LA | Ventura | Orange Counties Full-Service Flat Fee Broker Home Buyer Rebate Program
LA | Ventura | Orange Counties Full-Service Flat Fee Broker Home Buyer Rebate Program
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The exact amount of the rebate varies and is negotiated between the buyer and the agent. Rebates can be a closing credit, which reduces the total amount of money required by the buyer. Closing Credits are subject to a number of terms and/or restrictions and are subject to a lender approval. Please Review The Mortgage Research Center For More Information.
The following are 2 examples of how a Home Buyer Rebate process is designed. We will use a $2,000,000 home purchase price.
Percentage of the Agent's commission
Since August of 2024, when key commission changes were implemented, the decoupling of agents commissions has meant buyers are now responsible for the buyer's agents fees unless the seller offers or agrees.
In this scenario, the rebate is calculated as a percentage of the agent’s received fee. Since real estate fees are typically a percentage of the sale price (often around 2.5% to 3% each for the buyer’s and seller’s agents), your rebate could be a portion of your agent’s share. For instance, if the agent agrees to rebate 50% of their 2.5% fee on a $2,000,000 sale, you the buyer would receive $25,000.
Percentage of the Purchase Price
Some rebates are based on a percentage of the home’s purchase price. For example, if your agent offers a 10% rebate on a home purchase for $2,000,000, you would receive a $20,000 rebate. This method is straightforward and allows buyers to easily estimate their potential savings.
As per the California Legislature Information, a refund of a portion of an agent's conession to the buyer in a real estate transaction does not violate Business and Profession Code 10137 and is legal.
The buyer cannot use the rebate as part of the down payment. Lenders typically require down payments to come from the buyer’s own funds or as a gift from a family member, not from transaction-based rebates. However, a rebate can often be applied to closing costs or might be allowed to buy down the interest rate, indirectly reducing the amount of cash a buyer needs at closing. It’s essential to discuss this with your lender early in the homebuying process to understand what’s possible and ensure compliance with lending guidelines.
If the rebate is applied to closing costs or the purchase price, it may not be considered taxable income by the IRS. However, if the rebate is given to the buyer in cash after closing, it could be viewed differently. It’s crucial to consult with a tax professional to understand the tax obligations associated with your home buyer rebate, ensuring compliance with current tax laws and regulations.