Rebating Realtors - Save 1-2% on your real estate purchases

Finance
1

Wiki Post

House and real-estate are the largest purchases most people ever make. Saving even 1% on a $500,000 purchase will net you $5000.

Real estate transactions typically have seller-paid commissions of 5-6% to the real estate agents, often split 50/50 between the listing agents and the buyer’s agent. For several reasons, it’s difficult for a buyer to capture any part of this commission without their own agent. Walking into a listing and placing an offer will leave the listing agent with the full commission, and most will not be willing to reduce their commission to help the buyer.

The solution is to contract with a buyer’s agent who will agree to rebate a portion of their commission back to the buyer after the sale closes. The percentage of the rebate must be negotiated between you and your buyer’s agent based on your needs (see below).

Example transaction:
$500,000 selling price, a 5% commission split 50/50, 10% broker fee, 50% commission split
Total real estate commission $25,000
Buyer’s agent commission: $12,500

  • 10% agent’s broker fee: $1250
    Remaining agent’s commission: $11,250
    50% rebate to buyer: $5625.00

The rebate commission percentage should be negotiated between you and your buyer’s agent in advance and in writing. You must be clear and realistic about expectations for your agent.

Typical items for consideration that reduce the amount of work expected of the agent:

  • You find properties yourself by searching online databases/listings
  • You research properties / visit open houses without needing the agent
  • You come up with offer price / terms on your own with little/no input from the agent
  • You do not expect the agent to find listings for you, drive you around to showings, etc.
  • Agent is not expected to participate in drafting P&S or closing documents.

Other potential items (may or may not be realistic, subject to discussion):

  • You write and submit the offers yourself with the Agent’s name attached, but not requiring any action by the agent.
  • You call/email listing agents and arrange showings without your buyer’s agent present.

Items in this second list may not be possible in your market.

Challenges:

  • Finding rebating realtors may be difficult. (Should this site host a list?)
  • Inexperienced buyers probably don’t know what’s involved, and may underestimate the work an agent would do.
  • National chain RedFin offers buyers rebates, but at rates less than you might otherwise negotiate. (e.g. 25% of buyer agent commission).
  • Asking around to random realtors will likely result in hostile responses, e.g. claims that “that is illegal” when it is not, “there’s no way, nobody does that”, to acting insulted at even the suggestion.
  • There is some theoretical danger of a listing agent trying to cut your buyer’s agent out of their commission if they were not involved in “procuring the sale”.

States that ban realtor rebates (link): AK, AL, IA (multi-agent situation), KS, LA, MO, MS, OK, OR, TN

More info:
USDOJ page on rebates: https://www.justice.gov/atr/rebates-make-buying-home-less-expensive

Credit to dshibb on FWF for original post:
https://www.fatwallet.com/forums/finance/1278801

This post is a wiki. Please feel free to edit/update.

5 Likes
2

My Experience

This post saved me thousands of dollars, thanks to the original FW contributors.

The example transaction I posted in the Wiki is very close to my actual experience.

I found my realtor through a spreadsheet listed on FW. I’ll let him know about this site and see if he wants to post himself. I contacted him and we negotiated a rate based on my expectation of the work he would do.

Little did I know how “hot” the market was in my area. While I was successful at finding properties that I was interested in, the ones I wanted would often have 10+ offers and go well above listing. I had envisioned that I’d find a property, have the agent put in the offer, and be generally done with his work. We ended up putting in offers on about 5 properties, sometimes well above asking, only to be outbid buy “crazy” (as he put it) offers.

Note that there was one new construction condominium complex that we were interested in that had a policy that a buyer’s agent must accompany buyers on the first visit, otherwise they would keep all the commissions. So he came out for a showing for that one. Another house he was able to schedule the listing agent to show us a house. Otherwise we generally went to open houses on Sundays and those houses would have 10 offers by Monday.

Eventually we went “further out” from the nearby city and got much more house and land for the money we wanted. The agent came out for the inspection and final walk-through, which was nice and I appreciated although I didn’t expect him to.

In the end, my agent did much more work for me than I originally expected. Several offers, a couple of on-site visits, and about 15 months total time from first contact to final sale. He provided advice on offers and ran comps, both of which I didn’t expect but I was thankful for. He advised not overpaying on some of those “crazy” offers on crappy houses in the hot market.

Getting a check for close to $6000 was the reward.

Maybe worth a separate thread: I afterwards used him to find tenants for my condo rental for a flat fee. He posted the listing and arrange the showings directly into my Google Calendar. I did the showings and picked the tenant. He ran credit check and actually called in employment verification.
Sure I could have done that stuff myself, but it was extremely valuable services and I’d do it again to avoid the hassle myself.

1 Like
3

My mom used this company in Florida and they rebated 1.5%. Hers was a full service realtor and it was a great experience:

http://www.buyerrebatesrealty. com/home/other-florida-cities

4

Are rebates available for new construction homes? Does a buyers agent earn the same commission as an existing home?

