To remain competitive, some real estate agents give home buyers a portion of the commission they earn on the sales in the form of a rebate. This benefits both parties, because the real estate agent generates business while the homeowner gets a little bit of extra cash in his or her pocket. If you're thinking about hiring an agent that offers this perk, here's a little bit of information about home buyer rebates.
How Much Can You Get?
The amount of the rebate you can earn depends on a couple of factors: the price of the home and the percentage offered by the real estate agent. The commission for an agent is typically 6 percent of the sale price or around 3 percent per agent if both the seller and the buyer have people representing them.
Your agent will then give you a part of his or her commission, the amount of which depends on the percentage of the home sale they offer you. Some offer half a percent, while others offer more. So on a $300,000 home, for instance, you could get $1,500 if your agent offered a 0.5 percent rebate.
The important thing to know, though, is that you can negotiate the rebate percentage with your agent. If there is a lot of agent competition in your area, you may be able to get a higher amount from him or her.
Do You Get Cash?
Some real estate agents will cut you a check for the rebate amount. More often than not, though, agents may use alternative payment means. For instance, the agent may give you a gift certificate to local furniture store, pay for some of your closing costs, or offer free services up to the value of the rebate. Although cash is nice, regardless of how the rebate manifests, it can save you some money on your home purchase.
Are Rebates Taxable?
You'll be happy to know that home buyer rebates are tax exempt, because the IRS counts them as an adjustment in the home's sale price. However, this can be a mixed blessing. Although you don't have to report the rebate on your taxes, you do have to deduct the amount from home's price. This increases the amount of future profit you make on the home when you sell it, which is taxable.
To learn more about home buyer rebates or to get help buying a house, contact a real estate agent.