What are Buyer Rebate Programs?

There's no doubt that the real estate market is an exciting one to be part of today. You may have heard differently, but the fact is that the recent crisis in the market has caused some big changes in the way real estate transactions are being conducted. It's an important shift in an industry which has basically operated the same way since it was first conceived.

A lot of the new approaches to real estate you hear about are geared towards the seller. Menu programs, flat fees, and so on are all designed to save the seller some serious money when they are offloading their property. They all have benefits for the buyer as well -- and you can read some of the information we have on that here -- but those benefits are largely secondary.

Not so with buyer's rebate programs. These offers put money directly back into the pocket of a person who buys a home with the help of an agent. They are a way of increasing the amount of homes sold on the market as well as the business of people who operate as buyer's agents. So, how do they work?

We'll use a non-traditional real estate transaction as a model. A seller has elected not to use a full service brokerage for the sale of his or her home. They save money by not paying the full 6% commission, deciding instead to use the services most relevant to marketing their home.

A buyer, on the other hand, will still most likely use an agent to find a home. Traditionally, the listing agent and the buying agent would split the commission, but in the absence of the selling agent the commission is 3%, all to the buyer's agent.

Already the buyer has saved a significant amount of money (the seller as well) by not having to adjust the price of the home, but there's more with the rebate program. Here, the buyer's brokerage actually rebates an percentage of the commission agreed on upon hiring, to the buyer. Once escrow is closed, those funds go back to the buyer. They are almost always significant (think thousands of dollars) and can be used as down payment money, for closing costs, or taken as cash.