Real Estate 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 Ź- 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: Landmark Settlement Breaks Up the Real Estate Cartel The American Prospect Top real-estate CEO sees decades of housing pain ahead: 'What the Fed did will have a 30-year tail on it' Yahoo Finance Commercial Real Estate's Systemic Threat: Separating Fact From Fiction Commercial Observer Rules that helped set real estate agent commissions are changing. Here's what you need to know The Associated Press Who are real estate lobbyists talking to in New York? City & State New York Brockton-area real estate sales for Dec. 26 to Dec. 29, 2023. Enterprise News Refined Real Estate: Historic Queen Anne Polson House lists for $6,950,000 seattlerefined.com Pension funds snap up real estate at steep discounts Financial Times Luxury's Latest Battleground: Real Estate | BoF The Business of Fashion The Realtors' Big Defeat The New York Times Investigation underway after 44-year-old real estate investor seen on video firing shots off boat docked at Lakeview ... WSVN 7News | Miami News, Weather, Sports | Fort Lauderdale Will March bring more madness to Craven County's real estate market? New Bern Sun Journal A luxury agent on how the NAR settlement will change his business The Washington Post Rules that helped set real estate agent commissions are changing. Here's what you need to know Lufkin Daily News Cities Face Cutbacks as Commercial Real Estate Prices Tumble The New York Times Rules that helped set real estate agent commissions are changing. Here's what you need to know KXLY Spokane What National Association of Realtors agreement means for Texas real estate KAMR - MyHighPlains.com Realtor group will pay $418M to settle commission lawsuits The Associated Press Israeli real estate event: Legal complaints escalate NorthJersey.com National lawsuit could shakeup housing market, cut into real estate agent commission 11Alive.com WXIA Realtors settlement to lower home sale costs, alter commission structure The Washington Post Swimmo Invest Opens up a New Chapter in the Real Estate Industry Markets Insider What Seattle-area homebuyers should expect after national settlement The Seattle Times CrewBaltimoreâs mission to accelerate womenâs success in real estate Afro American Newspaper Realtors Reckon With a Seismic Shift to How They Get Paid The Wall Street Journal China's Real-Estate Market Just Set a Recordâbut Not a Good One The Wall Street Journal What the death of the 6% real estate commission means in D-FW The Dallas Morning News Settlement will affect Iowa homebuyers KCCI Des Moines Real estate commissions, unassailable for decades, could crumble after landmark settlement The Denver Post Is the Era of the Celebrity Real Estate Agent Over? Industry Reacts to Settlement That Could Slash Commissions Hollywood Reporter Making Sense of New York's Confusing Luxury Home Market The Wall Street Journal National Association of Realtors Agrees to Slash Commissions to Settle Lawsuits - The New York Times Rules that helped set real estate agent commissions are changing. Here's what you need to know Northeast Mississippi Daily Journal A commission settlement may affect housing market 9News.com KUSA Illinois real estate: Home sales in Peoria, Tazewell, Woodford counties Peoria Journal Star Bay Area Real Estate Executive Charged with Wire Fraud, Identity Theft in Investment Scam - Hoodline Realtors Reach Settlement That Will Change How Americans Buy and Sell Homes The Wall Street Journal Rules that helped set real estate agent commissions are changing. Here's what you need to know News10NBC Real estate lawsuit settlement upends decades-long policies that helped set agent commissions WQAD Moline Once America's Hottest Housing Market, Austin Is Running in Reverse The Wall Street Journal End of 6% real estate commissions could mean lower home prices The Atlanta Journal Constitution Real Estate Credit Investments (LON:RECI) Shares Pass Below 200 Day Moving Average of $126.75 Defense World A Look Into the Future of Home Buyers' Agent Commissions The Wall Street Journal Manhattan Real Estate Update westsiderag.com Granite Real Estate Investment Trust (TSE:GRT.UN) Given Consensus Recommendation of âBuyâ by Brokerages Defense World National Association of Realtors to cut commissions to settle lawsuits. Here's the financial impact. CBS News Bridgemarq Real Estate Services (TSE:BRE) Share Price Passes Above Two Hundred Day Moving Average of $12.93 Defense World Blackstone, World's Top Alternative Asset Manager, Eyes Record Highs Amid Real Estate Bottom Investor's Business Daily Chicago Voters Face Choice on Tax to Fund Homeless Programs The New York Times 4 Ways a Settlement Could Change the Housing Industry The New York Times Colony Ridge violated deceptive trade practices, Texas says The Texas Tribune Real Estate Stocks Drop As NAR Agrees to $418 Million Settlement Markets Insider |
RELATED ARTICLES
