Buying a home is one of the major financial milestones you can attain in life. People save for years to make it happen, and there are some things that you might overlook if nobody told you. For instance, if you are in the market for a new home, you may be surprised to learn about a feature that will actually put money back in your pocket rather than diminish your savings – the homebuyer rebate.
This bonus could come in the form of Benjamins or credit. If the rebate comes in cash, it is yours free and clear to do with what you want, whether it’s traveling, saving, or buying bitcoin. If it comes in the form of a credit, you will benefit in other ways. Keep reading to find out more.
What Is a Homebuyer Rebate?
A home buyer rebate is a chunk of change used as a competitive tool by real estate agents to win clients. Benjamin Franklin once said, “In this world, nothing is certain except death and taxes.” He might have added real estate commissions, considering that owning a home is still part of the American dream and doing so requires forking over a percentage of the home price to the agent.
To better accept this, one thing you might want to ask yourself when buying a home is, “What is a rebate at closing?” In doing so, you might be surprised to learn about an asterisk next to the commission that benefits the homebuyer.
The home buyer rebate, which can also be known as a homebuyer refund, commission rebate, and realtor rebate, is a piece of the commission returned from the real estate agent to the homebuyer. As fate would have it, this is also one type of income that cannot come back to bite you in the form of taxes. That’s because Uncle Sam is not entitled to any slice of homebuyer refunds. The IRS considers the realtor rebate an “adjustment to the purchase price” that ultimately lowers the price tag on the home.
If you live in the United States and are buying a new home, chances are good you might qualify for what’s known as a home buyer rebate. More than four dozen U.S. states give real estate agents and lenders the green light to negotiate homebuyer refunds in their deals. If you are fortunate enough to live in one of the 40 lucky states, you can be entitled to thousands of dollars through the realtor rebate.
How Does A Homebuyer Rebate Work?
If you are in the process of buying a new home or even considering it, you might be wondering how to get money back after buying a house. The homebuyer refund does not follow a cookie-cutter model, and the way it will work for you depends on a couple of factors, such as the broker and the state in which you live. The real estate agent could get creative in how they deliver it, and the rebate could come in the form of a closing credit or cold hard cash.
Generally speaking, however, let’s explore a scenario. The real estate commission is generally 6% of the home price, which is split between the buyer and seller salespeople. The buyer’s agent has the option to share some of this windfall with the homebuyer to sweeten the deal in a competitive real estate market.
For example, if that broker shares just 0.5% on a home with a purchase price of $500K, the homebuyer refund amounts to $2,500, which can go a long way when you need to buy home furnishings. Another possibility is that the cashback real estate agent could offer a flat percentage of the home price. In this case, 1% on a home selling for $400,000 would translate to $4,000.
While you may get money back after buying a house, a homebuyer refund doesn’t always work the way you might hope. If the rebate comes in the form of a credit, you will find yourself having to dole out less money at the closing, which is better than nothing. However, before you get the keys to your new home, you’ll be responsible for paying the service providers that helped you get to this point. The homebuyer refund could come in the form of a credit toward these fees across the appraisal, legal/escrow costs, loan origination, mortgage points, or transfer fees, for example.
While you may not have access to the homebuyer rebate until the closing, it’s something that you’ll want to negotiate with your realtor sooner than later, so there is no gray area. Be sure that your lender is in the loop too, as they will have a say in how the rebate is used if it comes in the form of credit. Even still, it is not exactly set in stone as the home buying process is fluid in nature.
Why Are Homebuyer Rebates or Commission Rebates Offered?
If you are not one to take the money and run, you may be wondering why real estate agents offer commission rebates in the first place. The real estate market is a competitive landscape, for sure, and this is one way that a realtor can differentiate themselves from their rivals. That’s not all there is to it, however.
Real estate agents have marketing budgets like any other business. By offering a homebuyer rebate, they are essentially slashing their customer acquisition costs because they should be able to gain more clients. Thanks to having more clients and theoretically more sales, realtors balance out any commissions they surrender in the name of the game. There is also a virtuous cycle at play. As more brokers and agents offer rebates, the competition has no choice but to do the same if they want to have a chance at wooing clients.
Explore Ratecloud’s Mortgage Options
Whether you’re just thinking about buying, actively looking for a home, or already spotted the house of your dreams, there is no time like the present. A homebuyer rebate will sweeten the deal, but an automated mortgage process like RateCloud offers can shave off even more in time and expenses.
Learn how Ratecloud can help you simplify your mortgage journey. Get started on your digital mortgage application today.
