Are Buyer Rebates legal?
Rebates are legal in all but a few states where “traditional,” established brokers fear competition. Everywhere else, including in Massachusetts, buyer rebates are recognized and encouraged as a legitimate way for brokers to compete for business. Here’s what the Department of Justice says about rebates.
Why do we offer Buyer Rebates?
We offer rebates to help us better compete in a crowded market that is dominated by a few giant companies. They have the budgets available to promote their businesses through slick corporate advertising, fancy web sites and big offices with mahogany desks. We don’t. We’re a local business, locally owned. That’s a matter of pride to us. Instead of spending money on these things, (none of which, in our opinion, enhance value to clients) we have decided to dedicate our resources to helping us provide big service at low cost. The lower cost/ high service model has worked in many businesses and through the time and cost savings leverage of technology it will work for us, too. Our cost structure is also lower; we don’t forward part of our revenue to any national franchise office to help them pay for their administrative structure, pad their profits or to pay for expensive corporate services we don’t need in order to support our local clients.
We recognize that some real estate buyers and sellers are simply more comfortable working with bigger, brand name firms. We respect that. In fact, there are many fine, well qualified real estate professionals in our area. But with competition based on price as well as services, reputation and brand recognition, the consumer wins.
Why don’t all real estate brokers offer Buyer Rebates?
They could, since all real estate commissions are negotiable. But you would really have to ask them.
Does this mean Watch City is a “self service” or “limited service” real estate agency?
Absolutley not. There are some variations between and among real estate brokers’ services, but we provide essentially the same services to home buyers and sellers as anyone else. We’re members of MLS, the network brokers use to exchange information about property listings. We’re also a Zillow Premier Agency, giving us access to additional tools and resources.
Is Watch City Real Estate a “virtual,” internet only real estate business?
No. You’re welcome to meet with us there if you call us first at 781.899.5300 to make an appointment.
What do you need to do in order to qualify for our Buyer Rebate program?
First, you need to sign a Mandatory Consumer Relationship Disclosure form with us before we show you a property.
We also encourage you to obtain a pre approval letter from your lender. (We can assist you with this.) A pre approval letter tells the sellers and the sellers’ broker that you are not wasting their time and that you can actually close a purchase. It ehances your credibility and can help in the event that the sellers are weighing your offer in a competitive bidding situation.
Are certain types of properties excluded?
Yes. Rebates are not offered for short sales, foreclosed property sales, “For Sale By Owner” sales (unless the owner agrees to pay our commission), certain multi family and other investment/commercial property sales and sales of undeveloped land.
Do we think cost is the only thing customers should consider when they choose a real estate broker?
No. Deciding which brokerage office to work with when you buy or sell a home is too important a decision to be reduced only to a mattter of transaction costs. Cost is important, but it’s not the only thing to consider. You need to feel confident that the real estate broker you hire has the requisite experience, adequate resources and an approach that feels right to you.
How can you confirm in advance of the purchase that you’ll receive your rebate?
The seller and your lender are really the key factors in this. Most lenders will approve and facilitate rebates because they are legal, increasingly common, and their customers want them and benefit from them. But it is important for you to mention the rebate early in your mortage pre-approval and application process. If the lender has special requirements or imposes limitations on rebates, you need to learn about that in advance. Your attorney will help you as the buying process moves forward.
Is the rebate taxable?
We are not required to report the amounts of rebates and we do not do so. However, you should speak with your own tax or legal adviser about this as we do not provide tax or legal advice. Here is an IRS letter on this subject.
How is the rebate handled at closing?
The rebate is included in the HUD settlement statement. Generally, the rebate is provided as a credit to settlement costs first. If your rebate exceeds your settlement costs, we will give you a check for the difference after the closing and settlement and after the deed has been recorded and escrow funds paid.
How do real estate commissions work?
Let’s look at two scenarios.
The first and most common situation occurs when one agency represents the buyer of a property and another represents the seller. Assume that the seller has agreed to pay a commission of 2.5% of the selling price to the listing broker and the same to the buyer’s broker. The 2.5% commission we receive compensates us for our work and we pay our customer (buyer) a portion of that in the form of a rebate.
Less commonly, an agency represents both parties in the transaction, listing the property and working for the seller and also finding a buyer. Listing agreements may provide that the agency will receive a lower commission in this case. The dollar amounts of the rebates will vary, but the percentages as a proportion of the total commission, will not.
This is a highly simplified description of the way real estate agencies work. Here’s a source of more information about the types of real estate agency representation (We suggest you print this document for easier reading.)