Real Estate Financing - Ten Ways Do you remember when real estate financing meant you saved up enough to put 20% down on a house, and then you got a mortgage loan for the other 80%? Well, you can still do that, but there are many more options now. Here are ten of them. The Perils of the Property Ladder: Has Anyone Noticed the Silence? There was a time when every conversation was focussed on property and every other TV programme was about property makeovers. Everybody wanted to get into property and those already on the ladder seemed fixated on becoming wealthy overnight. Home Owner Association Restrictions - Read Before Buying Many communities have associations for homeowners, property owners, condo owners, or similar associations. The presence of a homeowners association, also known as "HOA", introduces another layer of rules and regulations to consider when buying a home. On the Crossing of Continents Cyprus is situated in the north-east Mediterranean on the crossing of three continents - Europe, Asia and Africa. This strategic location ensured development of the island as an international business center with high-quality service, vast infrastructures and great deal of entertainment facilities. Should You Accept A Full Purchase Offer For Your Note or Not? You could be facing a dilemma when considering payout options on selling your mortgage note! To accept a full purchase offer or a partial purchase offer is not always an easy decision.Sure, to take the full purchase option is an easy decision to make if you're holding a second position note on a property that doesn't have any equity after you add the first and second mortgages, but what if that's not your situation? Full purchase payouts can be good if your primary concern is to just get out of the note and be done with it. Farm Expired Listings For Big Commissions Many real estate agents begin and sometimes sadly end their careers without a plan. And as the saying goes, failing to plan is as good as planning to fail. Real Estate Investors - Red Alert How's the real estate marketing doing? Is the huge jump in home prices that is evident in some areas symptoms of a value bubble? Good questions, yes?Two things to keep in mind when surveying the market:1. All real estate is local,2. Should I Invest in Real Estate While Running an Internet Business? Of course you should. I practice this for quite a while and I never looked back. Selling Your Own Home: 10 More Tips Selling your own home can be a time-consuming and frustrating process. Sometimes, though, in the right market, it makes sense to save thousands of dollars in commission and do it yourself. Customer Service - The Real Estate Revolution Traditionally, real estate has been viewed as a sales industry. But perceptions are changing. Follow-Up - The Key To Successful Closings If everyone always did everything they said they'd do, we'd all be a lot richer. Unfortunately, tasks are overlooked, and the ball is often dropped. Maui Realtors: What You Need To Know Maui is a great place for families of any size. However, before you plan a move to Maui and contact those Maui Realtors, there are some considerations that you should take care of. Death, Taxes, and Foreclosures So how do you find the best foreclosures. Its not easy as the business is very competitive, especially in this current crazy real estate boom. Real Estate Investing In Mexico Mexico is CHEAP! But its getting more expensive. As property values rise, especially in resort areas, investors wonder how they can profit from this. How Professional Property Investors Interpret and Use Capital Growth Statistics Understanding and using yearly price growth statistics in an area of interest is critical to making successful property investments decisions.Property price growth is usually expressed in terms of a percentage i. Selling Your Home - What Can Go Wrong With Pricing and Loans So, you're selling your home (house, townhouse, condo, apartment, land, lot, farm, ranch, etc.), what can go wrong? The sad fact is that a lot of things can go wrong. Buying A Home - Zoning and Architectural Review Board Restrictions When you buy a home, you need to be aware of the various things that can limit your control over the property. This is as true for finished lots and single family homes as it is for townhouses, condos, and apartments. New Homes in Ridgefield Location:Frequent travelers will absolutely delight in this town! As part of the southwest section of Connecticut, Ridgefield is a convenient town to live in since it is only miles away from both the New Jersey Tri-state area and New York City. It is also close to its neighbor, Danbury, and has a steady population that continues to grow. Estate Agents on the Costa Blanca Spain Properties for sale or to rent on the Costa BlancaAs a general rule of thumb, newly built properties on the Costa Blanca are generally cheaper than existing or re-sale properties - cheaper still if you buy 'off plan' (before the house has been started). Property prices have rocketed here over the last five - ten years and many fortunate people have found that their properties have grown in value enormously even before they had moved in! Even though the market is now leveling out, a property in Spain is still an extremely good investment. Investment Property Part 2 of 2: What You Need to Know Before You Buy Welcome to the second portion of a two-part series on investment property. In the first installment, "How Not to Become a Slumlord", we discussed a little of what it takes to own and operate a property as well as some of the do's and don'ts of the property management trade. |
home | site map |
© 2006 TIGER MEDIA |