Just like promo codes or coupons, rebates have become a way that consumers can get some of their money back after a purchase. Well, the same holds true of buying a house. It’s hard to believe, but there is such a thing as a real estate rebate.
“There would be more people doing it if more consumers demanded it,” says John Goddin, owner and real estate broker of Goddin Real Estate, serving Durham, Chapel Hill and Raleigh, N.C., for over 30 years.
“Homebuyers are paying their agent whether they know it or not,” Goddin says. “It’s built into the price of the property. If a seller didn’t have to pay a buyer’s agent, the owners could accept a lower offer.”
For a real estate agent to tell their buyer that they don’t have to pay any commission, is not an accurate statement, he adds.
“It is not a free service,” he says. “No, you don’t pay out of your pocket. But it is added into the price of the house.”Check your home buying eligibility. Start here (Sep 23rd, 2023)
How rebates work
This is how rebates work according to the United States Department of Justice – Real estate brokers offer consumers cash refunds or non-cash incentives to encourage them to use that broker’s service. Those rebates typically are cash payments after closing on a house. The incentives can be anything from gift certificates, closing-cost payments or free services such as home inspections or moving services.
The savings with a rebate can be big. For example, if a broker offers one-third of his/her commission to the homebuyer on a $300,000 home, then the savings would be between $2,500 to $3,000. The entire commission that the seller pays would be $18,000. The seller’s broker and buyer’s broker would each get $9,000. The buyer’s broker usually pays about 1 percent rebate to the buyer as an incentive to use them as their real estate agent.
However, ten states ban brokers from offering rebates, according to the Justice Department. CAARE (Consumer Advocates in American Real Estate) offer a listing of all the agents and brokers in America who offer rebates on its website, CAARE.org. Most states, only have a few people offering rebates to real estate buyers.
Recognizing that the role of a real estate practitioner has changed from “selling” real estate to providing valuable consulting services to its clients, Goddin set up his business about 10 years ago to offer the rebate program. He also started charging a retainer for his efforts, or buying clients can choose an hourly fee option.
“The price of real estate has gotten much higher, and much easier to sell real estate with the tools like the internet and all the information resources available,” he says. “But commissions have also gotten much higher. If you were to design a real estate business from scratch now, it would look different from the traditional commission. It needs some changes.”
For sellers of real estate, they have lots of options to reduce those commissions such as selling the house on their own, he explains.
“They can reduce the fees they pay by doing it that way. But it’s much more difficult for a buyer to do that. The buyer doesn’t control the buyer agent’s commission,” Goddin says.
Most properties in Goddin’s area offer buyer agent commissions in the 2.4-3 percent range. He offers a unique program that provides the buyer of a house with his services plus a rebate at closing. Rebates can range from 1% of the purchase price to the entire buyer agent commission if the buyer chooses an hourly rate payment plan with Goddin. The buyer can also choose an hourly rate of Goddin’s services.
Real estate agents traditionally only get paid when a property closes. Sometimes, that means an agent can spend hour after hour looking for houses to show someone, then spend more hours showing them the properties. In the end, they may never buy a house, meaning that agent gets no money at all.
“I get my clients to pay me nonrefundable retainers or by the hour. I get paid even if they don’t buy a house. But I know I will get paid, I can give them more of my time and my efforts,” he explains.Check your home buying eligibility. Start here (Sep 23rd, 2023)