What are Buyer Commission Rebates in Denver, CO?

Buying a home in Denver is a unique achievement. 

It means you’re settling into a city considered one of the "Best Places to Live in the U.S." for six consecutive years by the U.S. News and World Report. 

It also means dealing with demanding price points for Colorado real estate. If you want to buy a home in the Mile High City, be prepared to do some heavy financial lifting. 

No matter the market, every homebuyer's journey is clouded by the all important down payment and closing costs. But knowledgeable buyers in Denver have found a way to ease that burden and save themselves thousands of dollars when buying a home. 

The key? Utilizing a commission rebate. 

What is a commission rebate in Denver?

A commission rebate, also known as a buyer rebate, is a modern real estate tool that helps savvy home buyers unlock significant savings. 

Rebates are a novel approach to solving outdated practices of traditional brokerages. For example, in a typical real estate transaction, the seller may pay a 6% commission to the listing agent, who then splits the commission with an agent representing the buyer. 

A traditional brokerage might say that buyers are not paying a commission since it is not a specific line item on the closing disclosure. But the reality is that a commission is embedded into the cost of the home by the seller. The buyer is the one showing up to the transaction with all of the money, while agents walk away with sizable earnings.

Modern brokerages like Prevu invest in a tech-forward approach to real estate. This allows them to unlock substantial savings for buyers - returning a portion of the buyer’s agent commission back to the buyer in the form of a commission rebate. 

The modern approach of a commission rebate

Each brokerage works differently, but Prevu focuses on transparency and a personalized approach.

Prevu offers the largest commission rebate in Colorado, allowing buyers to receive a homebuyer rebate of up to 1% of the sale price of a home. Buyers can see their potential rebate from the start, visibly shown on every listing they view. 

Many traditional real estate brokers may frown upon rebates and claim they come at the cost of service. But that is not the case. 

For example, Prevu’s digital buying platform allows buyers to control their home search. Homebuyers can input specific criteria, from the number of desired bedrooms to the style of the home, and whenever the perfect match appears on the market, buyers are immediately notified on any smart device they choose. 

Buyers can browse the listings, schedule a tour, and partner with a dedicated Prevu agent. The agent then joins you on your homebuying journey and is with you every step of the way.

The relationship culminates in you receiving a commission rebate check totaling up to 1% of the home's sale price. Buyers can use that extra money to replenish savings, offset closing costs, or purchase furniture.

Commission rebate in Colorado ($1,200,000 example)

• Purchase price: $1,200,000
• Seller’s Agent Commission (3% of sale price): $36,000
• Buyer’s Agent Commission (3% of sale price): $36,000
• Home Buyer Rebate: $12,000 

How to find a buyer’s agent that offers commission rebates

Many first-time buyers tend to work with the first agent they meet. But the key is interviewing multiple agents to find the one that fits your needs. 

First, ask the agent how long they worked in the area and how many deals they closed. This will give you an idea of the agent’s market knowledge. Then, ask if they offer a commission rebate. Even if they do, ask about the services they offer.  

For example, Prevu hand-picks their agents to ensure they are local experts in their area. This guarantees they can provide buyers with knowledge of pricing history, and know where to look for listings that meet the buyer’s criteria. 

They also walk you through every transaction step and help you handle the complicated paperwork. From the beginning of your partnership with a Prevu agent, you are always aware of the commission rebate you can expect. 

Are commission rebates legal in Colorado?

Buyer rebates are legal in 40 out of 50 states, including Colorado. The Justice Department even released an article discussing the benefits of commission rebates as an incentive for home buyers.

Some traditional brokers may tell you that giving a commission rebate to an unlicensed person is a form of payment and, as such, illegal. However, this is not the case in a real estate transaction if the recipient of a rebate is the buyer of the property.

Is a commission rebate taxable as income?

Real estate brokerages cannot offer tax advice, so buyers should always consult with their accountants about handling a commission rebate based on their specific situation.

That said, the IRS released an article in 2007 to help clarify whether commission rebates can be considered taxable income. Essentially, because a buyer rebate can be seen as a reduction in a purchaser’s cost basis, it eliminates the requirement for a real estate brokerage to issue buyers a 1099 form if they receive a rebate.

Read the complete IRS letter ruling on commission rebate treatment.

Looking to buy a home in Denver? Browse listings and see how much you can save with Prevu.