How Buyer’s Agent Commissions Work
First and foremost, as a buyer, you need to understand that you are responsible for your agent’s commission. So, one of the benefits of our service is that we set that commission at 2% which is well below the national average of 2.55%. However, most home sellers offer to pay buyer’s agent compensation at or above 2%, making it unlikely that you will need to come out of pocket to cover your agent’s commission.
How Rebates Work
When you are purchasing a home and the seller agrees to pay buyer’s agent compensation, as a buyer under our referral agreement you become eligible to receive a rebate at closing on any compensation paid by the seller to your agent above 2%. For example, if the seller offers 2.5% buyer’s agent compensation you are eligible to receive .5% of the purchase price back at closing.
When a seller pays the buyer’s agent commission, any rebate given to the buyer out of that commission is treated as seller concession. As a result, the rebate is subject to lender approval, state laws, and seller cooperation. The rebate must be disclosed and agreed to by the sellers. This should be done so as part of the initial contract of sale. Lending regulations limit the total amount of seller concessions that you as a buyer may receive. The limitation varies by loan type. For example, if you are using an FHA loan, seller contributions towards your closing costs are capped at 6% of the purchase price. For VA loans, sellers can only contribute 4% towards your closing costs. Conventional loans vary depending on the total down payment.
Seller concessions generally cannot be used towards your down payment. But they can be used to cover expense like property taxes, title insurance, loan origination fees, appraisal fees, mortgage discount points, and more. To ensure that you maximize the use of your rebate, you will want to work closely with your lender, title company, and real estate agent.
*Note: Rebates may not be available in all jurisdictions. Based on our research, rebates are available in 42 states and Washington, D.C. but are not permitted in Alabama, Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee. However, the local broker/agent should have the most up-to-date information for their jurisdiction and should be consulted at the time of referral. The information contained on this page is not legal advice and is provided for general informational purposes only.