Commission Rebate NYC - How Buyers Can Save
By Thomas Kutzman on February 11, 2025
Imagine buying your dream apartment in New York City. You worked hard to save up for it. You searched online and were assisted by an expert NYC real estate broker and buyer agents to find the perfect place, with the potential for buyer broker commission rebates. You complete your purchase. Then, SURPRISE, you get a large commission rebate check from your real estate broker!
It may sound too good to be true. However, a commission rebate is the single most important topic that traditional real estate brokers aren’t telling you. Buyers can get cash back when buying NYC real estate. That means a significant savings for you that can offset buyer closing costs or simply put more money back in your pocket.
What Are Buyer Agent Commission Rebates in NYC?
A buyer agent commission rebate is a game-changer for anyone looking to purchase property in NYC with the help of a buyer's agent. Essentially, it’s a portion of the commission that your buyer’s agent may receive from the seller, which is then given back to you, the buyer. This rebate can be a substantial amount, often from 1% to 1.5% of the purchase price. Imagine buying a $1,000,000 apartment and getting up to $15,000 back in your pocket!
In the competitive NYC real estate market, buyer agent commission rebates are becoming increasingly sought after by buyers. Only forward-thinking real estate brokerages offer these rebates to attract savvy clients. The best part? You can use this rebate to offset your buyer closing costs, fund renovations, or simply boost your savings. It’s a smart way to make your money work harder for you.
The Half-Truth of Traditional Real Estate Brokers
Historically, there was a half-truth perpetuated by the traditional real estate brokerage industry that it is "free" for home buyers to be represented when they buy a home or apartment. Since the buyer's agent was typically paid for by the seller, traditional real estate agents suggest that their services are "free".
This statement is very misleading. The word "free" is intended to distract buyers from the fact of how much money traditional buyer’s brokers receive for each transaction. Buyers are not charged an itemized cost for a buyer’s broker on the closing documents, yet the fee is being paid for with the buyer’s money.
If an intermediary like a real estate broker is being paid a fee during your property transaction, it affects your price as a buyer. It begs the question – If your buyer’s broker is getting paid so much money, what if you could receive a commission rebate from your broker?
First, traditional brokers do not properly educate home buyers on how the economics of real estate commissions work during a transaction. Most home buyers don’t realize how much their buyer’s broker receives for the transaction. In most cases, buyers don’t learn how much agents make from a seller-paid commission until they are sitting at the closing table.
Second, it is simplistic to say that a buyer’s agent commission is paid for by the seller, but the very existence of this commission affects how a seller sets the price of their property. This ultimately results in a higher property price for buyers.
Luckily, transparency around commissions has improved. Following a court settlement by the National Association of Realtors (NAR), effective August 2024 many local real estate associations have begun to encourage buyer brokers and their clients to enter into buyer representation agreements prior to touring properties. These agreements outline how a buyer's agent can receive compensation, how that compensation may be seller-paid, or buyer-paid at a specific rate or amount - if a seller-paid commission is not offer or able to be negotiated.
For brokerages that offer the possibility of commission rebates, the terms of these rebates are defined in the buyer representation agreement.
How Real Estate Commissions Work in NYC
Understanding how real estate commissions work in NYC can help you see the value of a buyer agent commission rebate. Typically, the seller pays a commission to the listing agent, and many owners also choose to offer a buyer’s agent commission to incentivize buyer's agents to bring their buyers. While there is no standard commission in NYC, since commissions are always negotiable, many transactions are completed with a total commission 5% to 6% of the purchase price, with half going to the listing agent and half going to the buyer’s agent.
However, with a buyer agent commission rebate, the dynamics change in your favor. The buyer’s agent gives a portion of the commission they receive from a seller back to you, reducing the overall cost of your transaction. This can be a significant financial benefit, especially in a high-stakes market like NYC. By leveraging a buyer agent commission rebate, you can lower your effective purchase price and make your home-buying process more affordable.
Commission Rebates in NYC – A Smart, New-Fashioned Approach
Thankfully, there is a smarter, fairer approach called a buyer’s agent commission rebate, also referred to as buyer broker commission rebates, realtor rebates, or buyer broker rebates. This new approach enables buyers to get more financially when they buy a home or apartment in New York City.
The concept is simple. The buyer’s broker gives a portion of a seller-paid buyer’s agent commission back to the homebuyer in the form of a rebate or refund. In NYC, the concept of offering rebates has not been widely adopted yet.
