What is a Home Buyer Rebate?

It's something that many agents don't like to discuss - here's why.

In the video above (you can read full transcript below), I unpack what this often uncomfortable topic entails.

This tip is part of a series as I launch a new free, 1-hour webinar to get home buyers ready for the fall market. Sign up now for my full Home Buying Strategies webinar to help you get an edge over other buyers in a competitive market like Toronto - while avoiding costly mistakes.

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Full Video Transcript

This next topic is a pretty controversial one among a lot of real estate agents - something called a buyer rebate. Now this is something that maybe some of you have heard of, but many others haven't, so I'm going to unpack this issue in this video.

When we think about sellers negotiating the commission that they're paying their agent when they're listing their home for sale,  this of course is something that many of us know is not fixed, it's negotiable.

Some listing agents charge 5%, some charge 4%, but the point is that we know that the seller can negotiate with their agent on commission.  

Now what a lot of people don't realize is that even though a buyer's agent is paid by the seller (or listing) agent's brokerage, technically that commission is actually also negotiable with the buyer.

So for example, if I'm a buyer and I have a real estate agent and I know that they're getting paid say 2.5% of the purchase price of the home, I can negotiate with them that they will give me what's called a rebate of $1,000 or $2,000 after I purchase a home.  And the way you do this is in your buyer representation agreement, you would have to include a clause that effectively says that the buying brokerage  agrees to pay you a couple thousand dollars on completion of the transaction and then the buying brokerage would actually cut you a check for $2,000 on closing.  

So next question of course is should everyone do this? Why doesn't everyone do this?  It sounds like free money, why shouldn't we all do this?

The reality is I'd say most people don't do this because if you have an agent that you want to work with  and are really leaning towards working with them, my experience is most people are choosing an agent that they trust  that is very competent and that they really want to work with and the rebate isn't the primary driver.

For other agents and for other buyers, for some buyers who just don't value maybe what a lot of agents do  and think they're just opening up lockboxes, they're more inclined to do that.  

And when we think about the agents that will offer rebates versus the ones that don't, from my experience the agents that are very successful, good at what they do and are very busy usually don't because they don't need to, they don't want to separate themselves based on commission, they just want to be better at what they do and they want people who are working with them to work with them because they're better at what they do, not because they're giving a rebate.  Whereas younger agents or junior agents who don't sell a lot of homes might think to themselves  that making $15,000 is better than making $0 even if I have to give a $5,000 rebate. So some agents who don't do a lot of sales may be more inclined to offer their client a rebate if they're thinking I'm not going to make that money anyways.  

In the next video in this series, I'm going to unpack why buyers should think about asking for a buyer rebate even if they don't really want one because it can actually reveal a lot about how agents communicate and how they deal in what can be stressful situations because no one likes haggling or talking about money.

I hope you found this buyer tip helpful. If you're buying a home in the Toronto area's very competitive housing market and want an edge,  sign up for my free one hour webinar on the top 10 strategies that are going to give you that advantage. You're going to learn the number one thing that you need to know when deciding what price to offer on a home,  why price alone is not the only factor that leads someone to win in a multiple offer situation  and how to find value in good homes that other buyers overlook.

Click this link or click on the image below to sign up now to give yourself that advantage in Toronto's  housing market.

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John Pasalis is President of Realosophy RealtyA specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).

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