Commission Rebates in LA - How Buyers Can Save

Los Angeles is one of the most desirable places to live. It has a vibrant economy and amazing weather, but property prices are not exactly inexpensive! The Los Angeles real estate market has some of the most expensive homes in the country and for good reason. 

You have worked hard to save up for a down payment and are ready to buy, and here are two things you shouldn’t forget:  1) Select a great buyer’s agent, and 2) save money with a buyer commission rebate.

The half-truth that brokers tell buyers

Traditional brokers have continually relied on a "half-truth" on how the economics of real estate commissions work. Most home buyers aren’t aware of how much their buyer’s broker actually receives for representing them. 

Since the buyer’s agent fees are paid for by the seller, buyers agents will claim that their services are actually "free". This statement is misleading to the home buyer. These extra fees increase home prices and reduce affordability. 

The good news though is that buyers can actually receive a commission rebate, sometimes called a commission refund, directly from their buyer’s broker. For example, Prevu gives back up to 1% of the purchase price to buyers while providing them with an elevated level of service versus a traditional agent. 

Let’s take a deeper look into how real estate broker commissions work in Los Angeles and how you can save money with a commission rebate.

Traditional commission rates are antiquated

Traditional real estate brokerages negotiate a listing agreement and commission fees directly with the seller. This seller usually agrees to pay 6% of the price of the home in Los Angeles. When there are two agents involved in a transaction, generally half of the commission (3%) will be paid out to the seller’s broker, also referred to as the listing broker), and the remaining half (3%) is paid out to the buyer’s broker.

Each sides’ 3% allocation is then divided between their brokerage and the agent. There are lots of mouths to feed. Even though the buyers are the ones showing up with all the money, until now there hasn’t been a way to unlock additional savings. 

Tech-enabled brokerages unlock savings for buyers

Prevu, a tech-enabled real estate brokerage in Los Angeles, offers buyers their Smart Buyer™ Rebate of up to 1% of the purchase price. 

The math is pretty straightforward. Buyers receive half of the commission Prevu receives for acting as the buyers agent up to 1% of the purchase price and subject to the market minimum. That’s a lot more than the $0 a buyer gets from a traditional agent at closing. The amount of the commission rebate or commission refund  is transparently shown on every listing on Prevu’s platform.

How is Prevu able to accomplish this? Well, we are glad you asked. Prevu has created a great team of expert agents that we have hand selected. With our experienced agents and large investment in technology, Prevu is able to be significantly more efficient than traditional agents while also providing an elevated customer experience for buyers. The combination of tech and salaried agents allows us to unlock huge savings for our buyers.

You won’t sacrifice service either. Prevu’s agents and the company’s digital home buying platform provide expert advice from the very beginning of your process all the way through closing. Prevu’s technology-driven tools empower buyers to be able to buy a home online while having an expert salaried agent by their side whenever you need the expert advice. 

Commission Rebate Los Angeles (Based on $1,900,000 purchase price)

• Purchase Price: $1,900,000
• Seller's Agent Commission (3% of Purchase Price): $57,000
• Buyer's Agent Commission (3% of Purchase Price): $57,000
• Commission Rebate (1% of Purchase Price) :$19,000

Are commission rebates legal in California?

The quick answer is yes. Commission rebates are legal in Los Angeles and the entire State of California.

Some agents may tell you that they are not able to pay an unlicensed person, which is generally true, except when you are the buyer and you are getting money back.  A buyer commission rebate or commission refund is extremely consumer friendly and they are legal in California and 39 other U.S. States. Rebates have also been encouraged by the Department of Justice. 

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

Prevu is not allowed to provide tax advice. You should always speak to your accountant or tax advisor about your specific situation.  With that said, the IRS has penned a private letter ruling stating that rebates are generally treated as a reduction in the cost basis of the property and as such Prevu is not required to issue a 1099 to buyers. 

To learn more, you can read the IRS private letter which provided guidance on the topic commission rebates.

Prevu Real Estate, Inc. is a licensed real estate broker in California, license number 02134758.