Traditional real estate brokers are stuck in the old way of doing things. They do not pass savings to homebuyers. The few firms which do provide rebates only give back a measly 0.25% to 0.5%, so it is important to negotiate buyer broker commission rebates when interviewing buyer’s agents.
How to Negotiate Buyer Rebates in NYC
Negotiating buyer commission rebates in NYC requires some strategy and clear communication. Here are some tips to help you get the most out of your rebate:
- Research and Compare: Start by researching and comparing different real estate brokerages and agents to find one that offers rebates. Look for reviews and testimonials to gauge their reputation.
- Discuss Upfront: Have an upfront discussion with your agent about their commission rebate policy. Make sure you understand how the rebate works and what potential percentage you can expect, as seller-paid real estate commission paid can vary from listing to listing.
- Get It in Writing: Ensure that the rebate terms are clearly outlined in your buyer representation agreement. This provides transparency and holds the agent accountable.
- Choose the Right Brokerage: Consider working with a real estate brokerage that openly offers rebates. Some traditional brokerages may offer a tiny rebate, but it is better to work with a brokerage that is known for their transparent rebate policies and can help you save significantly.
Prevu Smart Buyer Rebate – Get Cash Back When You Buy
Prevu is a smart online real estate brokerage in NYC. Their Smart Buyer™ Rebate offers the largest buyer broker commission rebates in NYC.
The Smart Buyer™ Rebate is straight-forward. Prevu rebates a portion of the commission it receives for acting as your real estate broker. The amount of the potential commission rebate is transparently disclosed on every listing prior to making an offer.
Prevu has created a team of expert real estate agents that are more efficient with a focus on an enhanced customer experience for buyers. The combination of technology and salaried agents allows the company to pass on significant savings to New York City home buyers.
Once a NYC buyer has decided on a property (whether you attended a private showing with Prevu or attended an open house), Prevu provides expert advice from offer preparation all the way through closing. A Prevu agent performs comparable analysis to identify optimal purchase price and negotiation strategy. Prepares and submits the formal offer after reviewing it with the buyer. Manages the negotiation process to achieve an accepted offer. Compiles the condo or co-op board package applications with you, if applicable for your purchase. Plus, your agent provides trusted referrals along the way for any additional services you’ll need.
If a home buyer purchases a NYC real estate with Prevu that is a 6% commission paid for by the seller (split evenly between the seller’s listing broker and buyer’s broker), the home buyer receives a Smart Buyer™ Rebate from Prevu. That’s a lot better than the $0 a buyer receives from a traditional real estate broker or agent at closing.
The financial benefit of a buyer agent commission rebate can help offset buyer closing costs, provide a budget for new furniture, or simply replenish your savings account.
Commission Rebate NYC (Example $2,00,000 apartment)
- Purchase Price: $2,000,000
- Seller's Agent Commission (3% of Purchase Price): $60,000
- Buyer's Agent Commission (3% of Purchase Price): $60,000
- Commission Rebate: $30,000
Are Commission Rebates Legal in NYC?
The concept of a buyer commission rebate, referred to as a commission refund in some states, is a positive for consumers and are legal in New York State and NYC. It has been encouraged by the Department of Justice and is currently legal in 40 US states. The states that have not yet adopted the concept are Alaska, Oregon, Iowa, Kansas, Oklahoma, Missouri, Mississippi, Louisiana, Alabama, and Tennessee.
Common Misconceptions About Commission Rebates
There are several misconceptions about buyer broker commission rebates in NYC that need to be cleared up. One of the most prevalent myths, as just discussed, is that commission rebates are illegal or unethical. This couldn’t be further from the truth. Commission rebates are completely legal in NYC and are even encouraged by the New York Attorney General’s office as a way to foster competition in the real estate industry.
In 2015, the Attorney General of the State of New York weighed in on the matter in a letter to the real estate industry. The letter highlighted the consumer benefits of commission rebates.
"Rebating by real estate brokers can greatly reduce the costs of buying and selling property and even facilitate new and innovative business models," said former Attorney General Schneiderman. "I urge the real estate community to embrace this opportunity to be more competitive, and improve the choices available to New York homeowners. I also encourage buyers and sellers alike to take advantage of your right to bargain with your broker for a lower commission."
