Commission Rebates in Boston - Save When You Buy

Boston is an amazing place to live, but home prices aren’t exactly cheap! You have worked hard to save for a down payment and are excited to buy a home. The next step then is to hire a great buyer’s agent and save money with a buyer commission rebate. 

Consumers today are accustomed to getting perks when they make purchases in their daily lives. Many people have received cash back or loyalty points when using their credit cards, airline miles when purchasing tickets, or bonus cash when buying via e-commerce sites. 

It only makes sense that you should also get cash back when you make the largest purchase of your life - a home!

With the newer concept of commission rebates, you can get cash back from your real estate broker when you buy a home. While few brokerages provide these rebates, the embedded economics of a real estate transaction (i.e. your buyer’s agent getting paid a commission) provides a large amount of money for brokerages to unlock savings for the homebuyer.

What is a commission rebate in Boston? 

There is a half-truth perpetuated by traditional brokers that it is "free" for a buyer to be represented in a real estate transaction. The fact that buyer’s agents are compensated by the seller or listing agent for representing you doesn’t make it free. Buyers are showing up with all of the money at closing and you have the ability to benefit from this. 

A commission rebate, also referred to as a commission refund, occurs when your buyer’s broker gives you back a portion of the commission they received for representing you.  

Let’s say for example you are buying a $1,000,000 home and the seller has agreed to pay 6% in commission as part of the transaction. Typically, this 6% commission is then split between the listing agent and the buyer’s agent. 

In this particular case, your buyer’s agent will receive a check at closing for $30,000. A commission rebate is when the agent gives you some of that money back after closing. 

Are commission rebates legal in Massachusetts?

Many traditional brokers will say, "commission rebates are illegal and a broker is not allowed to pay an unlicensed person." While a broker can not pay a commission to an unlicensed person, a buyer (or seller) may receive a rebate from their broker since they are party to the transaction. So the answer is yes!

Buyer commission rebates are a very pro-consumer practice that the federal government and many states have promoted. For example, the United States Department of Justice (DOJ) has encouraged these home buyer rebates and even has published on the benefits discussing how rebates work. 

The DOJ also confirms that the concept of real estate rebates is currently legal in 40 US States, including Massachusetts. 

Prevu offers the largest commission rebate in Boston

Prevu is a digital buying platform that streamlines the home search and buying process for Boston homebuyers and enables them to collaborate with their Prevu buyer’s agent seamlessly online. 

Thanks to the efficiencies created by their industry-leading technology platform, Prevu’s team is able to provide buyers with a better full-service experience plus the largest commission rebate in the Greater Boston area.

When buying a home with Prevu, homebuyers in Boston receive a portion of the buyer's agent commission.

Commission Rebate Boston (Based on $1,000,000 home)

• Purchase Price: $1,000,000
• Seller's Agent Commission (3% of Purchase Price): $30,000
• Buyer's Agent Commission (3% of Purchase Price): $30,000
• Commission Rebate: $10,000 

Do I have to pay income taxes on the rebate? Will I be issued a 1099? 

These are common questions for home buyers to ask. Everyone’s tax situation is different so it is always recommended to consult with your accountant about your individual situation. 

That said, commission rebates are generally treated as a return of principal to the buyer which typically will reduce your cost basis on the property. What does this mean? It means that you will not pay income tax on the rebate received and Prevu will not issue you a 1099. The IRS ruled on commission rebates in a private letter back in 2007, and as a result real estate brokerages are not required to issue 1099’s to rebate recipients.

To better understand how accountants view the cost basis of the property, let’s go back to the example from earlier. If you bought a $1,000,000 home and you received a commission rebate of $20,000, your cost basis in the property would now be $980,000 ($1,000,000 purchase price less the $20,000 commission rebate). 

Furthermore, if the home is your primary residence and you have lived in the property for at least two years when you sell the home in the future, you will not be subject to capital gains taxes on the first $250,000 of gains for individuals and the first $500,000 of gains for married couples (based on current federal tax law).

At the end of the day, it’s important that Boston homebuyers are aware that commission rebates exist and that you can save money when you buy a home. Make an informed decision when selecting a real estate broker and put more money back into your pocket with a rebate.