5

In general yes, but you may need to be more careful to make sure your agent gets the commission.

With new construction I’d be careful about showing up to model homes and signing in. At the very least make sure you list your agent’s name on a sign-in sheet. Preferably call ahead and check if the agent must accompany the first showing. A new construction condo required the agent to be present. Another new construction subdivision I visited, my agent was able to call in and register before visited the model home without him.

6

Taken to the next level, I recently closed on a transaction with Golden Key (formerly SoloPro), which is a startup flat-fee/a-la-carte buyer’s agent service. I believe their network of agents is nationwide.

I did all the research on my own, toured houses on my own / with listing agents / at open houses / etc. A GoldenKey agent would show me a house for a flat $50(?) fee.

When I found a house I wanted, GoldenKey assigned me an agent to write the offer. Three days before closing, I paid a flat dollar amount fee to my agent for ‘transaction representation’ (roughly $2000). At closing, the full 2.4% buyer’s agent commission was rebated to me on the HUD.

Working with GoldenKey was honestly a huge hassle – but this saved me about $8000. This was my 7th real estate transaction in the last ~2 years (including some without any agents on either side). It worked for me and was worth the effort in the end, but was an enormous headache. It literally would have been easier if I were 100% representing myself, but with current regulations it’s not possible to do that and receive a commission rebate.

I’m glad I did it, but especially in the competitive market lately I don’t think I’d recommend GoldenKey to anyone without significant real estate experience.

5 Likes
7

Are there rebating realtors for sellers as well, or is this strictly a buyers phenomenon? I’m planning on selling a home next year and am looking into options like Redfin but wondered what else is out there for the budget conscious seller.

1 Like
8

There are lots of options for sellers – this is a relatively new thing for buyers.

What you want to look for is a “flat fee” listing agent. Most will charge you somewhere between $500-$1000 or 1% or something for the listing depending on how much they do for you, and you’re expected the pay the buyer’s agent fee.

2 Likes
9

I’m a rebating realtor in NYC. Happy to help anyone that is interested.

10

Anyone know any rebating brokers/agents in the DC area or can recommend anyone?

11

What do I do if I’m in a state that bans rebates to buyers?? It seems rediculous to have a buyer’s agent earn 2.5-3% of a $600k purchase. In my situation, we know what house we want to put in an offer for, so there will be little value realized from the agent.

12

Debating b/t a rebating realtor in PHX or opendoor or redfin etc. We will be selling before next school year and hope the market stays hot…

13

You can’t ban charging lower fees. The offer contract can be contingent on less fee at close. Buyer sets the offer contract. Sure, other parties can reject the offer…

My state doesn’t ban rebates, but my loan was negative cost (not enough prepaids were left for the 1.5% to go towards), so I put through contract modification to move the 1.5% to the purchase price during the option period.

1 Like
14

Contact the seller’s agent to show you the house. Then make a lower offer, factoring in the buyer’s agent commission.

This will not always work, because the agent might have to split the commission 50/50 with the broker. The agent would also have to be motivated enough to modify their contract with the seller to reduce their commission to make up for the lower offer price.

All of this requires lots of explaining to the seller, and additional paperwork. Many agents try avoid drawing too much attention to how much of a commission they are getting from the seller. Yes, it’s in the settlement statement, but most buyers only hear 3-6% commission, which doesn’t sound a lot. Considering that there will be all kinds of fees and old mortgages to be paid back, most sellers aren’t fully aware of it. They just see the big check they are receiving.

Bottom line, it won’t work most of the time.

1 Like
15

I just relaunched the website for Silverwood Brokers. If anyone is in NYC, I can offer a FD bonus.

16

Sorry for the bump of this old thread but I’m house shopping and 7 years ago I had a good experience using a Redfin agent but I’m wondering if there are better values in 2020 for rebating realtors?

Thanks.

17

https://www.rebaterealty.com/how-it-works/ <— they seem to be active. Some of the other ones linked in the thread are no longer around (perhaps it’s not sustainable)

18

I’d suggest to search on google for “Your City” + “broker/owner” or “rebating realty” or “discount realtor”.

Best deal (and possibly even the best service) would be feasible from an independent person who is both the real estate broker and agent and has no third parties taking a cut of their commission.

There are also the referral outlets that take a cut, but that obviously cuts into the lower commisions going to the broker so it kind of limits any possible savings, at least for smaller purchase amounts. Compound that if you find an agent who is not the actual broker – then they’re paying the commission to the website for the referral and then paying a large cut to their broker firm. Much smaller pie left to give you a piece of.

2 Likes
19

I ended up finding a buying agent using https://www.upnest.com/
I’ll update when I have finished the entire process.

3 Likes
20

Look forward to hearing about your experience.