listing agreement with the seller, you [the buyer] might consider trying to negotiate a reduction in your [buyer's] agent’s portion of the commission. In some states, agents can rebate some of their share of the sales commission to the buyer." - FTC (Federal Trade Commission)
How can a rebate be used? Consult with your mortgage representative; but in short and possibly depending on the mortgage company’s guidelines of the buyer’s loan (FHA, VA, Conventional), rebates can be used against closing costs, an interest rate buy-down for the entire 30 years, reduce your sales price or given as a rebate check after closing to assist with moving expenses. In the latter scenario, the rebate check is processed within 24 Hrs. after closing. With an interest rate buy-down, the rebate lowers the mortgage payment.
With any of these methods, rebates do (1) one of (4) four things:
- lowers the monthly mortgage payment
- reduces the amount of money needed at closing
- reduces the sales price by the amount of the rebate
- puts money into the buyer's hands after closing
These rebate-savings are so important to the home buyer that the USDOJ (United States Department Of Justice) has been vehemently fighting all across our nation so that all states allow rebates. The USDOJ has also set up a website, funded by our tax dollars, to illustrate the importance of these rebate-savings:
This must be pretty important? See for yourself...
Source: USDOJ From the United States Department Of Justice:
“[rebates] give consumers monetary benefits from the transaction that they otherwise would not have obtained.”
“Rebates can save consumers several thousand dollars in a single transaction.”
"Rebates Make Buying a Home Less Expensive"
Once the importance of a rebate has been established, then a home buyer needs to address the qualifications of the buyer's agent that will provide the rebate. It would not be wise to merely select an agent based on a certain rebate amount, but rather a combination of the service to be provided as well as a buyer's rebate. A good buyer's agent will go to bat for the home buyer that potentially saves the home buyer thousands extra through strong negotiations in all aspects of the transaction; one can be "penny wise, pound foolish" when selecting an agent solely on the amount of the rebate. What's most invaluable is when a buyer's agent will contend on your behalf for the numerous issues that usually arise during a real estate transaction.
Home Buyer Rebate Information