Another common misconception is that commission rebates are only available to certain types of buyers or properties. In reality, any buyer can negotiate a commission rebate with their agent, regardless of the property type or their individual circumstances. It’s all about being informed and proactive. By understanding the facts, you can take full advantage of commission rebates and enjoy significant savings on your NYC real estate purchase.
Are Real Estate Commission Rebates Taxable As Income?
Two of the most common questions Prevu receives from buyers are: 1) Are commission rebates taxable as income? 2) Will I receive a 1099?
Prevu is not allowed to provide specific accounting advice. Our team encourages all buyers to speak to their accountant or tax professional as their individual tax situations may vary. That said, the Internal Revenue Service ruled on the matter of buyer agent commission rebates and explained that such a rebate is not taxable as income to the buyer and the rebate is generally treated as a reduction in the cost basis for accounting purposes. Additionally, there is no 1099 required to be issued by the real estate broker to the buyer.
For example and to keep the math easy, if you purchased an apartment in NYC for $2,000,000 and received a commission rebate of $30,000, your accountant would likely advise you to reduce your purchase price ($2,000,000) by the amount of the commission rebate ($30,000) to arrive at your adjusted cost basis ($1,970,000), assuming no other buyer closing costs.
Read the entire IRS private letter ruling on commission rebates.
Some home buyers may choose to go the traditional route in selecting a buyer's agent. However, it’s important that homebuyers are aware that buyer commission rebates exist and that you can save money during your home buying process. Then, they can make an informed decision when selecting a real estate broker. Getting money back from your broker is even better than "free".
Are There Any Issues with Buyer Rebates in NYC?
Commission rebates can be a significant financial incentive for buyers in NYC, offering a portion of the buyer broker commission rebates back to the buyer after closing. However, there are some important considerations to keep in mind to ensure a smooth transaction.
One critical issue is the potential impact on the Loan-to-Value (LTV) ratio. Lenders calculate the LTV ratio based on the purchase price and the loan amount. If the commission rebate is substantial, it could affect this ratio, potentially jeopardizing the loan approval. To avoid this, the rebate should not exceed the buyer’s closing costs.
Keeping the rebate within this limit ensures it is viewed as part of the transaction costs and does not reduce the property’s effective purchase price, which could alter the LTV ratio. Given buyer closing costs in NYC are high, buyer rebates rarely affect this.
Before proceeding with a commission rebate, it’s essential to discuss the details with both your real estate agent and lender. Your agent can help structure the rebate in a way that complies with all regulations and lender requirements.
Meanwhile, your lender can provide guidance on how the rebate will be treated in the context of your mortgage application. This proactive communication helps prevent any last-minute surprises that could delay or complicate your closing process.
Choosing a Buyer's Agent Who Offers Rebates
When choosing a buyer's agent who offers rebates, there are several factors to consider. Here are some key considerations to help you make an informed decision:
- Transparent Rebate Policy: Look for a real estate brokerage that has a transparent rebate policy. This ensures you know exactly what to expect in terms of savings.
- Licensing and Membership: Check if the brokerage is licensed in New York State and a member of the Real Estate Board of New York (REBNY) if you are looking in NYC or OneKey if you are looking in Westchester County or on Long Island. Membership in REBNY or OneKey indicates a commitment to ethical standards and professionalism.
- Agent’s Experience: Research the agent’s experience and reputation in the NYC real estate market. An experienced agent can provide valuable insights and negotiate better deals.
- Tech-Enabled Brokerages: Consider working with a tech-enabled brokerage that offers a rebate as well as online tools for the homebuying process. These brokerages leverage technology to provide greater ability to collaborate with your agent digitally and offer significant savings.
How to Get the Most Out of a Commission Rebate
Maximizing your commission rebate requires a bit of strategy and clear communication. Start by discussing the rebate policy with your agent during your first conversation. Ask about their commission rebate policy and don’t hesitate to negotiate for a higher rebate, if possible. It’s crucial to get the rebate terms in writing as part of your buyer representation agreement to ensure transparency and accountability.
Apartments for sale in NYC with commission rebates
Homes for sale near NYC with commission rebates
Prevu is the digital home buying platform on a mission to save people money when they buy a home or apartment with it's industry-leading Smart Buyer™ Rebate - providing homebuyers in NYC a buyer agent commission rebate after closing. Prevu is a licensed real estate broker in New York and a member of the Real Estate Board of New York (REBNY) and OneKey. Prevu's New York City agents are REBNY members.
